Back in May, Ontario’s government announced a plan to raise the minimum wage to $15 per hour by 2019, a move which sparked fierce debate along the usual fault lines of economy, politics and social welfare. About 8.9 per cent of the Ontario workforce earns the minimum wage, which is currently $11.40 per hour.
This wage hike has a lot of appeal. For one thing, the current minimum wage is nowhere near close enough to support a family and can trap some workers in a perpetual cycle of poverty. Raising it is also the most immediately intuitive way to deal with the increasing costs of education and housing.
However, there’s a basic economic argument against it: increasing the price of labour will result in fewer jobs. Employers will act to offset the higher wages somehow, and the most obvious method is laying off a few employees. Ontario’s Financial Accountability Office projects the loss of an estimated 50,000 jobs. This also disproportionately affects students: the government’s own advisory panel found that a 10 per cent increase in minimum wage would lead to a one to three per cent reduction in teenage employment. Eleven dollars per hour isn’t great, but it’s sure better than nothing.
A higher minimum wage might increase spending that will ultimately bolster the economy. At the same time, higher wages could mean higher prices, which might offset the motivation to spend more of this extra cash.
Whether you agree or disagree with the hike, one thing seems clear: the way it’s been implemented is flawed. This is a dramatic shift, rolled out too fast with little nuance. Karl Baldauf, speaking for a coalition of Ontario businesses, warns that the change is far too sudden and causes “tremendous uncertainty”: this is, after all, a 32 per cent increase in a mere 18 months.
Furthermore, a blanket policy for all of Ontario seems overly simplistic. It doesn’t account for the differences in average wage between urban centres like Toronto and rural towns in northern Ontario. When New York State implemented a $15 minimum wage, they aimed for the end of 2020 and made separate provisions for different cities and counties.
Raising minimum wage is a fantastic idea on paper and can have beneficial effects on the economy and workers — but ultimately, it could also have drastically negative effects on employment. There is little to suggest that this downturn is going to be dealt with appropriately; if anything, the size of the raise, the looming deadline and the way it blindsided businesses indicates a lack of consideration.
Thankfully, the plan seems to be open to change. In its current form, it's a legislative sledgehammer; but with input from small businesses, we might be able to soften its blow.