Raises vs. tax cuts

Frankly Speaking with Frank Likely

Published on March 15, 2017

Frankly Speaking with Frank Likely

Every employee should be able to afford to buy the products he/she makes or sells.

It is from this belief that I approach the debate over increases to the minimum wage.

Usually about this time of year, provincial governments announce some increase to the provincial minimum wage. Typically, employers denounce the extra costs and predict higher prices to be passed onto the consumers. Employee groups on the other hand praise the increase, but suggest it is still not enough for most employees to enjoy a decent standard of living. Both sides may be right in their own way.

The debate then usually progresses to an argument over whether the best way to improve the employees’ situation is to increase their wage or to increase their basic tax exemption.

Both options provide the employee with more disposable income, but in greatly different ways. An increase in the minimum wage provides more money in the employee's pocket immediately, although usually by just a very little bit, often just a few dollars each paycheque. It is most often the employee groups who see this as the better alternative.

An increase in the basic personal tax exemption on the other hand usually provides a bit larger amount to the employee, but at the expense of having the income deferred until tax time. It is the employers who usually prefer this alternative as it does not mean any increase in their costs of operations.

There is a third option, which does not seem to get as much attention as these other two, but, I feel, deserves serious consideration. That is an increase in employer deductions to offset any increase in the minimum wage.

Employees have more disposable income. It doesn't cost employers any more to operate. It would appear to be fair for both sides.

 

Frank Likely is a retired Anglican minister and past president of the Springhill and Area Chamber of Commerce.