Minimum wage hike hurts small business
Uwe Schmidt commented that small business owners should close their business operations if they cannot afford to pay a higher minimum wage. I enjoy reading letters to editor in the newspaper, but it really annoys me when I have to read fiction. If I want to read fiction, I can go to my local library to do that.
When the minimum wage is increased, more money has to be paid in benefits. When the employer remits statutory deductions each month, the employer has to match the amount of CPP paid by the employees, and also pay 1.4 per cent times the amount the employees paid in UIC. The employer quarterly payments also have to be paid to Worksafe B.C. benefits, that are based on total gross earnings. Each sector of the industry job types, has a different percentage rate for payment. The employer also has to pay vacation pay starting a four per cent of gross earnings, for the first five years of employment. After five years of employment this changes to six per cent of total wages. Some small business owners also have a group insurance benefit plan for their employees which include life insurance, weekly indemnity, long term disability, dental, extended health, and eye care. Some owners pay the total amount on behalf of their employees and others set up a cost sharing ratio with their employees. When minimum wage is raised, the total amount of the monthly group insurance plan bill also rises.
Small business owners use the minimum wage as a starting wage. That does not mean, that all of their employees are paid minimum wage. After a employee has been employed for quite some time, the employer will give the employee a pay raise.
An example is, say minimum wage is at $11.35 per hour. Some employees will already be at $12.35 per hour. When minimum wage goes up, say 50 cents per hour, then the employee at $12.35 must also get a 50 cent per hour raise. These senior employees just don’t stay at the same rate of pay when minimum wage increases. Employee benefits paid for on behalf of their employer is approximately 35 per cent. Present B.C. minimum wage is $11.35 per hour. Add 35 per cent in benefits, the hourly rate is $15.32 per hour to the employer. Effective June 1, 2018, the minimum wage will go up to $12.65 per hour. Add 35 per cent in benefits, the hourly rate is $17.07 per hour to the employer.
The present B.C. NDP minority government knows nothing about how a business operates. If they would take the time to learn the difference between a debit and a credit, then they would see that raising the minimum wage affects the small business owner. The NDP would then have a different view on minimum wage.
Locally, business owners such as Lee’s Chicken, A & W, Wendy’s, Burger King, MacDonald’s, Dairy Queen, and Tim Hortons are only franchise owners. They are not corporate owned. Comments like Tim Hortons being able to pay high wages does not apply to these franchise owners. These franchise owners, have to sign lease agreements for their locations, which are set for a term and renegotiated after a term has expired. These franchise owners also have to pay a percentage franchise fee, monthly, to the corporate owners who own the franchise name. This percentage is calculated on the total sales of the business. These are the top two items that have to been paid monthly, let alone all operating expenses of the company.
When minimum wage is increased, a small business owner would rather lay off staff, than raise their prices to the customer. Your NDP government solution is give all employees a pay raise and raise your prices to the customer. This is why the past NDP governments in B.C., Ontario, and Nova Scotia were only one term governments, with Alberta joining the group next year when the NDP government lose the provincial election. The reality is that, the customer is not willing to pay higher prices than what they are accustomed to do. An example is presently a burger costs $7.50, and now goes to $8.25 because of minimum wage increase. That is a no-no to the customer. Sales become lower, but all of the expenses still have to be paid by the small business owner. Some expenses remain constant regardless of revenue.
Minimum wage is a pay scale used by small business owners. In summary, the main point that has to be remembered is that only new employees hired are paid the minimum wage. After a time of employment served, they will receive a pay raise from their employer. Small business owners in Seattle, Alberta, and Ontario, have all chosen to lay off staff instead of raising prices, since the minimum wage has been increased. Keeps the staff at the unemployment office busy with employee claims.