Tax policy key to unlocking minimum-wage debate By: Dan Lett Posted: 7:00 PM CDT Wednesday, Aug. 10, 2022

Opinion

Hey there, time traveller!
This article was published 09/08/2022 (772 days ago), so information in it may no longer be current.

It’s never a good idea to start off by saying a story published in this newspaper isn’t really news, but I’m going to do it anyway: the disagreement between labour and business on a new minimum wage is one of the least surprising stories of the summer.

For all the right reasons, labour wants people to reap more for their hard work; business is just as justified in its desire to keep labour costs at a reasonable level. The fact that both sides are right is not, however, creating any consensus.

The Manitoba minimum wage is scheduled to rise to $12.35/hr in October, but there is pressure, with inflation running white hot, to go even further. If the Progressive Conservative government wants to do that, it has to make an announcement by (ironically) Labour Day.

Labour representatives would like to see it rise to $16.15/hr, which they argue is a living wage in Manitoba. Business types are opposed, claiming it would cripple industries that rely on minimum-wage labour.

• Business, labour groups divided on new minimum wage

There are signs the notoriously business-minded Tory government understands this isn’t just about overhead. Labour Minister Reg Helwer acknowledges, through a spokesman, minimum wages are key to the recruitment and retention of workers.

Perhaps it’s time to change the entire context of the discussion, with government re-examining its tax policy.

No government in this province of any stripe has ever solved the dilemma that is minimum wage. Low-income earners were just as disadvantaged under the former NDP government as they are now under the Tories.

That said, over the past six years, Manitoba’s Progressive Conservative government has devoted hundreds of millions of dollars to improve the standard of living of high-wage earners, with almost nothing for people at the lower end of the socio-economic ladder.

Former premier Brian Pallister frequently patted himself on the back for indexing the basic personal exemption, the threshold that determines when someone starts paying provincial income tax.

There have been other Tory tax cuts whose benefits skew heavily towards higher-income Manitobans.

Pallister claimed he was directly helping the lowest-income Manitobans, but a 2016 analysis by the Canadian Centre for Policy Alternatives showed raising the BPE provided only a few dollars in tax relief for low-wage earners. Top-level earners (more than $180,000 a year) saved more than $500.

There have been other Tory tax cuts whose benefits skew heavily towards higher-income Manitobans.

The one-point cut to the provincial sales tax costs the government roughly $350 million in unrealized revenue every year. Although it would be technically correct to claim Manitobans, regardless of income, are paying less PST, the overall economic impact of this cut for people making minimum wage is negligible.

The only scenario where a one-point cut in PST has a big impact is when you buy big-ticket items (automobiles, newly constructed homes). PST cuts may have enormous political value, but to most Manitobans, they have little value as a mechanism to make life more affordable.

You could argue those savings are available to everyone, but it’s pretty clear you have to have money to realize the benefits.

Pallister spent tens of millions to eliminate sales tax completely on things such as home insurance, will preparation, personal income tax preparation and probate fees. You could argue those savings are available to everyone, but it’s pretty clear you have to have money to realize the benefits.

Then we come to the cut to education property taxes.

It’s not incorrect to assume most homeowners — the people who benefit directly from this tax cut — are fortunate enough to have incomes significantly higher than minimum wage affords.

Again, a 2021 CCPA analysis showed, on average, someone would have to earn $52,000 a year (about $25/hr) to cover a downpayment, land-transfer tax and legal fees, and service a mortgage for an average-priced home ($300,000) in Winnipeg.

It’s not hard to see how the impact of the education tax cut (currently costing government nearly $400 million a year) disproportionately benefits higher-income individuals.

How do we connect tax policy and the minimum wage?

Other jurisdictions have shown fair and appropriate taxation of higher-wealth individuals and businesses allows government to provide direct support to people at the low-end of the income ladder. Put another way: if you can help low-income Manitobans reach the level of a living wage, through a combination of minimum wages and social supports, they will be better off — without adding significant burden to employers.

The Tory government’s tax policy has left it with little in the way of fiscal resources to support low-income Manitobans. As a result, it is essentially passing the entire burden of supporting lower-income folks to employers, even though it is aware, with inflation running high and uncertainty surrounding a lingering pandemic, employers have little capacity to pay more.

People often think of tax cuts as a windfall. The minimum-wage debate is a graphic reminder tax cuts are a qualified windfall for some and no windfall for others.

dan.lett@freepress.mb.ca

Dan Lett
Columnist

Born and raised in and around Toronto, Dan Lett came to Winnipeg in 1986, less than a year out of journalism school with a lifelong dream to be a newspaper reporter.

   Read full biography