Given current economic conditions, the P.E.I. government's move to increase the minimum wage is poorly timed and may cost jobs, says the Canadian Federation of Independent Business.

Erin McGrath-Gaudet said the government could help low-wage earners with a tax cut. (CBC)

The government approved a 40-cent increase last week that will bring minimum wage to $8.40 an hour by Oct. 1.

"It will mean different things to different businesses," said CFIB policy analyst Erin McGrath-Gaudet.

"Some will be more affected than others, and certainly as this recession or this economic downturn progresses we'll see businesses having to make tough choices. So that part of that may be cutting back on staff."

McGrath-Gaudet said the group supports regular increases in minimum wage, but that this year's five per cent increase is too much. She noted over the past few years minimum wage increases have outpaced inflation.

CFIB would like government to use tax relief as a way to stimulate the economy instead.

McGrath-Gaudet suggested the province could increase the basic personal exemption to help low-income Islanders, saying P.E.I.'s personal tax exemption is the second lowest in the country.