Thursday, February 15, 2018

Minimum Wage Increase in Ontario

Two red and white Canadian flags with central maple leaf.January, 2018 saw the minimum wage in Ontario rise to $14 per hour and the early predictions (made in 2017) were ... a little off. That doesn't surprise me in the least. Back when the the bill came out, my thoughts (personal opions) on the increase in the minimum wage were virtually opposite of what economists and business specialists predicted should happen. It's still early in the game but so far, but many things are not very rosy ... not for employees (who haven't actually had the light bulb turned on yet), and not for the business owners.

Maybe large conglomerates aren't feeling too much of a pinch, but a lot of smaller businesses are, including one of Canada's wide spread coffee shops ... Tim Horton's. But that's only one of them.
Some other small businesses have closed up shop entirely - a few that were "mom and pop" type shops - after literally a lifetime of service to their communities.  You can't take a large jump in minimum wages when you have a really small business ... not unless you just let your few employees go and run it all alone. There is that option I guess.

According to this opinion piece from the CBC, what the wage increase will really do is fill the government coffers with additional income tax money ... so it will benefit the provincial and federal governments much more than it will benefit the people who got the wage increase. The article estimates that those who got that wage increase will see only one third of that money in their pockets.

A white plastic piggy bank with coins scattered around it.While they do get more money per year, by the time the manufacturers and product producers
increase their prices to cover the costs of the wage increases and increased payments (employers have a lot of premiums to pay out already (based on total wages) for things like health care, workers' compensation, etc.) that little bit extra the workers see in their pay packet will already be gone. Anything they purchase will likely cost them more.

Of course, that's if they still have a job, or haven't had their part-time hours reduced, or lost their benefits, or had their benefit costs increased.  There are so many things that will eat up what little they gain that the benefits will be easily negated.

Then there are those that have lost their jobs entirely. Ask them how much of a benefit the minimum wage increase was to them ... I'm sure they'll be happy to tell you.

Ontario is one of the most populated provinces in Canada, but the CBC also points out that in January, with the installment of the new minimum wage, the province lost over 59,000 part time jobs. That's 59,000+  people left without employment. I don't isuppose those people have gotten any benefit from the new wage increase.  Most will attribute their loss to that, but to be fair, since it's still very early in the year, not even the experts can say how the increase and the job loss are related, or if they are.  On the other side of the coin, they also report an increase in full-time jobs, but at just over 8,000 new jobs ... it won't make up for the amount that was lost.

I don't know the statistical make up of the part time jobs, but in our city a lot of part time jobs are held by working moms, students in university/college, and seniors. Most of those people can't take full time work due to their circumstances.

A cardboard Tim Hortons coffee cup with plastic lid.
Back at the beginning of this article, I mentioned Canada's Tim Horton's franchise ... and the Toronto Star has obtained figures for the average increases faced by a franchise. Some people seem to forget that in some cases (at least 2 in our city that I know of) are owned by ordinary people, like you and I. You pay a franchise fee, open your shop and run your business. They aren't all owned by the Tim Horton's company. There was a pretty big hue and cry back at the beginning of January where a franchise took away paid breaks for the employees (ostensibly to cover the increases), and benefit premiums. The public was yammering away about how Tim Horton's had billions of dollars and they could afford the increase. What they didn't stop to think was that the shop in question was owned by a franchisee, not Tim Horton's.

Economists predictions can't seem to agree with each other, although TD economists are predicting employment numbers to decrease by roughly 12,000,  but whether that's entirely due to the wage increase they haven't said.  Scotiabank is riding the fence a bit, saying it could go either way.

But while all that is probably very interesting to investors and economists ... the only thing that really counts to the workers is the money in their pockets; and for consumers, the money they may have to pay out for increases.

A blue five dollar Canadian paper bill.Although I believe that everyone who does an honest day's work (regardless of what capacity they work in) is entitled to a living wage, I don't think increasing the minimum wage was the best way to do it. I really like what the CBC article suggested (to raise the Basic Personal Exemption amount on tax filings). I think it would have resulted in more benefits to more people than the wage increase did.

... so that's my political opinion for the day, such as it is.


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