The P.E.I. economy is in no shape to absorb a minimum wage increase approved Thursday by the provincial government, says the Greater Charlottetown Area Chamber of Commerce.

'In addition to that, the province moved earlier, late last year, to bring in Islander Day.'— Doug Coles, chamber of commerce

The $0.40 per hour increase will be come in two phases over the next year, going to $8.20 an hour on June 1 and $8.40 on Oct. 1. Chamber president Doug Coles told CBC News on Friday that companies are already facing financial challenges and this will only add to the burden.

"The economy isn't the greatest, but in addition to that, the province moved earlier, late last year, to bring in Islander Day," said Coles, referring to a new winter holiday celebrated for the first time last month.

"That was another burden that had to be absorbed by members and the employers. And to bring a wage increase on top of that, it is going to be very bothersome at this point in time. In a poor economy it's very difficult to pass these costs directly on to the consumer."

Coles said it's unfortunate, but businesses may have no choice but to make staff cuts or reduce staff hours to make up the costs. He noted the wage increase this year is on top of a 6.7 per cent wage increase last year.