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Would boosting minimum wages help ease income gap?

These are stories Report on Business is following Thursday, Sept. 12, 2013.

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Income gap and minimum pay
Taken together, the National Household Survey and an Ontario Chamber of Commerce study beg this question: Would hiking minimum wages help ease income inequality in Canada?

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As The Globe and Mail's Bill Curry reports, the 2011 survey released yesterday highlighted income disparity across the country, notably this: To be in the top 1 per cent, you need $191,100 in total annual income, which is almost seven times the national median of $27,800.

Would raising minimum wages help narrow that gap? Proponents will tell you that of course it would, while others will say that it hurts in the end because higher pay means businesses, particularly smaller ones, can't afford it and have to cut back.

This is a particularly hot-button issue in the United States.

Separately yesterday, the Ontario Chamber of Commerce released a lengthy report urging the provincial government to adopt a system that links minimum wages to inflation.

The minimum wage in Ontario – it now stands at $10.25 – is now "determined by the government on an ad hoc basis and through unspecified criteria," the group complained, saying businesses need a more predictable system.

Rogers names Laurence chief
Rogers Communications Inc. has named Guy Laurence its new chief executive officer, hiring a seasoned telecom executive away from Vodafone UK to run one of this country's largest companies.

Since 2008, Mr. Laurence has been chief executive of Vodafone UK Ltd., the British unit of Vodafone Group PLC, where he earned a reputation as a turnaround specialist who made painful cuts but transformed the company to compete with aggressive rivals, The Globe and Mail's Steve Ladurantaye reports.

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He will take over on Dec. 2, a month ahead of current CEO Nadir Mohamed's planned retirement.

"The board unanimously chose Guy as the best leader to succeed Nadir and to take the company forward," said Rogers chairman Alan Horn said in a statement.

"Guy is a strong, proven executive who has consistently delivered strong financial and operating results in highly complex and competitive markets. The breadth and depth of his experience in telecommunications, pay television and media are perfectly suited to Rogers and to the challenges and opportunities we see ahead."

Lululemon sinks
Shares of Lululemon Athletica Inc. sank today after the company reported a dip in second-quarter profit and cut its outlook for the year.

The yoga wear retailer also failed to name a successor to chief executive officer Christine Day, who's leaving when a replacement is found.

Lululemon profit slipped in the quarter to $56.5-million (U.S.) or 39 cents a share from $57.2-million, also 39 cents, a year earlier, The Globe and Mail's Marina Strauss reports.

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Revenue, however, climbed 22 per cent to $344.5-million from $282.6-million, while same-store sales, a key measure in retailing, rose 8 per cent.

The Vancouver-based company also projected earnings per share of between 39 cents and41 cents for its third quarter, and revenue of $370-million to $375-million.

But it trimmed its outlook for the year, now projecting earnings per share of between $1.94 and $1.97, compared to its earlier forecast of $1.96 to $2.01.

Annual revenue is now forecast at between $1.63-billion to $1.64-billion, down from its earlier projection of $1.65-billion to $1.67-billion.

Ms. Day described 2013 as the "most important and most productive year" in Lululemon's history, noting its rebound from a big recall of pants that were see-through in some cases.

"I am confident that the leadership currently in place coupled with a new CEO will have tremendous success leveraging the platform for growth," she said.

HBC sales up, profit misses
Hudson's Bay Co. says makeovers at several stores are paying off with strong sales growth, but the retailer's second-quarter profit fell below expectations today, The Globe and Mail's Bertrand Marotte reports.

The company posted second-quarter net earnings of $3.9-million or 3 cents a share, compared with a loss of $2-million or 2 cents a year earlier.

Sales reached $947.7-million, up 3.9 per cent over the same-period last year, a measure that beat analysts' expectations of $939-million.

There was strong same-store sales growth at the Hudson's Bay outlets and rising e-commerce sales, the company said. Consolidated same-store sales grew 3.5 per cent, while Hudson's Bay same-store sales were up 6.2 per cent.

However, Lord & Taylor same-store sales fell 1.2 per cent on a U.S. dollar basis.

"We are seeing strong performance from stores and departments that have recently received capital investments," chief executive officer Richard Baker said in a statement.

Encana sees 'significant' changes
Encana Corp. says a study of its operations has found "several areas where significant changes" are needed.

The Canadian energy giant made the comment today in advance of a conference in New York, where it's presenting an update.

Encana had both internal and external teams undertake a review of its assets, and the results, while good, were mixed.

"Initial insights from the independent research combined with our internal analysis showed that Encana's strengths include our vast amount of resources, our robust knowledge of market fundamentals and a proven ability to develop and operate plays very cost-effectively relative to our industry peers," chief executive officer Doug Suttles said in a statement.

But the company also had this to say: "The assessments also identified several areas where significant changes are required to be successful. Encana has more inventory in its portfolio of plays, particularly dry natural gas, than can be optimally developed. The company must focus its portfolio and concentrate capital in the assets that leverage its strengths and generate the strongest returns."

Home prices climb
Canadian home prices are at record highs as the real estate market rebounds, climbing 2.3 per cent in August from a year earlier.

On a monthly basis, prices rose 0.6 per cent in August from July, according to the Teranet –National Bank house price index released today.

As The Globe and Mail's Tara Perkins has reported, Canada's housing market has bounced back smartly since the government mortgage insurance restrictions cooled it off last summer. Sales have picked up across the country as the impact of Ottawa's move fades and buyers rush to beat higher mortgage rates.

According to the Teranet-National Bank report, six cities beat the national average among the 11 municipalities measured, while three saw record levels.

Here's how the cities fared: Prices rose 6.5 per cent from a year earlier in Calgary, 5.5 per cent in Hamilton, 3.8 per cent in Toronto, 3.5 per cent in Quebec City, 2.6 per cent in Edmonton and Winnipeg, 0.7 per cent in Montreal and 0.3 per cent in Ottawa-Gatineau.

Prices fell for the 13 consecutive month in Vancouver, though by just 0.1 per cent, and for the sixth month in a row in Victoria, by 2.5 per cent.

Halifax also registered a decline, of 0.6 per cent, marking the first drop since September of 1996.

National Bank economist Marc Pinsonneault sought to put this in perspective, suggesting there's no bubble here despite that view held among some observers.

"Even if it exceeds CPI inflation … home price inflation in Canada remains subdued in August, especially if it is compared to the 12-per-cent rate registered by the U.S. Case-Shiller index," he said.

"Note that the latest monthly rise is lower than the average change in the month of August in the last 12 years," he said, adding in his research note that the August readings are not "indicative of an overheating market."

Separately, Statistics Canada reported today that prices for new homes rose 0.2 per cent in July from June, and by 1.9 per cent from a year earlier.

Calgary led that charge, with an annual gain of 5.8 per cent, the fastest pace since December, 2007.

While August's annual pace may seem fast, Derek Holt and Dov Zigler of Bank of Nova Scotia note that it has been easing since the 12-per-cent rates of mid-2010.

"No wonder Statistics Canada reported yesterday that a quarter of all mortgage borrowers are paying more than 30 per cent of income in housing affordability costs as housing affordability measured by actual – not artificially constructed – payments remains under elevated pressure," they said.

"For that reason, we believe that the Canadian housing market will do better than what many observers, including The Economist, expect."

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About the Author
Report on Business News Editor

Michael Babad is a Report on Business editor and co-author of three business books. He has been with Report on Business for several years, and has also been a reporter and editor at The Toronto Star, The Financial Post and United Press International. His articles have appeared in major newspapers around the world. More


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