Increasing minimum wage puts money back into small business economy, says labour expert

An higher minimum wage has the potential to boost local economies by putting more money into the pockets of workers, according to a labour expert.

Following blowback against businesses that have cut benefits and paid breaks to account for the recent mandatory minimum wage increase in Ontario, York University labour geographer, Steven Tufts, said small business owners should embrace wage increases as an opportunity.

"When we take wages and increase them and put more money in the pockets of workers they buy the products from those small businesses and that's good for the economy," Tufts told Stephen Quinn, host of CBC's The Early Edition.

Reduce turnover

His comments come as some independent businesses in Vancouver say they're having trouble recruiting and retaining workers amid a housing affordability crisis in British Columbia.

B.C.'s NDP government raised the hourly minimum wage to $11.35 last fall and has committed to ultimately raising it to $15 per hour, but without a firm deadline. Ontario has announced it will increase the provincial minimum wage to $15 an hour by Jan. 1, 2019. 

Tufts said he's heard from business owners in Ontario who want to focus on the potential benefits of wage increases rather than the cost of higher wages.

"There are some small business folks … who are advocating that employers actually go along with the increase and turn the increase into an advantage," said Tufts, "That might actually reduce turnover because you're paying more."

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Historically, organizations like the Canadian Federation of Independent Business have had a gut reaction to wage increases and tend to send the same message each time the issue arises, according to Tufts.

"We have to put that in historical perspective, however. For the last 80 years, since minimum wage was put into effect by government, employers say the same thing every time and they almost react the same way to increases every time and that's independent of how significant the increase is," said Tufts.

He pointed to the wage freeze in Ontario in the 1990s, put into place by Progressive Conservative premier at the time, Mike Harris, saying Ontario wages have been playing catch up since then.

"Even if you're adjusting for inflation, getting it up to $14 or $15 is not that far back from where minimum age has been set historically. It's just we've had a number of years where it hasn't been raised at all so what we're seeing now is just an adjustment."

With files from CBC Radio One's The Early Edition