Labour costs

Raising the minimum wage is yet another obstacle for small business

minimum-wage-increase

Recent changes to minimum wage in Ontario and Alberta, along with the installation of an NDP government in British Columbia (where we should expect similar moves) have demonstrated, once again, governments’ lack of a targeted approach when it comes to small businesses.

Each small business sector is different and has unique challenges and circumstances. In grocery, for example, profit margins are lower than other retail sectors and there are extra costs for energy and food safety, as well as unique issues around transportation.

Now, through the implementation of a $15 minimum wage in Ontario, there will be even more pressure on small businesses in the province.

None of these factors are taken into account by governments, nor do they comprehend the various fees, regulations and costs that grocers and other small businesses must contend with from all three levels of government. Instead, each level tends to view its latest regulation, policy or legislative measure only through the narrow lens of its own silo.

The Ontario government’s recent announcement to hike the minimum wage by 32% within a year and a half is not only astounding, but short-sighted and counterproductive.

Small businesses are the backbone of Canada’s economy. About 40% of employed Canadians work for companies with fewer than 100 employees. Small food and foodservice businesses are already seeing payrolls climb. According to a report from Scotiabank published in the Globe and Mail, small businesses averaged a 1.4% increase in payroll growth versus a 0.9% increase among firms with more than 500 employees between 2010 and 2015.

It seems like government has decided to set up a roadblock for business. But why on Main Street? This one-size-fits-all approach that imposes huge increases in labour costs will disproportionately impact small businesses compared to larger businesses.

The government accepts that higher credit card swipe fees imposed by Visa and MasterCard disproportionately impact small business.

So why, one asks, would a similar idea be ignored when considering wage increases?

While the field on which small business plays is far from a level one, retailers recognize that competition can be influenced by changing demographics, consumer demands and also spending habits. It should not, however, be altered by arbitrary labour legislation changes and nonsensical minimum wage hikes within a time period that will negatively affect small business owners.

That said, government sometimes does the right thing. When Ontario was establishing a new distribution system for beer and wine that allowed grocery stores to bid for licences, the government accepted Canadian Federation of Independent Grocer’s argument that the challenges faced by small grocers were greater than those of the larger chains. For that reason, they created two “pools” for licence bidding: a Class A category for chains, and a Class B for independents.

Why don’t all provinces adopt a similar framework for minimum wage increases? What is so difficult about having a small business category?

Government should be creating incentives for small business, not disincentives. It’s time to take the roadblocks off of Main Street; it’s where most of the business community in Canada lives. Let’s keep it that way!

Gary Sands is the senior vice-president of public policy and advocacy at the Canadian Federation of Independent Grocers and the chair of the Small Business Matters Coalition. Reach him at garys@cfig.ca