Minimum wage or tax increase?

Minimum wage or tax increase?

By Payman Parseyan

Alberta’s minimum wage will rise starting October 1st, 2018. The idea is to give people more money so that it can help to make ends meet. Except, this isn’t going to happen. Businesses who pay minimum wage usually have tight margins. Businesses are not charities and are private FOR-PROFIT entities. If costs go up, this will likely result in price increases. Minimum wage wasn’t meant to be a living wage. It was meant to be an introduction wage for someone to be introduced to the labour market. A rate for a 14-year-old going to their first job or someone who has yet to develop to the work force.

Minimum wage will increase from $13.60 to $15 per hour. Provincial taxes will increase from $768 to $1040/year. That is a 10% increase in wages and 35% increase in taxes. Minimum wage increases raise prices for goods+ services and they result in higher taxes for the government.

For example:
Someone making $13.60/hr now makes $15/hr. They used to pay $10 therefore being left with $3.60 after that (let’s assume 0 tax) but as costs for the business increase, so do products. Labour costs also include insurance, coverage, admin, accounting and are usually 20-30% above the wage. Same meal now costs $11.65 and the person is left with $3.35

Minimum wage increases production costs, lowers part-time work and will put more pressure on current workers to take on more work as employers will be reluctant to hire additional staff. Solution?

Increase the minimum taxable threshold so that people aren’t paying taxes until they earn a full minimum wage. Working $13.6/hr for a year = $28,288/year. The minimum tax threshold is currently at $18,915/Year and this number should be increased to allow people to take home more of their earnings and businesses to grow. Growing businesses will hire more people and as their staff gain more experience, their wages increase. $15/hour, after tax is $25,825.00/Year. $13.60/Hour without tax is $28,288. Who is the real winner when minimum wage increases?

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