With the minimum wage in BC set to rise from $8.00/hour to $10.25/hour by early 2012, many are asking the question: what does this mean to small business owners who will now be expected to bear this increased cost?
As a political hot topic, there are of course different perspectives on the issue. While campaigning for the leadership of the BC Liberal party, now premier Christy Clark made it clear that she intended to raise the minimum wage, in light of economic difficulties faced by low-income families in a new era of inflation. While many expected the wage to rise, some were surprised by the speed and amount of the increases.
$8.00 -> $8.70/hour on MAY 1, 2011
$8.75 -> $9.50/hour on NOV 1, 2011
$9.50 -> $10.25/hour on MAY 1, 2012
Expressing his concern on the rise, John Winter of the BC Chamber of Commerce questioned the move:
“It still strikes us as being an awful lot very quickly,” he said. “We would have liked to have seen that extended a little further in terms of the time frame. Many small businesses are still struggling to make ends meet coming out of the recession. The timing is never right, but this is not particularly good.”
A separate question to be asked, however, is what this means to future / emerging entrepreneurs who are still in the planning stages of business development, or who have yet to set up shop.
There is, of course, the pragmatic 'deal with it' point of view. This perspective would contest that if you can't afford to pay workers an additional $18 per day - your business probably isn't doing you any favours anyway. Additionally, just because the minimum wage in BC is/was $8.00 per hour, how many of your employees would realistically settle for this amount, especially over a longer period of time? A lot of small businesses, in fact, would have a hard time attracting and retaining employees if they refused to go higher than the provincial minimum. There are, of course, exceptions to this - most notably the food / alcohol service industry where wages are supplemented by tips (alcohol servers will only see their minimum wage rise to $9.00/hour) - but even in such industries, higher hourly wages are often needed to keep valuable staff, particularly if tips/business starts to slow down.
The other point of view, frequently held by the business community, is that an increase to the minimum wage, particularly of this magnitude, will:
- Result in layoffs / hiring freeze
- Impact the bottom line of already squeezed business owners
- Force marginal businesses to shut down
- Deter new business owners from starting up
Which brings us back to the original question: how does this affect your start-up planning? Does an increase in labour cost change your business plan from reality into fantasy? How should existing business plans and projections be adjusted to deal with these changes?
Given the financial challenges faced by many new business owners during their first few years of operations, it seems an understatement to say that this wage increase is not good news. At the same time, effective business planning should take economic uncertainties and risk into consideration, and develop strategies to cope with factors that are out of our hands.
More new/links about BC's minimum wage:
Clark increases B.C. minimum wage after decade-long freeze - Globe & Mail
B.C. minimum wage to vault to $10.25 - CBC news
Does hike in minimum wage cut poverty? Findings say no - Globe & Mail
Minimum Wage in Canada (2011) - About.com
PHOTO CREDIT: Photo Wages can't catch Food created by Thoth, God of Knowledge, on Dec 1, 2009. Photo made available under a Creative Commons Attribution-Noncommercial license. Last viewed on Mar 18, 2011.