Wage hike raises economic debate
Group calls it ‘a recipe for ... collapse’
The Tuesday announcement by Kathleen Wynne, the premier of Ontario, that she wants to raise the province’s minimum wage to $15 by 2019 prompted a stern response from an employers’ group, the Coalition of Concerned Manufacturers of Ontario.
“The dramatic increases in minimum wages under the proposed l egislation mean small companies will hire fewer students and new staff — reducing employment opportunities and the chance for new workplace entrants to get meaningful experience,” wrote Jocelyn Bamford, whose family owns Automatic Coating in Toronto, which paints industrial equipment, in a news release Thursday.
The Coalition called the wage hike and other changes to the labour code “a recipe for economic collapse.”
Bamford and other critics warn that, if the government puts minimum wages up too high, employers will lay off their workers en masse, or flee to lower-wage provinces or states.
But is that true? Or could the move perhaps stimulate the economy, as low- wage workers, suddenly flush with more cash, turn around and spend it in their local stores?
Some s t udies in t he United States suggest that could be the case.
New York passed a law last year that will gradually push the minimum wage in New York City, for large employers, to US$ 15 an hour by Dec. 31, 2018. ( The rate is currently US$11 an hour).
A study of the impact of the New York wage hike, by researchers at the University of California at Berkeley, concluded that the move would be good f or New York’s economy.
“While a higher minimum wage induces some automation, as well as increased worker productivity and higher prices, it simultaneously increases worker purchasing power. In the end, the costs of the minimum wage will be borne by turnover reductions, productivity increases and modest price increases,” the researchers wrote.
Seattle moved in 2014 to steadily hike to its minimum wage, which will hit US$ 15 for all workers by 2021. Seattle studied an 18- month period during which it raised i ts minimum wage from US$9.96 to US$11.14.
Over those 18 months, low- wage workers saw their employment rate, number of hours and overall earnings go up.
But the researchers, at the University of Washington, warned that Seattle’s results may not apply everywhere.
“Seattle’s success shows that the city ’s l ow- wage workers did relatively well after the minimum wage increased, but largely because of the strong regional economy,” says the report.
In the United States, President Franklin Roosevelt instituted the first minimum wage, 25 cents an hour, in 1938. Ontario got its first minimum wage, 90 cents an hour, in 1965.
That same year, Prince Edward Island instituted a minimum wage of $1, though only for men; women on P. E. I. made just 95 cents per hour, even by 1969.
Clearly minimum wages did not kill the U. S. or Canadian economies.
So we are not debating whether we should have a minimum wage, but rather at what rate we should set it.
At present Ontario has a minimum wage of $11.40 per hour. Nunavut’s minimum wage is the highest, $ 13 per hour; Saskatchewan’s is the lowest, at $10.72.
Labour and anti- poverty groups, loosely organized into an organization called “15 and fairness,” have lobbied the Ontario government since 2013, the third year of a four- year $ 10.25 an hour freeze of the minimum wage. In 2014 Ontario raised its minimum wage to $ 11, and the province indexed it to inflation.
Alberta has led Canadian efforts to hike the lowest wage; Alberta’s minimum wage jumps to $ 15 an hour in October 2018. Ontario’s current plan will raise its minimum wage to $ 14 in 2018 and $15 on Jan. 1, 2019.
“I think this is a huge victory,” said Simon Black, an assistant professor of labour studies at Brock University in St. Catharines, Ont. “This should not be seen as a gift bestowed on labour by a benevolent government. This is the product of a social movement, of protests, of workers taking it to the streets, and meeting with their MPPs.”
A minimum wage i ncrease in Ontario will benefit the economy overall, argues Black.
“If a high- income earner gets a raise, they might speculate in the stock market,” he said.
“For those on the lower end of the economy, when more money is put i nto their pockets they spend more money in the economy, which leads to job creation and economic growth.”
But Bamford calculates the minimum wage hike will cost her company $ 68,000 a year, and will force her to hire three fewer workers.
“We usually bring people in at minimum wage, but their wages rise quickly. They get a bump when they learn to spray, learn to blast, learn to drive the forklift,” she said. Starting everyone at $15 an hour means she has to also push up the wages of people who currently make $15 an hour, she said.
“I can’t have the new guy make the same amount as the guy who has been here for a year and done all his training.”
Anil Verma, a professor or human resources management at the University of Toronto, who has chaired provincial panels on wage increases, favours gradual increases in the minimum wage. But he warns that Ontario’s first increase, to $ 14 by next Jan. 1, is a “big shock.”
Rarely has a government attempted a 20 per cent wage hike all at once, he said — so it’s hard to know what will happen.
“I don’t know, and I don’t think anyone else knows what the negative effect will be. We know that this is a huge bump.”