OPINION: B.C.’s labour minister should look at the pandemic’s financial carnage amid minimum wage increase
Minister of Labour Harry Bains recently confirmed that B.C.’s minimum wage will climb by 75 cents to $14.60 per hour on June 1. This is in keeping with a schedule of planned increases announced by the NDP government a couple of years ago.
Many people will welcome the prospect of the lowest-paid workers earning more. When the NDP government started down the road of boosting the minimum wage, the Business Council of B.C. supported the policy.
In normal economic times, most organizations that employ relatively low-paid workers can adjust to modest increases in labour costs associated with a higher minimum wage, without necessarily dampening overall job growth in the process. And this is more or less what happened amid the buoyant job market the province enjoyed from 2017 until mid-2019.
The government’s latest move on the minimum wage, however, is problematic. Businesses across B.C. have been hit with the biggest shock in decades as large swathes of the economy were shut down to help manage the COVID-19 pandemic. At the same time, the province’s export-oriented industries have been hammered by the sudden onset of a deep global recession together with disruptions to international supply chains and the virtual cessation of cross-border travel and tourism.
In truth, the timing couldn’t be worse for any government decision that drives up costs for business. In March and April, B.C. lost a staggering 400,000 jobs as tens of thousands of businesses and non-profits were compelled to shut their doors and laid off huge numbers of staff. Many self-employed and “gig” workers have also seen their incomes shrivel. When earlier minimum wage increases were implemented, B.C.’s unemployment rate was around 5 per cent. Now, it is above 11 per cent and still rising.
How bad are things for the private sector? A new survey conducted by the Business Council, the Greater Vancouver Board of Trade, and the B.C. Chamber of Commerce tells the story of a business community in distress.
Almost 80 per cent of the firms surveyed report dwindling revenues. Many have furloughed staff. Almost four in ten say they have deferred or cancelled capital projects since February. And while the B.C. government is re-opening the economy by gradually easing social distancing restrictions, barely one-quarter of the companies directly impacted by COVID-19 believe they are ready to restart and operate profitably.
Of interest, about one-third of B.C. firms have increased their digital or e-commerce presence in the past three months, a step that may allow them to run their businesses with fewer workers once the pandemic has passed.
A key question is how many of the 400,000 jobs lost in B.C. since February will “come back” as the economy wakes up over the coming months. Some undoubtedly will, as more companies re-open and ramp up activity. But thousands of small and mid-sized businesses are likely to close for good, either voluntarily or due to insolvency. Many others will resume operations but with fewer employees.
Restaurants and retail stores, for example, have been ordered to reduce capacity and limit the number of customers served; this will assuredly translate into less need for employees. All segments of B.C.’s large tourism sector will struggle to survive through the end of 2020 as visitor numbers plummet. More generally, shifts in consumer behaviour due to worries over the virus will weigh on the demand for some goods and services, depressing employment in certain industry sectors.
In this challenging economic environment, governments at all levels should be doing everything possible to encourage companies to re-hire and retain workers. This requires a concerted focus by policy makers on containing costs, including labour costs. Unfortunately, B.C.’s ill-timed increase in the minimum wage will work against this objective by making it harder for many businesses to rehire and retain employees.
Instead of aggravating an already difficult situation, the Minister of Labour should take an honest look at the carnage befalling large parts of our business community during this economic calamity and recognize the overriding need to get people working again.
Jock Finlayson is the Executive Vice President and Chief Policy Officer for Business Council of British Columbia.
As published by Black Press.