Jobs Minister Lori Sigurdson announced Monday that the $10.20 per hour minimum wage will rise by $1 to $11.20 an hour on Oct. 1.
When that kicks in, only Ontario ($11.25 an hour on Oct. 1) and the Northwest Territories (currently at $12.50 an hour) will pay more to those who earn the least.
Saskatchewan will then be the lowest, at $10.20 an hour.
Sigurdson said the decision was as much about social policy as economics.
"We believe minimum wage should at least allow people to meet their basic needs," Sigurdson told reporters.
"Paying people a decent minimum wage will translate into a better life for low-income workers and, as a result, a better life for their families and for all Albertans."
She also said the NDP government remains on track to hike the rate to $15 an hour by 2018, in keeping with its campaign promise in the May 5 election.
The province will further do away with its minimum wage differential, which pays liquor servers $9.20 an hour on the assumption they make up the rest in tips. Alberta is one of five provinces with a differential.
Sigurdson said liquor servers will make $1.50 more an hour — $10.70 — on Oct. 1, but the differential will end in 2016.
The wage hike is one of several initiatives launched by Premier Rachel Notley's government to remake how the province raises and spends money. It has already passed legislation to hike taxes on large corporations to 12 per cent from 10 per cent and to boost income taxes on the top seven per cent of earners.
Monday's announcement caps weeks of heated debate on the merits of rapid hikes in minimum wage, with arguments cleaved along ideological lines.
Business groups have joined the Opposition Wildrose party and the Conservatives in fighting the move, saying it will lead to price hikes or massive job layoffs.
Unions have joined the NDP, arguing the pay increase will recirculate throughout the economy, with everyone benefiting.
Ken Kobly, president of the Alberta Chambers of Commerce, said he is relieved this year's wage hike is not higher than $1.
He said the bigger increase will adversely affect employers, and his team will be working over the next few years to convince the government to alleviate social inequality through other means.
"We would like to see perhaps a method that is smarter, that targets in fact those people who do need it at the poverty level," Kobly said.
Wildrose Leader Brian Jean said the NDP is ramming ahead with sweeping changes with little thought to the ramifications.
"We need to put on the brakes, listen to chambers, small businesses and job creators to make sure we understand the full impact of this," Jean said in a release.
Alberta Party Leader Greg Clark agreed, saying it's disappointing the NDP didn't look at alternatives or the bigger picture.
Liberal Leader David Swann said the change must be balanced out by, perhaps, reductions in small business taxes.
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