Minimum wage hike puts Ontario in ‘uncharted waters’: Fraser study

TORONTO — 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 right-wing 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 towards 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 and northern 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.

The Fraser study is just the latest salvo on what has become a contentious subject. Some on the antiwage hike side have argued businesses, particularly smaller ones, will be unable to handle the rising labour costs. The pro-side, meanwhile, has maintained it will be a big boost for people struggling to make ends meet with the current minimum wage.

Ontario’s Financial Accountability Office — an independent, non-partisan office of the legislature — estimated last week that the province’s move to a $15 minimum wage from its current level of $11.40 could cause a net loss of 50,000 jobs.

However, Unifor, Canada’s largest private-sector union, said the FAO’s work was misleading.

“The reality is that 50,000 workers are not expected to lose their jobs,” said Unifor National President Jerry Dias in a release. “This figure is not a projection of actual lost jobs but rather a combination of estimates that includes potential, but not actual, future job creation and jobs lost to increased automation.”

Unifor noted that the FAO had found the wage hike would actually benefit a massive amount of workers, nearly 1.6 million, or about 22 per cent of the province’s labour force.

Ontario Labour Minister Kevin Flynn has said the province won’t back down from its planned wage increase.