P.E.I.'s minimum wage rising in 2023, but inflation may claw it back

With minimum wage in P.E.I. set to increase to $15 per hour by the end of2023, some Island businesses say it's good to see wages go up but governmentneeds to act immediately to address inflation or it'll all be for naught.

Ramila Agrawal, the owner of The Spice Store in Charlottetown, wishes the government would "come up with some kind of scheme to support us during this period, because we have so many challenges as a small business.

"Our return on investment is pretty much stuck if we have to bearthese extra wage costs," she said, adding that staff do need a raise because ofinflation.

Agrawalsaid much of The Spice Store's stock, which comes from India, has been made more expensive by shipping costs that increased fivefold in the last two yearsbecause of inflation, worldwide oil prices and impacts of the pandemic.

In September, the P.E.I. government said it would increase minimum wage in two adjustments in 2023. First, there will be anincrease of 80 centson Jan. 1, bringing minimum wage up to $14.50. Then an additional 50-cent increase will be implemented in October.

The annual inflation rate on P.E.I. rose to 9.7 per cent in November, while nationally the rate went down to 6.8 per cent. The Island's inflation rate has been the highest in the country every month since March 2021.

Blake Doyle, president of the Greater Summerside Chamber of Commerce, said the increase will take a toll onbusiness and will end up being reflected back in the form of consumer price hikes because of the increased cost of goods.

"This is just going to be absorbed into peoples' regular spending," Doyle said. "We would like to see some supports from government that may offset [this], as they've done for other constituents.

"From the chamber's perspective, we recognize the hardships that inflation is causing on everyelement of our economy and society. This is a planned increase, we'll adapt to that, but we do recognize that it will be an impairment to business, and business will have to find a way to accommodate another increase in a series of increases over a couple years that have been really challenging."

Balancing act between fair wages and profit

George Jia, an associate professor of economics at the University of Prince Edward Island, said it's not common to see more than one minimum wage increase in a year.

But the P.E.I. government's decision to introduce changes in increments is "welcome news" to some.

"That allows the policy to, you know, trickle in a little more slowly and then you can actually see: 'What are the responses of the economy to these kinds of changes?'" Jia said.

Jiasaid he thinks the timing of the second increase in October may be related to the fact that the tourist season in P.E.I. will be largely over by the fall.

That will mean business owners willnot have to pay a significant increase in wages over the summer while employing a large seasonal staff.

Jia also said it's important to remember the minimum wage increase will not have much of an impact in many of the Island's industries, as some employers have already had to offer compensation above minimum wage to attract and retain staff.

'I have no idea what's going to happen'

That's certainly the case for VKGreenhouses. Peter Meijer, senior operations manager at the Charlottetown business, said paying workers above minimum wage and maintaining a profit is always a balancing act.

"It's about finding the right spot where, you know, we're taking care of the people that work here and we're selling to a community at a price that's fair, without trying to gouge the market in any way and still running a good business," he said.

Meijer said as minimum wage increases, the greenhouse will also likely raise its workers' wages.

Jia said students and part-time workers are likely among those who will feel a meaningful benefit from the minimum wage increase, but it's still difficult to say how much it will financially affect the population at large in the long run.

"We don't have a crystal ball,soI have no idea what's going to happen next year," Jia said.

"What if inflation does not come down? And then for P.E.I., specifically, what happens if the rent continue[s] to skyrocket into the new year?"