Wynne’s class war­fare just may work

National Post (Latest Edition) - - EDITORIALS -

It would have re­quired a de­gree of cyn­i­cism even we can’t muster to have pre­dicted that one of the first big po­lit­i­cal sto­ries of 2018 would be the premier of On­tario, backed by labou­runion al­lies, wag­ing a sham­ing cam­paign against the small- busi­ness own­ers who sell cof­fee and dough­nuts at one of Canada’s most iconic brands, Tim Hor­tons.

On Jan .1, new labour reg­u­la­tions took ef­fect in On­tario. The most re­marked-upon is a sig­nif­i­cant bump, ef­fec­tive im­me­di­ately, in the pro­vin­cial min­i­mum wage, from $11.60 to $14. A fur­ther bump, of an­other dol­lar, is planned for the first day of 2019, bring­ing the to­tal to the some­how tal­is­manic num­ber $ 15, which Lib­er­als be­lieve is the ex­act per­fect min­i­mum wage for ev­ery low- skill worker whether they’re toil­ing in down­town Toronto or Sioux Look­out.

The ev­i­dence in sup­port of the min­i­mum wage as a means of el­e­vat­ing the qual­ity of life for low- in­come Cana­di­ans is thin, at best, and at the very least it’s clear that higher wage floors should be brought in grad­u­ally, to give busi­nesses ( and the con­sumers who sup­port them) time to ad­just.

In any case, there are other poli­cies that have far more cred­i­bil­ity in help­ing low- in­come work­ers get ahead. But there’s an elec­tion in On­tario this year, and the Lib­er­als are be­hind in the polls. So, there is no time to waste on ev­i­dence­based poli­cies with more sub­tlety than this sledge­ham­mer to busi­ness own­ers. Es­pe­cially for politi­cians try­ing to save their ca­reers by spend­ing some­one else’s money.

And that’s lit­er­ally what a boost to the min­i­mum wage is. Even the pol­icy’s most ar­dent sup­port­ers don’t deny that it re­sults in a wealth trans­fer — in­deed, that’s the point. The only ques­tion is who ends up cov­er­ing the cost.

And that brings us to Tim Hor­tons. Most Tim Hor­tons out­lets are fran­chises: they are owned and op­er­ated by in­di­vid­u­als who agreed to ad­here to a se­ries of com­pany- wide stan­dards en­forced by head of­fice. The stan­dards, in the case of Tim Hor­tons, in­clude brand­ing, lo­gos, decor, menu and, cru­cially, price. Head­quar­ters pe­ri­od­i­cally raises the price of its menu items, say, to re­act to com­mod­ity- driven spikes (if the mar­ket rate for cof­fee beans goes up, you’ll pay for it) or to keep up with in­fla­tion. But Tim Hor­tons store­own­ers have no con­trol over that.

Yet it’ s the fran­chise own­ers in On­tario who are now cov­er­ing the in­creased labour costs trig­gered by the min­i­mum wage. And not just those. As Restau­rants Canada pres­i­dent and CEO Shanna Munro noted in our Fi­nan­cial Post com­ment pages this week, the min­i­mum wage hikes make up just a por­tion of the new costs trig­gered by a raft of new labour rules that took ef­fect along with the higher min­i­mum wage. While the higher wages ac­count for 58 per cent of the costs of the On­tario Lib­er­als’ Bill 148, Restau­rants Canada es­ti­mates that an­other 42 per cent are ex­penses cre­ated by all the other new work­place reg­u­la­tions.

When a busi­ness is faced with a sud­den in­crease in op­er­at­ing costs, own­ers nor­mally must make it up by los­ing prof­its, rais­ing prices or find­ing cost sav­ings else­where( or some com­bi­na­tion of those). But fran­chise own­ers like those at Tim Hor­tons, or other chains, re­ally only have 1.5 of those op­tions, since they can’t raise prices and must pay com­pany- dic­tated costs for their in­puts. That means cut­ting into prof­its, which for owner- op­er­a­tors typ­i­cally means cut­ting their own pay or try­ing to find other ways to con­trol the cost of labour it­self.

Since fran­chise own­ers only get into busi­ness in the first place to make a profit, ad­just­ing those labour costs is ex­actly what some Tim Hor­tons op­er­a­tors have opted to try. They’ve dropped some perks that were nice for their em­ploy­ees but not legally re­quired, like paid breaks and free food. Some are now re­quir­ing their em­ploy­ees to chip in for in­surance ben­e­fits that were once fully cov­ered ( which is a fairly com­mon em­ploy­ment re­quire­ment). The op­tics of busi­ness own­ers deny­ing their work­ers a maple glaze aren’t cheery, but the re­ac­tion is as much ba­sic eco­nom­ics as sup­ply and de­mand. A min­i­mum wage hike doesn’ t come free; some­one picks up the tab. Did any­one re­ally ex­pect em­ploy­ers to sim­ply eat the ex­pense — even if it jeop­ar­dizes the health of their busi­nesses?

To dem­a­gogue poli t - icians, the an­swer is ob­vi­ously yes. Kath­leen Wynne has re­peat­edly de­nounced the changes as if these busi­ness own­ers are ene­mies, even re­fer­ring to their de­ci­sions as “bullying.” A se­ries of protests have been staged out­side Tim fran­chises, com­posed of labour ac­tivists who have tra­di­tion­ally been close to the On­tario Lib­eral party. Labour ac­tivists are the ones who pushed the cam­paign for a $ 15 min­i­mum hourly wage — since their con­tracts are in­dexed to go up with any leg­is­lated rise in the wage floor — and they’d surely love to lure Tim Hor­tons work­ers into join­ing their ranks.

The en­tire af­fair is ab­surd. Many rep­utable economists warned the Lib­er­als that the min­i­mum wage bump was too much, too fast, and rec­om­mended a longer phase- in pe­riod. Busi­ness own­ers im­plored her to lis­ten. The premier’s poll­sters, ap­par­ently miss­ing the memo from fed­eral Fi­nance Min­is­ter Bill Morneau that cheap and ugly class- war­fare pol­i­tics are risky busi­ness, ap­par­ently con­vinced her there was no time for such mod­er­a­tion with an elec­tion just months away. So it’ s full speed ahead, then, and damn the con­se­quences.

And now that busi­ness own­ers, es­pe­cially those con­strained by fran­chise obli­ga­tions, are re­act­ing pre­dictably, the premier is cam­paign­ing at their ex­pense, along­side jeer­ing unions who well rec­og­nize an op­por­tu­nity for mak­ing more money for them­selves, even as they ac­cuse the fam­i­lies who run cof­fee shops of be­ing greedy. It’s out­ra­geous, trans­par­ent and all too pre­dictable. But lucky for Wynne, it is On­tario. It’s crazy enough that it might just work.

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