Min. wage rise a risk to jobs?

Anal­y­sis by Fi­nan­cial Ac­count­abil­ity Of­fice finds 50,000 po­si­tions could be lost

Northern News (Kirkland Lake) - - BUSINESS - gzo­chodne@post­media.com GE­OFF ZOCHODNE

On­tario’s plan to in­crease the prov­ince’s min­i­mum wage to $15 an hour by 2019 is a weak weapon in the war on poverty, and could ul­ti­mately cause a net loss of 50,000 jobs, an in­de­pen­dent anal­y­sis of the pol­icy has found.

The Fi­nan­cial Ac­count­abil­ity Of­fice of On­tario on Tues­day re­leased a com­men­tary cov­er­ing the prov­ince’s pro­posal to in­crease the min­i­mum wage, find­ing the added labour costs for busi­nesses will in­crease work­ers’ in­comes, but that those ex­tra pay­roll costs will force firms to axe some low­er­in­come po­si­tions.

The watch­dog es­ti­mated that the wage hike will re­duce to­tal em­ploy­ment in the prov­ince by about 0.7 per cent, or a net to­tal of 50,000 jobs, as busi­nesses try to shrink their costs through au­to­ma­tion or price in­creases that could lead to re­duced sales and cause lay­offs.

“How­ever, there is ev­i­dence to sug­gest that the job losses could be larger than the FAO’s es­ti­mate,” the FAO said. “On­tario’s pro­posed min­i­mum wage in­crease is both larger and more rapid than past ex­pe­ri­ence, pro­vid­ing busi­nesses with a greater in­cen­tive to re­duce costs more ag­gres­sively.”

Af­ter con­duct­ing its anal­y­sis, the FAO — an in­de­pen­dent of­fi­cer of the On­tario leg­is­la­ture that ex­am­ines its fi­nances and poli­cies — con­cluded that “higher min­i­mum wages are not an ef­fec­tive way to al­le­vi­ate poverty,” as just 27 per cent of the gain in labour in­come would flow to low-in­come fam­i­lies. In­stead, house­holds above the low­in­come cut­off would reap most of the ben­e­fits, the watch­dog found.

“As a re­sult, the in­come gains from On­tario’s pro­posed min­i­mum wage in­crease would be rel­a­tively broadly dis­trib­uted across all house­holds and not con­cen­trated on low-in­come fam­i­lies,” the FAO wrote. “Since min­i­mum wages tar­get low-wage work­ers, but not nec­es­sar­ily low-in­come fam­i­lies, rais­ing the min­i­mum wage would be an in­ef­fi­cient pol­icy tool for re­duc­ing over­all poverty.”

On­tario’s Lib­eral govern­ment says the prov­ince’s eco­nomic growth is al­low­ing them to in­crease the min­i­mum wage and usher in a host of em­ploy­ment and labour law re­forms, such as en­sur­ing paid sick days for work­ers. The govern­ment also cited eco­nomic stud­ies tout­ing the ben­e­fits of higher wages.

“We don’t be­lieve that any­one in On­tario who works full time should be strug­gling to pay their rent, put food on their ta­bles or care for their fam­i­lies — es­pe­cially when the pro­vin­cial econ­omy is do­ing so well,” Labour Min­is­ter Kevin Flynn said in a state­ment. “The moral and eco­nomic ev­i­dence sup­port­ing this fun­da­men­tal be­lief is with­out ques­tion. We will not back down from this com­mit­ment.”

The FAO es­ti­mated that about seven per cent of the prov­ince’s work force is earn­ing On­tario’s cur­rent min­i­mum wage, or ap­prox­i­mately 520,000 peo­ple. The cur­rent $11.40 wage is set to rise to $11.60 an hour on Oc­to­ber 1, then shoot up to $14 in Jan­uary and $15 the year af­ter, a move that would raise the in­comes of about 1.6 mil­lion work­ers in the prov­ince, or 22 per cent of its work­force, the watch­dog pre­dicted.

But the bump in On­tario’s min­i­mum wage, planned by Lib­eral Premier Kath­leen Wynne’s govern­ment, would also shift the de­mo­graph­ics of the work­ers earn­ing that pay, the FAO said. Whereas ap­prox­i­mately 60 per cent of cur­rent min­i­mum wage work­ers are teens and young adults, a $15 wage would see adults ac­count for 56 per cent of min­i­mum wage work­ers, the watch­dog es­ti­mated. As well, most of the an­tic­i­pated job losses would be borne by younger work­ers, the FAO found.

On­tario Pro­gres­sive Con­ser­va­tive Leader Pa­trick Brown said his party sup­ports a $15 min­i­mum wage, but ar­gued the Lib­er­als’ ap­proach is out of touch with small busi­nesses.

“When it comes to the in­creas­ing min­i­mum wage, they’re giv­ing On­tario busi­nesses two op­tions: Lay off staff or raise prices,” Brown said in a state­ment. “Some busi­nesses will have no choice but to do both.”

The watch­dog pro­jected that the in­crease in the min­i­mum wage would hike to­tal labour in­come by about two per cent, but nudge busi­nesses to raise their prices in or­der to pay for the ris­ing labour costs. It would also in­crease the per­cent­age of full-time work­ers who earn the min­i­mum wage.


On­tario Premier Kath­leen Wynne’s plan to raise the prov­ince’s min­i­mum wage to $15 an hour won’t do much to fight poverty in On­tario and could cost 50,000 jobs, ac­cord­ing to the Fi­nan­cial Ac­count­abil­ity Of­fice of On­tario.

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