Fight for $15 minimum wage has businesses, economists question economic impact
Research suggests mass layoffs and other detrimental effects could be part of the fallout.
TORONTO — Ontario’s minimum wage workers are set to get a bump in their paycheques after the province voted in favour of raising the standard to $15 an hour over the next two years.
Currently at $11.60 an hour, the minimum wage will rise under the legislation to $14 an hour on Jan. 1, with the increase to $15 coming in 2019.
The push to raise the minimum wage is also gaining traction in Alberta and British Columbia.
But the validity of raising wages depends on who you ask.
Many businesses are crying foul – pointing to research that suggests mass layoffs and other detrimental effects could be part of the fallout.
Some economists, meanwhile, believe those concerns are overstated because more money in the pockets of the nation’s lowest earners means more consumer spending, boosting the economy.
Fifty-three economists signed an open letter supporting Ontario’s proposed hike, saying such increases can “lead to little or no job loss.”
However, Ontario’s financial watchdog has said that the province’s wage increase could result in more than 50,000 job losses because the tight timeline will provide incentive for businesses to aggressively reduce costs. It added that the new policy will increase the number of minimum wage workers in Ontario from just over 500,000 to 1.6 million in 2019.
Meanwhile, a Canadian Centre of Economic Analysis (CANCEA), study found Ontario’s plan could cost the province’s businesses $23 billion over two years and risk 185,000 jobs, representing about 2.4 per cent of all employees.
However, Paul Smetanin, president of CANCEA, noted that the majority of jobs at risk are those that employers may have created had they not been forced to increase their payroll costs.
“Bill 148 is really good if you’ve got a job,” he said, referring to the Ontario bill.
The bill benefits those who already have jobs by giving them more money and inadvertently discriminates against those who don’t, Smetanin said. Young people, new immigrants and individuals moving between provinces may have a more difficult time finding work as a result, he added.
As many businesses are quick to point out, minimum wage hikes could result in an accelerated push toward automation, replacing more workers replaced with technology.
A report from the Brookfield Institute on the Canadian jobs most at risk of automation found employees in the lowest-paid sectors, such as cashiers and food and beverage servers, are most vulnerable.
Canadian retailers such as Dollarama Inc. and Metro Inc., have said they are speeding up studies of automation as they consider options for offsetting the pending wage increase.
Employers have also said they could offset higher payroll expenditures by passing some of their costs down to consumers. Movie theatre owner Cineplex Odeon Corp., for instance, has already increased ticket prices in anticipation of raises for much of its workforce.
Some businesses are also worried that a higher minimum wage will have a ripple effect and employers will have to pay more to anyone who earns close to the new minimum, increasing their payroll burden even more.
In 2011, B.C. decided to raise its minimum wage to $10.25. Between 2010-13, the province’s employment for 15 to 24 year olds fell by 1.6%, despite much larger estimates after the wage hike was announced, according to a report from the Canadian Centre for Policy Alternatives.
Only a small number of jobs are lost following such changes because the fate of low-paid employees is more tied to whether economic growth is good, said David Macdonald, a senior economist for the centre.
“In the real world, what usually happens is low-income folks are better off because they’ve gotten a raise and they spend that money.”
One common argument is that most employees making minimum wage are youths and do not have a family to support.
In Canada, 50.2% of workers earning minimum wage are between 15 and 19 years old, according to Statistic Canada’s most recent figures from 2013.
However, other reports have debunked the image of the teenager as a low-income earner. A Wellesley Institute report found 61 per cent of people in Ontario making just over minimum wage (between $10.25 and $14.25 an hour) were 25 years old or more.
The debate, it appears, does not end once higher minimum wage becomes the norm.
The jury is still out on three-year-old pledge to hike minimum wages to $15 an hour in Seattle, with one recent University of Washington study suggesting an annual increase in 2016 to $13 an hour caused low-wage workers’ annual pay to fall rather than rise, and overall low-wage jobs to fall. However, a University of California study looking at restaurant workers during the same period, found wages went up and employment levels were unaffected.