The elimination of health-care premiums will pump $1 billion annually into the economy beginning next January and some of that cash could wind up in employees’ pockets, say business and union officials.

While no one can say for sure who will reap the benefits of the massive tax cut announced Tuesday, the savings give businesses that paid the fee for their employees a host of options, says Danielle Smith, Alberta director of the Canadian Federation of Independent Business.

“We get the strong indication from the business community that they recognize they have to be competitive on wages and benefits,” she said. “I imagine by having more money in their pockets to devote to increasing employee pay that will be one of the main places they decide to reinvest. It may not be immediate, but I imagine throughout the course of the year there will be a lot of that money going back to employees.”

While 2.6 million Albertans face health-care premiums, 1.6 million pay for them through benefit plans that are often subsidized by employers.

The CFIB surveyed Alberta businesses last summer on what they would do with any savings from a tax cut and the majority responded they would invest in new equipment and increase employee wages, Smith said.

Alberta Federation of Labour president Gil McGowan said it’s an issue that unions haven’t yet had time to digest.

“We’re talking about hundreds of millions of dollars here that will be freed up as a result of the elimination of the premiums and the big question is where does that money go,” he said. “Obviously, employers will have a lot of ideas for it, but it does at least open the possibility for some of the money going into the employees’ pockets.

“It puts a little more money on the table at a time when the labour market is tight and workers are in a better position to ask for wage increases.”

Mike Percy, the University of Alberta’s dean of the business faculty, said the tax cut could have the same impact as former Premier Ralph Klein’s $400 resource dividend, but this tax cut isn’t just a one-time shot. Albertans will save that money annually, he noted.

“It will have a positive effect, but it will be very difficult to say how much,” he said. “It’s complex.”

Edmonton Journal, Thurs Apr 24 2008
Byline: Darcy Henton