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On May 1, Quebec's minimum wage will increase by 7%, from $14.25/hour to $15.25/hour. In response, some business owners were alarmed by the supposedly staggering increase in prices that would follow. That was the case for FoodTastic oligopoly owner Peter Mammas, who told La Presse that "a 7% increase in the minimum wage cannot be absorbed by the industry without a price increase."
According to Raphaël Langevin, a doctoral student in economics at McGill, "as much as the increase in the minimum wage generates price increases in certain sectors, a 7% increase in the minimum wage will never result in a 7% price increase in the current year." Even in the more affected sectors such as restaurants, where a large portion of employees earn the minimum wage, an equivalent price increase would be impossible.
The "economic catastrophism" displayed by the business owners in the La Presse article is nothing new, explains Langevin: "These people just have a view of their own business, but when you take a step back and look at the macro-economic (larger) level, yes there are beneficial effects. [...] Business owners need to understand that they are not economists, their focus on their own business [prevents them] from seeing the big picture."
Wage increases that don't keep up
This so-called extreme increase in the minimum wage does not even seem to match the increase in productivity in sectors where the minimum wage is important, which is increasing due to labour shortages.
While the productivity of workers and the money they bring in to the company is rising, the real minimum wage seems to be stagnating. "If we had to match the increase in the real minimum wage [since its inception] to the increase in real productivity, we would be at a minimum wage of around $15/hour in 2016. For comparison, the minimum wage at the time was $10.75."
This stagnation of the minimum wage in relation to worker productivity allows companies in the restaurant industry to make significant profits. This is the case for FoodTastic, which owns some 20 chains with more than 900 restaurants in Canada and whose sales will exceed one billion dollars this year.
Francis (fictional name), a long-time employee of a popular chain in the FoodTastic empire, takes issue with the CEO's assertion that it would be impossible for them to absorb a 7% increase in the minimum wage: "I think they can afford it, they're making a lot of profit, otherwise they couldn't afford to buy a lot of them [restaurant chains]. And at worst, they'll make a little less profit."
Michel Rochette, a high-ranking member of the Canadian Retail Council, an organization that serves to defend the interests of the grocery cartel in Canada, says that this increase will put pressure on the industry: "Wages have been increasing a lot for a while now."
It's the salaries of the top executives of these grocery stores that have gone up a lot in the last year. Loblaw's CEO, Galen Weston, saw his salary increase by 1.2M$ in 2022, which represents 55% more than the previous year. Metro's top five executives have seen their annual bonuses increase by 13.7% in the same year.
As for the employees of these large grocery chains, the majority of them remain around the minimum wage, which increased by 14%, but over a period of three years rather than one.