Business is the reluctant hero in the minimum wage transition: Don Pittis

We don't give business enough credit.

And sometimes it seems the lowest expectations for the ability of capitalism to adjust to changes like the rise in minimum wage comefrom those who claim to speak for business.

In a recent panel discussion on the CBC, C.D. Howe Institute president Bill Robson suggested that instead of raising the minimum wage, governments should use tax money to top up low wages, allowing businesses to continue employing just as many workers. That idea would horrify a lot of pro-market economists.

"I really don't like this business of creating a problem for businesses and then vilifying them," Robson said. "Sure, they're having trouble reacting. If you pay a lot of minimum wage jobs you're sort of on your back foot anyway, but the whole tone of this is terrible."

Reluctant superheroes

Inthe battle over minimum wage, one side has made business the victim, the other has made it the villain. Both have it wrong. Neither side is giving business credit for its superpower. Business should be seen in its true role as the reluctant hero.

The genius of business, as part of the capitalist system that makes Canada wealthy, is findingstrategies to maximizeprofit in the face of constant change.

Even at the old minimum wage, companies wanted to use as little labour as possible. Cutting jobs, including atTim Hortons, has always been one business strategy for increasing profit.

It is by no means clear that a cheaper minimum wage would make them use more labour. How much more bread would you eat if it was 20 per cent cheaper?

Whilecheaplabour is one component of business success, most businesses will tell you it is far from the most important.

The giant retailer Sears is not closing its stores because labour is too dear. Nor is the global construction giant Carilliongoing broke because of high minimum wages.

• Liquidation of British firm Carillion threatens 6,000 jobs in Canada
• Final Sears Canada stores shuttered for good

The most common reason for a company's failure is bad management, and the evidence of that is that some businessesfizzle while their direct competitors prosper in the same market. The constant challenge for managers is choosing the right strategy for constantly changing times.

As University of British Columbialabour economist David Green has pointed out, many companies do well by adopting a high wage strategy. The examples he offers are the restaurantchain White Spot and the up-market hardware retailer Lee Valley Tools.

High wages, not high prices

Costco is well known for paying above minimum wage, part of a strategy of telling employees it values them as people and workers. It just seems natural that the loyalty it offers its employees is returned, leading to better trained staff, low turnover and thus lower costs.

Keeping employees happy is one well-known strategy for business success. Even more important is keeping customers happy, including making them think you are a good employer.

• Demonstrators picket Tim Hortons after cuts to employee benefits

Ironically, before the public relations disasterthat was its reaction to the minimum wage hike,the Tim Hortonsfranchise owners in Cobourg, Ont., had been striving for good employee relations, offering paid breaks and benefits.

Creating and running a business is not easy. It is never static. Costs outside the business owners' control are always changing.

In many Canadiancities, soaring property rents have beena far larger challenge than labour costs.

The changing value of the Canadian dollar has beena constant burden, for many retailers more significant than the cost of staff.

Darwinian selection

You might have thought acrashin the priceof an industry's main product by more than 50 per cent, like the oil and gas industry suffered, would have led to total destruction. Not so, as oil and gas companiesfound a hundred ways to cut costs and survive. Even people in the business were surprised.By comparison, Alberta's rise in minimum wage seems irrelevant to the industry.

The amazing thing is that in the face of constant change, businesses survive at all. And yet they do.

Not all do, of course, just the best ones, which isthe ultimate Darwinian process of competitive selection.

Amazon is constantly nipping at the heels of Walmart. Canadian Target and Zellersjust didn't make it. The restaurant at the corner is in mortal combat with the one down the street. Businesses are constantly going out of business.

The ones that are quickest on their feet and the ones best able to cope with constant change are the ones that survive.

With minimum wage hikes comingacross the country, we as a society have decided that the true cost of Canadian labour is the price where Canadianworkers can live a minimum decent Canadian lifestyle.

Those businesses that cannot figure out how to do it will go broke or go away.

The business heroes, the ones that do figure it out, by installing technology, by increasing efficiency, by creating a better product with better service that you're willing to pay a little more for,will get the customers ofthose thatfail.

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