Minimum wage increase little more than a tax grab. (Back Page).

If there ever was a subject that could raise a stink in this province, it's the minimum wage or, more precisely, an increase in the minimum wage.

That's exactly what happened earlier this year and will again in the fall--the minimum wage is on the rise and so are tensions on both sides.

The increase comes in two stages--a 35-cent or five-percent hike--is already in place. A further 30-cent rise comes in November. While the two sides--advocates for a higher minimum wage and employers who are less than thrilled with higher payroll costs--reacted predictably to the changes, the debate has been awfully simplistic. Workers deserve it and employers complain the marketplace should have a role in determining wage rates.

Obviously, management looks like an ogre in this. How can anyone be opposed to an entry-level worker getting a raise?

Well, there's one element of this story that never sees the light of day and it's too bad because it provides a far better insight into the impact of a minimum wage increase.

Traditionally, we have looked at the gross increase to the worker, not the net. And that's the problem.

The Minimum Wage Board was set up to provide some measure of protection to entry-level workers and establish a basic rate of pay. The idea of raising the minimum wage every once in a while is to give these workers, usually young people securing their first job, a small bump in pay.

However, when you look at the increases after payroll deductions, the story is quite different. What, ostensibly was a five-per-cent increase earlier this year is not five per cent at all. Depending on whose perspective you approach it from, the change is anywhere from a four-per-cent hike to 18 per cent.

Here's the breakdown, first from the perspective of the minimum wage earner.

What is, on the surface, a five-per-cent hike actually works out to four per cent after taxes and payroll levies.

Now, from the employer's perspective. The five-per-cent hike is really a seven-per-cent increase.

Finally, the government's perspective. The increase in payroll and income taxes spawned by the rising minimum wage is 19 per cent for the provincial government and 17 per cent for the feds.

So much for the five-per-cent hike. In fact, the largest beneficiary of a higher minimum wage is government and the employee--the one who is actually supposed to benefit from the change--gets the least impact.

These figures are based on the spring increase to the minimum wage for a worker putting in 160 hours a week. We can expect a similar story when the second hike arrives this fall.

It's hard not to be cynical of a government that finds itself in a fiscal squeeze and then pads its own pocket under the guise of helping entry-level workers by raising the minimum wage.

If the plan was to get more money into the hands of the minimum wage employee, the best way would be to lower tax rates for the lowest of the low-income earners. By raising the income tax threshold, these workers could actually keep their wages and employers would not be forced into forking disproportionately higher payroll taxes.

Old Rate

                 Employee  Change  Employer  Change

Gross pay         $960.00      --
Federal Tax        $43.70      --
Provincial Tax     $27.30      --
CPP                $31.41      --    $31.41      --
E.I.               $21.12      --    $29.57      --
Net Pay           $836.47      --

Current Rate

                 Employee  Change  Employer  Change

Gross Pay       $1,008.40    5.0%
Federal Tax        $50.85   16.0%
Provincial Tax     $32.35   18.0%
CPP                $33.67    7.0%    $33.67    7.0%
E.I.               $22.18    5.0%    $31.05    5.0%
Net Pay           $858.95    3.8%

Fall 2002 rate

                 Employee  Change  Employer  Change

Gross Pay        $1064.00    5.5%
Federal Tax        $59.20   16.0%
Provincial Tax     $38.20   18.0%
CPP                $36.30    8.0%    $36.30    8.0%
E.I.               $23.41    5.5%    $32.77    6.0%
Net Pay           $906.89    4.0%

Based on working 160 hours per month

Paul Martin is heard daily on 980 CJME and 650 CKOM as well as on the radio stations of the Golden west Broadcasting network in Saskatchewan.