Minimum wage increase hits Strathmore

Miriam Ostermann
Times Associate Editor

 

A $1 minimum wage spike across the province has numerous Strathmore businesses bracing themselves, cutting corners, and adjusting hours in a cash-strapped economy that’s already plagued with layoffs. The NDP’s course of action, which raised the Alberta minimum wage from $10.20 to $11.20 on Oct. 1, is the first of future hikes, part of an an ambitious goal of boosting the minimum wage to $15 by 2018. Although last week’s increase remained comparatively low, local businesses have felt the financial impact, are preparing to adjust their operations to balance their financial load, and are questioning the timing of the implementation when slumping oil prices contributed to thousands of job losses thus far.
“It affects our bottom line immediately,” said Peter Klironomos, owner of the Strathmore Station and Pub.
“With the economy being the way it is right now, we have to be a bit more careful because we won’t be able to allocate all these extra hours to people. Eventually what will happen is it gets passed on to everybody else I suppose. Whether it’s NoFrills or a restaurant, you’re going to have to raise your prices, otherwise you can’t survive.”
The Station employs 80 employees, out of which 40 to 50 have seen increases to their hourly wage. While wait staff and liquor servers, who also receive tips, previously received a minimum of $9.20 per hour, the Station, in compliance with the provincial government’s decision, noticed payroll costs go up when the wages increased more than a dollar to $10.50 per hour. In chorus with the economic effects of droughts in California and higher food costs – specifically in the beef industry – Klironomos argued the increase should’ve been introduced more gradually. Alberta has increased minimum wage based on the cost of living for the past 10 years. While many businesses expected a three to four per cent increase, the recent jump corresponds to a 10 per cent increase.
Despite employees in the food and beverage industry noticing a slight increase in their wages, with much of their paycheque made up of tips, the modification is resulting in the opposite effect of its intent elsewhere in Strathmore. As a store that employs a number of high school students, the Canadian Tire has only seen changes to the income of seven part-time high school students. However, if wages continue to spiral upwards, the store’s owner Randy Orford expects consequences to present themselves in the number of people the store can employ with only so much money being allocated to wages.
“At this point the $11.20 has very little impact on our business today, but $15, certainly, that would have some substantial impact,” said Orford.
“What the government is trying to achieve is not being achieved. All we’re doing is raising the wage of a bunch of high school kids that is just a part time job. They’re more worried about people that are working full-time at that wage and raising their income, but that’s not the case, that’s not what’s happening.”
According to the Alberta Chamber of Commerce, Strathmore’s reaction is mirrored in communities across the province. In fact, the chamber predicts low-income earners will lose numerous benefits when receiving $15 an hour. Based on their projections, in bumping someone from $10.20 to $15 an hour, in a year the individual would earn an additional $9,600. However, once the wages reach the final phase in three years time, employees will no longer be eligible for the GST credit, the working income tax benefit, the child tax benefit. As a result, single parents would only receive $6,900 more while the federal government would receive nearly $3,000 in reduced benefits and higher taxes.
“The other things that’s missed in this whole discussion is … that it won’t just drive up the cost of labour for those people who are sitting at minimum wage, it’s likely to drive up wages in general,” said Ken Kobly, president and CEO of the Alberta Chambers of Commerce. “Not all businesses can, but some will increase their prices to offset costs. I think there is a fair bit of worry around the province, as to what’s going to happen when it hits its full phase and is $15 an hour. I think their idea of lifting people out of poverty is a good idea, it’s an admirable thing to go for, but there are different ways of doing that.”
The chamber conducted a study with close to 1,600 responses from businesses in over 100 communities within the province. The majority of responses suggest that Alberta businesses expect to reduce staff, increase prices, cut down on hiring high school students, and nine per cent responded by saying they would close their doors. Kobly added he believes independent businesses in smaller communities tend to be at a higher risk.
One of Strathmore’s independently owned businesses, Rebel Sports, only recently opened its doors in downtown Strathmore. Having owned a business in the food industry previously when minimum wages jumped from $5.35 to $8 and a staff of 26, owner Rhonda McCoomb hasn’t felt the impact with her current staff of six. However, with the $15 on the horizon she admitted the change is worrisome.
“I think by 2018, that’s really going to close a lot of doors,” said McCoombs.
“I like to give my raises to people that earn them. I understand $10.25 is really hard to live on, but it’s really a fine line between finding a balance. What’s more important, having businesses open or paying people more?”
While the Alberta Chamber of Commerce said most businesses will likely be able to absorb the added costs, they expect future increases will leave a sour taste in the mouths of independent small businesses such as locally owned pizza places, bottle depots, and daycares. The chamber is planning on surveying their members again in a month time to see how they have balanced off the increase to their labour cost.