Wednesday, October 24, 2007

Parity between the Canadian and American dollars has led to all sorts of demands from consumers who want a chicken in every pot and want both for the same price as in Buffalo. Everything, it seems, can be tied to the sharp increase in value of the Canadian dollar. Consumers have had their say, lambasting retailers for maintaining high prices for trinkets, widgets and doodads in spite of the dollar's strength. In response, some retailers, Zellers most prominent so far, have lowered prices on some 250 items. That most pernicious purveyor of all ominously boasted of its "best-ever year of price reductions".

Of course, is it really possible to explain something as complex as the pricing of goods on an open market by appeal to the exchange rate? John Williamson from the Canadian Taxpayer Federation says as much in his griping about our labour laws and regulations. In an open letter to federal finance minister Jim Flaherty, he writes: "you and I both know the strong loonie is only one factor that determines price. Others include taxes, government regulations, minimum wages, and labour laws." These things, apparently, are bad.

Williamson goes on to advocate a reduction in the Employment Insurance payroll tax, because it is "without doubt passed on to, and paid, by consumers." Clearly, if you're able to buy a DVD player with small change, there is still a hidden price to pay. I hope we aren't willing to pay that cost, which comes in the form of taking away some of the niceties of life in Canada.

The logical next step in this train wreck of a debate, I think, ought to be a rejoinder on the part of retailers that the minimum wage in all provinces need to be rolled back to reflect the loonie's strength. If the Wal-Mart in Cheyenne, Wyoming or Savannah, Georgia is only required to pay employees $5.15/hour, why does the Wal-Mart in Bracebridge, Dryden or Scarborough have to pay its employees $8 per hour? After all, if we're going to let the exchange rate determine how we do business in Ontario, there's no reason to leave the minimum wage as unfairly high as it is.

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