Skyrocketing inflation could lead to a big jump for the Yukon’s minimum wage next year; it’s tied to the Consumer Price Index (CPI), and the Yukon Party says that could be a problem for businesses.
Last week, the Yukon Party continued its attack on commitments made in an agreement between the Liberals and NDP.
The official Opposition asked if the minimum wage will continue to rise with inflation – which has increased substantially since last spring – when the NDP-Liberal agreement keeping the minority government in power expires next year.
Currently, the minimum wage is $15.70 an hour in the Yukon. As part of the Confidence and Supply Agreement (CASA) between the Liberals and the NDP, annual increases are now tied to the CPI. The wage increases every April 1 based off that figure.
Going off the CPI (7.5 per cent) for Whitehorse in September, the Yukon Party asked the government if businesses should prepare themselves for a potential $1.18 increase in the hourly wage next spring.
In question period last Monday, YP MLA Geraldine Van Bibber asked Community Services Minister Richard Mostyn when businesses will know what the increase will be next April.
“Yukon businesses are looking for certainty as they try to navigate the economic challenges that are ahead,” Van Bibber said.
“A potentially massive increase to the minimum wage could have a serious impact on a lot of small and medium businesses.”
Mostyn said the minimum wage increase is based off the annual CPI report from the Yukon Bureau of Statistics, which comes out in February. He said tying the minimum wage to inflation is necessary.
“We are working very, very hard to make sure that this territory, in the face of all the inflation pressures we are seeing, is affordable for Yukoners,” he said.
“A minimum wage tied to inflation — as with other social supports — aims to help to reduce poverty and increase affordability for Yukon’s lowest wage earners.”
Mostyn told reporters last week the government was clear and transparent with businesses about minimum wage increases last year, informing them in late January what the CPI-based increase would be.
Mostyn asked if the government would reconsider the current model of raising the wage, given huge increases in the CPI – 7.6 per cent for Whitehorse in October – and a rapidly approaching expiration date for his party’s agreement with the Yukon NDP. The minister was non-committal.
“I’m going to say that we haven’t made a decision yet how we’re going to proceed with this – and we actually don’t even know what the rate is yet,” he told reporters. “I think everybody should take a deep breath and wait to see what happens in the early New Year.”
The CPI for Whitehorse published in February of this year was 3.3 per cent, compared to the national CPI of 3.4 per cent, Statistics Canada reported.
The CPI measures the price change for goods and services bought by consumers in Whitehorse.
It essentially shows how the average cost of a large basket of goods and services goes up on a monthly and annual basis. So as the price of gas, milk, eggs and many other goods climbs, so does the CPI.
The point of tying the minimum wage to the CPI is to ensure pay for the territory’s lowest-income households reflects the cost of goods and services in the territory, said NDP Leader Kate White.
“We’re talking about the lowest wage earners in the Yukon,” she told reporters last week.
“It should be tied to inflation…and we should also make sure that it doesn’t drive people into worst poverty.”
White said she doesn’t know of many Yukon businesses that don’t pay more than the minimum wage. She expects low-income employees will be helped far more than any businesses will be hurt.
Shayna Hammer, the executive director of the Yukon Chamber of Commerce, disagrees.
Hammer said the chamber includes more than 750 businesses, most of which are small or medium-sized enterprises.
Though she acknowledges many of them “are already offering competitive wages,” she said her members would still be concerned with a large jump in the minimum wage.
“Further increases definitely invite the risk of rendering a lot of smaller businesses, especially in a post-COVID economy, unviable,” she said in an interview.
“Continued increases will have detrimental impact on small and medium enterprise in Yukon, pushing up all costs of living in a continuously increasing cycle,” she said.
“So if we’re looking at affordability, maybe that’s not quite the right choice at this point.”
Hammer said an increase could lead to layoffs, reduced hours and even a push to replace workers with automation wherever possible.
She also asked if tying minimum wage to the CPI would go both ways, wondering what would happen if the index went down.
She also questioned whether minimum wage hikes are even effective in increasing affordability.
She referenced a 2020 Yukon government evaluation of proposed changes to minimum wage that called the minimum wage a “crude anti-poverty measure” at best.
That report said one-third of an increased minimum wage is deducted. The remaining 70 per cent goes to students and teenagers who have financial support from their parents.
“This leaves just 20 cents on the dollar for the poor,” the report states.
The findings from that report, however, are far more ambiguous than that, saying economists are divided on the economic impact of minimum wage increases.
“The lack of evidence cuts both ways,” it reads, “with little clear and convincing evidence that minimum wages harm labour market outcomes for low-wage workers, nor much evidence that they reduce poverty.”
The report notes the latest numbers available at the time showed 1,500 employees were earning less than $15 an hour in the territory, about seven per cent of the Yukon’s employees. All Yukoners are now required by law to earn more than that.
Hammer suggested there are other ways to improve affordability outside the minimum wage through tax breaks and social programs.
Yukon Party Leader Currie Dixon believes this is a more appropriate route.
He told reporters last week his party would prefer to increase affordability through a series of cost-saving measures for Yukoners such as cutting the fuel tax temporarily and enriching the home owners grants program.
He also said the government should return to re-evaluating the minimum wage through an independent committee, not by tying it to inflation.
“When you increase the minimum wage too dramatically, too quickly, what you’re going to do is put the pressure on small businesses to have to make decisions about either cutting jobs or reducing the amount of business that they do,” he told media.
“And we don’t think that’s a sustainable path either for Yukon businesses.”
Mostyn told the legislature last week the government is also tackling affordability through means beyond minimum wage. He touted the government’s work on universal childcare and subsidies for heating costs, both through fuel wood and electricity.
The current minimum wage model tied to the CPI will need to be re-evaluated once the CASA agreement expires Feb. 1, 2023.