CFIB report warns $20 living wage could risk 600,000 businesses

New CFIB study finds a $20 living wage might cost Canada $44.9bn and threaten small businesses

CFIB report warns $20 living wage could risk 600,000 businesses

The Canadian Federation of Independent Business (CFIB) has released a report, ‘Affordability, minimum wages, and living wages: Striking a balance for small businesses,’ which examines the implications of implementing a $20 per hour living wage across each province.  

The analysis suggests that this wage increase would incur an additional cost of $44.9bn in wages and potentially jeopardize nearly 600,000 small businesses by rendering them unprofitable.   

Beatrix Abdul Azeez, a CFIB policy analyst, criticizes current wage policies, stating, “Minimum wage and living wage policies often miss the mark when it comes to truly supporting the most vulnerable workers. Governments are setting these wages with no anchor in economic reality, relying on subjective and unpredictable criteria.”  

She advocates for a departure from these “blunt tools” towards more effective strategies that address the rising cost of living without placing undue stress on small businesses.   

The report details the projected economic impact across various provinces:   

  • Newfoundland and Labrador could see costs of $943m, affecting 10,653 small businesses. 

  • Prince Edward Island might face $332m in additional wages, putting 3,100 small businesses at risk. 

  • In Nova Scotia, the impact could reach $1.933bn, with 14,048 small businesses potentially becoming unprofitable. 

  • New Brunswick's figures are similar, with $1.543bn and 12,519 small businesses affected. 

  • Quebec and Ontario, with their larger economies, could face the most significant impacts: $10.255bn and $16.741m respectively, threatening the viability of 141,927 and 200,387 small businesses. 

The report also highlights the broader economic effects of recent minimum wage increases, noting that 60 percent of small businesses had to raise wages for other employees, and 59 percent increased their prices, contributing to inflation.  

Additionally, 31 percent of small businesses reduced hiring, and 25 percent cut jobs, particularly among young and unskilled workers.   

Jairo Yunis, CFIB's director for BC and western economic policy, suggests a more holistic approach to tackling Canada's cost of living crisis. He recommends stabilizing essential costs like rent, food, and gas, alongside supporting workers and businesses through tax reductions. 

  To mitigate the impact of rising wages, CFIB recommends several policy changes:   

  • Lower other taxes and payroll costs for small businesses, including the small business tax rate and contributions to CPP, EI, and health/education payroll taxes. 

  • Establish a transparent and predictable minimum wage setting process that reflects market conditions and considers economic impacts. 

  • Adjust minimum wages in line with private sector wage growth or a percentage of the median wage. 

  • Address underlying affordability issues by increasing housing supply, reducing energy taxes, and easing trade barriers. 

  • Provide targeted financial support for vulnerable workers through reduced personal income tax rates, increased basic personal amounts, and expanded tax credits. 

These measures aim to balance the need for fair wages with economic stability and business viability.