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Minimum wage increase misses the target


March 7, 2008
By Canadian Pizza

The Saskatchewan government’s plan to reduce poverty by
raising the minimum wage is misguided and will not target low income
households, says the Canadian Restaurant and Foodservices Association
(CRFA).

The Saskatchewan government’s plan to reduce poverty by raising the minimum wage is misguided and will not target low income households, says the Canadian Restaurant and Foodservices Association (CRFA).

“We’re disappointed that the government has chosen political expediency over real solutions to addressing poverty,” says Courtney Donovan, CRFA’s vice president for Manitoba-Saskatchewan. “The research overwhelmingly shows that minimum wage is a blunt tool for addressing poverty. Lowering taxes and increasing the personal basic exemption are much more targetted ways of assisting lower income earners.”

The majority of minimum wage earners do not rely on their earnings as a primary source of support. Most are young people between the ages of 15 and 24 who live at home with their parents, according to a recent release from the CRFA. In the foodservice industry, many of them earn tips well in excess of their hourly wage.

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“Any benefits associated with minimum wage increases are just as likely to affect high income households as low income households,” says Donovan.
Researchers from the Organization for Economic Co-operation and Development conclude that minimum wages have almost no effect when it comes to reducing inequality and poverty among households, the press release further notes.

“A mandated across-the-board increase with the related rippling effects is not an appropriate way to deal with the very small minority of minimum wage earners who are supporting a family. This sweeping approach sideswipes young people needing a summer job or their first job,” says Donovan.

Raising the minimum wage too quickly can actually hurt lower income earners, because it discourages job creation and reduces entry level opportunities for students and others looking to gain a foothold in the job market, according to the association. In the labour-intensive foodservice industry, thirty cents of every dollar in sales goes directly to staff wages and payroll taxes, an amount second only to food and beverage costs.