Increasing British Columbia’s minimum wage to $10.25 an hour could lead to a loss of more than 52,000 jobs, according to a new report from the Fraser Institute.
“While increasing the minimum wage may be done with good intentions, the facts show that it has very negative consequences,” said Niels Veldhuis, Fraser Institute senior economist.
“When governments impose high labour costs on businesses, employers react by hiring fewer workers and reducing the number of hours employees work.”
The study found increasing the minimum wage has a significant, negative impact on employment, particularly for younger workers. Based on Canadian research, an increase in B.C.’s minimum wage to $10.25 per hour from $8 per hour will result in employment reductions ranging from 9,391 jobs to 52,194 jobs.
“This is a conservative estimate that only looks at the impact on teen and youth workers,” Veldhuis said.
The report noted that a gradual increase in the minimum wage—in B.C.’s case, three 75-cent increases over the next year—will do little to ease the burden on employers or prevent job losses.
On May 1, B.C.’s minimum wage will rise from $8 an hour to $8.75. Further increases take place on Nov. 1 ($9.50) and May 1, 2012 ($10.25).
Despite the report’s findings, some local business leaders feel the minimum wage effect will be less dramatic.
“The surprisingly few number of people who make minimum wage in B.C. tells me there’s not going to be a huge effect on the economy,” said David Hull, executive director of the Abbotsford Chamber of Commerce.
Government statistics state only 2.3 percent of the provincial workforce earns minimum wage.
“That report is probably a little more on the fear-mongering side,” added Hull.
The service sector makes up 92 per cent of minimum wage earners, so Hull doesn’t see how 50,000 jobs can be eliminated.
“Are they going to shut down bars and restaurants?” he asked.
According to Hull there are other, larger issues that business people should be concerned about, including the strong Canadian dollar which is “taking a chunk” out of B.C.’s export business.
“The big issue is not the minimum wage, it’s the HST vote and the possibility of returning to the archaic system of two taxes,” said Hull.
“Quite frankly, if the people of B.C. make a huge mistake, (and eliminate the Harmonized Sales Tax) it will really hurt.”
In addition to job losses and reduced hours, the Fraser Institute report points out that higher minimum wages have other negative effects, including fewer benefits and less training for workers.