Ontario entering ‘uncharted waters’ on minimum wage hike

The war of minimum wage studies rages on in Canada, with the Fraser Institute the latest to predict unintended and uneven consequences that could arise from a proposed hike in Ontario.

The think-tank said in a report released Tuesday that Ontario’s plan to increase the province’s minimum wage to $15 per hour by 2019 could increase the chance that less skilled workers, especially young people, will be “priced out” of a tougher labour market.

The report cites the Kaitz index, which measures the ratio of the minimum wage to the median wage, and research that shows the higher that number is, the greater the risk of adverse employment effects. The study warns that the province would become “badly out of step” among the U.S. rust-belt states it battles with for manufacturing investment, like Michigan, the study says.

“With the introduction of a $15 minimum wage, Ontario will enter into largely uncharted waters,” wrote authors Ben Eisen, Charles Lammam and David Watson. “However, there are good reasons to be concerned that this learning will come at a substantial cost to many Ontario residents, particularly to youth ages 15 to 24, who are likely to see significant adverse employment effects resulting from a minimum-wage increase that will push the province far outside of Canadian, North American, and even international norms.”

Ontario is not the only province heading toward a $15 minimum wage. Alberta is instituting it for 2018, and the fledgling British Columbia government said it will appoint a special commission to “establish a pathway to a minimum wage of at least $15 per hour.”

But the $15 minimum wage would also make Ontario stick out from the crowd, the Fraser study says, because it will be implemented across an entire province, not just one city, as was done in Seattle.

The group said this is “potentially problematic,” as Ontario is a big province with labour markets that range from mega-city Toronto to smaller rural towns, where average wage levels can be lower.

“A dramatic and speedy escalation in the minimum wage may risk especially severe employment effects in these parts of the province as they are already struggling with weak labour market performance,” wrote the authors.

Some on the anti-wage hike side have argued businesses, particularly smaller ones, will be unable to handle rising labour costs. The proside, meanwhile, has maintained it will be a big boost for people struggling to make ends meet with the current minimum wage.