The Quebec government acted correctly in announcing the hourly minimum wage would be hiked from $13.50 to $14.25 on May 1, rather than the $18 called for by some community groups and unions, says the Montreal Economic Institute think tank.
The Syndicat de la fonction publique et parapublique du Québec (SFPQ) and many other groups had argued that the hike to $18 would be justified to “ensure that a single person working 35 hours a week can work and escape poverty.”
The MEI, in a Viewpoint prepared by its economist Maria Lily Shaw and public policy analyst Gabriel Giguère, Public Policy Analyst at the MEI, argues that “even though a hike to $18 an hour may seem beneficial for low-income workers, this steep 33% increase would have negative consequences on the financial health of a range of companies in the retail, food services, and accommodation sectors... many workers in these sectors could lose their jobs.
“No fewer than nine out of 10 small and medium-sized enterprises would be directly affected by such a minimum wage hike,” the think tank’s statement adds. “Retail employs 45% of all minimum wage workers, the largest percentage of any sector, followed by the accommodation and food services sector with 23%. Together, these two sectors thus account for 68% of minimum wage earners, a total of over 182,000 employees.
The MEI adds that those sectors “have very low profit margins.
“Businesses in these sectors don’t have much left over once they have paid their taxes and subtracted their administrative and operating expenses such as material, labour, and manufacturing costs,” says the statement. “The profit margins for gas stations and restaurants, for example, are less than 3%, meaning that for every $100 they make in sales, they take home a net surplus of only $3 once they have paid their employees and covered their other expenses.”
The MEI contends that an $18 minimum wage “would jeopardize the jobs of typical minimum wage workers, namely students with part‑time positions in sectors that might not be able to absorb such an increase, given their very thin profit margins.
“As for single mothers, often used to illustrate the plight of minimum wage workers, their situation is not at all representative of the category. Furthermore, there exist other, more effective and less economically harmful methods to directly assist single mothers, such as education and training, as well as more targeted measures.”