The head of a committee that proposed a controversial two-tiered minimum wage for Manitoba says a lower minimum wage for employees who receive tips is warranted to protect against negative economic consequences.
But John Godard, a professor of industrial relations at the University of Manitoba, says governments need moral and economic justification to make the move.
In an interview yesterday, Godard urged New Brunswick Labour Minister Martine Coulombe not to make a decision on a two-tiered minimum wage simply to appease two competing sides of a divisive issue.
Coulombe said this week that she has now received a report reviewing two types of two-tiered systems: one with lower wages for those younger than 18 and a second that would see a lower minimum wage for employees who receive tips, such as servers and bartenders.
New Brunswick small businesses have cried out for help as the province prepares to raise the minimum wage to $10 per hour in September.
Poverty groups, labour unions and university groups have staunchly spoken out against a two-tiered minimum wage.
Godard chaired a minimum wage committee in 2001 in Manitoba which proposed a two-tiered system to offset a jump in the minimum wage to what he said would be the equivalent of $11 today.
The recommendation faced criticism and was scrapped by the Manitoba government, although several province’s have a form of the two-tiered system in place today.
“I had this commission where the business community and especially food services was crying their eyes out about how the minimum wage is too high, and then I had the labour community arguing that everyone should make $50,000 a year,” Godard said.
“The traditional thing to do was simply to get a middle ground that didn’t offend either party too much.
“But I thought of this radical thing where I will give the labour community the substantial increase, but I will give the business community the two-tiered system.”
Godard said he wanted a minimum wage that would have no adult earning below the poverty line, but he then found that a substantial increase in the minimum wage would hurt youth employment.
A large wage hike would affect the number of employees businesses could hire and retain.
“If there can be some moral justification for it as well as an economic one the two-tiered system makes sense,” Godard said.
“Not just on the employer’s pockets, but on employment.”
University of Toronto professor Morley Gunderson, an expert in labour economics and author of an Atlantic Institute for Market Studies report on the minimum wage, says there is a correlation between lower youth employment levels and a higher minimum wage.
A 10 per cent increase in the minimum wage reduces the employment of youth and teens by roughly three to six per cent, according to Gunderson.
“The benefit of the two-tiered system is that it gives a little more flexibility,” Gunderson said.
“In the case of waiters and waitresses it is clear that their base wage is less of a relevant factor in their compensation.
“If you pay a $10-an-hour wage and then tips amount to another $10 an hour that’s not a minimum wage, it’s a pretty high wage, and not raising the minimum wage for them is not so big of a factor.”
The structure has been adopted by some provinces.
In Nova Scotia, for example, the minimum wage is $9.65 per hour. But inexperienced workers only make $9.15 per hour. An inexperienced employee has done a particular kind of work for less than three calendar months.
Ontario’s minimum wage is $10.25 per hour.
But students under 18 and working less than 28 hours per week or during a school holiday receive $9.60 per hour.
Liquor servers, who would also earn tips, earn a minimum wage of $8.90 per hour.
The New Brunswick non-profit group Common Front for Social Justice has been vocal against any proposals from business groups to stop a planned increase to minimum wage or to adopt a two-tiered minimum wage program.
It argues that wages must be the same for work of equal value, not tied in with the age of the person performing the work or the type of work.
University student groups in the province have also voiced their displeasure with a potential two-tiered system that would limit the ability for students to save and in turn pay tuition costs.
Interim Liberal leader Victor Boudreau has said the Opposition is against any two-tiered system, stating that if you are qualified to work in a specific job, you should be paid accordingly no matter your age or job industry.
Conversely, the Canadian Restaurant and Foodservices Association has commended the New Brunswick government’s reexamination of the minimum wage, which it says will assist small businesses.
“A lower wage for inexperienced workers or those who earn tips is common practice in other Canadian jurisdictions,” said Luc Erjavec, the association’s Atlantic Canada vice president.
“Small businesses in New Brunswick, particularly during an economic downturn, have been hit hard by the 21 per cent increase in minimum wage implemented by the previous government.
“A two-tier wage system recognizes the high cost of training inexperienced workers and significant income earned by tipped employees, and could help employers create new jobs across the province.”
Erjavec argues that the increase in minimum wage threatens the New Brunswick restaurant industry, which has more than 24,000 direct employees.
It also limits the number of students the industry can hire.
The restaurant industry currently provides roughly one in five jobs for people under the age of 25.
“It’s a divisive issue,” Godard said. “If I was the government in New Brunswick I would want real proof to move to a two-tiered system in that they just aren’t doing this for pure political reasons.”