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Canadian Echoes

October 25, 1996
State Capital Bureau

JEFFERSON CITY - On November 5, Missourians will vote whether to accept the highest minimum wage rate in the nation. But for more than a year, one Canadian province already has been dealing with the highest wage in that country.

Since last October, Canada's west-coast province, British Columbia, has been paying workers $7 an hour, which is roughly equivalent to $5.25 in U.S. currency.

The province's economy relies mostly on tourism, service, forestry and mining. At 8.5 percent, British Columbia has the second lowest unemployment rate in the country, and it is continuing to drop.

Despite a growing economy, much like Missouri's, opponents to the increased wage contend the higher rate is hindering further growth.

"Having the highest minimum wage is viewed as a barrier to creating more jobs, especially in the low scale areas because these are low skilled jobs and the margins aren't very high in a small business," said Suromitra Sanatani, director of the Canadian Federation of Independent Business in British Columbia.

She said the minimum wage should not be raised to a level at which people can live comfortably, because those jobs are meant only to be stepping stones, especially for young people.

But proponents of the wage increase argue the rate needs to be high enough to provide a living above the poverty level.

"Really there's no excuse for a society as rich as Canada and the United States to not pay workers a wage they can live on," said Bill Tielman, director of communication for the British Columbia Federation of Labor.

Tielman said the economy tends to improve under a higher minimum wage, because these workers typically spend all their income instead of saving it. And more money in workers' pockets means more money into the economy, he said.

Tielman said because of a recent boom in the national economy, there is probably no better time for a wage increase in Missouri.

"I would argue that the time to increase minimum wage where it's going to cause the least amount of disruption is when your economy is growing, goods and services are being produced, and when you have the ability to absorb a modest increase," Tielman said.

But Fazil Mihlar, a policy analyst with the Fraser Institute said since last year's wage hike, British Columbia probably has lost some business to its closest neighbors - Washington State and the province of Alberta to the east.

The Fraser Institute is a pro-business research center for social and economic policy located in Vancouver, British Columbia.

Mihlar said Missouri has even more to worry about with seven surrounding states with borders no more than just a few hours away. He said if local businesses are forced to raise prices as a result of higher wage rates, consumers will spend their money elsewhere.

"If the minimum wage is raised, relative to Illinois, what you do see is that increase in wage has to be reflected in the price of the item being sold," Mihlar said. "I think consumers will quickly get into the groove of buyings things not in Missouri, but in Illinois or Kansas."

He speculated if people buy from non-Missouri businesses, the more likely that the minimum wage would cause layoffs.

For example, Mihlar said some phone companies are operating out of the Caribbean instead of the United States due to lower costs.

Tielman, with the British Columbia Federation of Labor, said blaming slower competition on a minimum wage hike is absurd.

"The economic competition between based on the total economy and all sorts of factors input into it," Tielman said. "To reduce it to a minimum wage hike being a factor in competition is frankly ridiculous."

He added competition and job losses usually are cited as objections to a wage increase debate. But aside from an occasional anecdote, Tielman said there was little documented proof.

Still, with more than a year under the highest minimum wage in Canada, British Columbia's unemployment rate is declining steadily, and the economy is continuing to grow.