Benefits to raising Ontario’s minimum wage are tangible
Increase is one of the most effective means of assisting economically disadvantaged
Kevin Pierson has three Tim Hortons stores in west-end Toronto. Like many businesspeople in the food service and hospitality industry — one of the country’s biggest concentrations of lowincome workers — Pierson worried that the 21 per cent hike in Ontario’s minimum wage to take effect Jan. 1 of this year would cut deeply into his profits, forcing him to lay off employees and reduce hours for those who remained. But it hasn’t turned out that way. Pierson prefers that his real name be withheld, since Tim Hortons was the centre of a consumer backlash early this year when a few of its franchisees openly mused about cutting employee benefits, punishing them for a government policy they had no role in shaping.
For that matter, the 1.7 million Ontarians living in poverty appear powerless in influencing the policies of the new Ontario government led by Doug Ford.
In what could be described as a propoverty agenda, Ford is slashing in half the previous government’s planned increase in welfare payments, shutting down Ontario’s universal basic income project that held promise of becoming a world model and scrapping the planned further $1 an hour increase in the minimum wage, to $15, effective Jan. 1, 2019.
Increasing the minimum wage is one of the most effective means we have of assisting the economically disadvantaged. It puts a new, higher floor under all wages, including those earned by millions of Ontarians living just above the poverty line.
The benefits are tangible: higher household incomes; increased consumer spending; lower workplace turnover and absenteeism.
The few studies claiming to show job loss from minimum wage increases have been debunked.
A recent example is a discredited 2017 study “proving” job loss from Seattle’s drive toward a $15 minimum wage. Actually, job creation has been strong in the Seattle region since 2011. “If this is what the nasty effects of aggressive minimum wage rises look like,” Financial Times economics columnist Martin Sandbu wrote, “they are rather an encouragement to do more and more widely.”
Pierson reports that 2018 is shaping up as one of his best years ever. A bit proudly, Pierson says: “There have been no layoffs. And every employee who has asked for more hours has got them, on merit.”
Business is also booming at Recipe Unlimited Corp. (RUC). The former Cara Operations Ltd. is Canada’s biggest casualdining operator, with 1,272 restaurants including Swiss Chalet, Harvey’s and The Keg Steakhouse chains.
RUC has reported stronger sales in Ontario than most other provinces since the $14 minimum wage went into effect. Which only makes sense. More than 10 per cent of Ontarians got a double-digit pay hike on Jan. 1 and promptly shovelled that money back into the economy. As we know from Economics 101, while the top 1 per cent of income earners don’t even notice a tax-cut windfall, low-income Canadians spend additional funds immediately on deferred needs.
This is déjà vu. In 2016, the Trudeau government’s childbenefit program was a significant injection of funds into low-income households.
The following year, Canada’s economic growth outpaced that of all other G-7 economies, contrary to the forecasts of world economists.
What the economists missed is that the 4.7 million Canadians living in poverty, including 1.2 million children, are not tied down by the mortgage and car payments of an over-indebted middle class. They cannot afford to buy a house or vehicle. But they are significant spenders, on deferred essen- tials, especially for their children.
There is no convincing explanation for Canada’s booming GDP in 2017 except that Ottawa injected a lot of cash directly into the households of economically disadvantaged Canadians. And they spent it, at Dollarama and also at Canadian Tire, Loblaws and Canada’s Wonderland.
In one of the more embarrassing incidents in recent Canadian economic history, the 2017 consensus of economic forecasters was that Ontario would suffer major job loss from the $14 Ontario minimum wage that went into effect Jan. 1, 2018.
To cite only a handful of the alarmists, the Bank of Canada, TD Bank, National Bank Financial and the Financial Accountability Office (FAO), the Ontario government watchdog, all predicted that Ontario would lose between 50,000 and 140,000 jobs because of the new $14 minimum wage.
As it happens, though, Ontario has gained so many jobs since Jan. 1 that by August, the Ontario jobless rate had dropped to an 18-year low, of 5.4 per cent, second-lowest in the country after B.C.
Ontario’s food service and hospitality sector, one of the industries most affected by the minimum-wage increase, has not shed jobs, as predicted. It has created 7,100 new jobs since January.
Meanwhile, labour shortages are becoming more acute. The “vacancy rate” of unfilled jobs at Ontario hospitals, for instance, has jumped from 1.9 per cent in 2015 to 2.8 per cent last year. That helps explain the scourge of wait times. A higher minimum wage eases the challenge for recruiters in health care, another field with a preponderance of lowincome workers. Better working conditions, including decent pay, expand the workforce by making jobs worthwhile and stabilize the workforce in an era of rampant job-hopping.
The Ford government claims that by eliminating income taxes on minimum-wage workers, as a sop for scrapping the $15 minimum wage, workers will benefit by about $800. But the great many low-income workers who earn too little to pay income taxes will receive nothing from that benefit.
Simply staying with the previous government’s further $1 an hour increase in the minimum wage, to $15 an hour by Jan. 1, would yield an additional $1,100 or so a year for a minimum-wage worker, according to the Canadian Centre for Policy Alternatives (CCPA), a progressive think tank. CBC News also ran the numbers during the Ontario election campaign. By its calculation, sticking with the $15 minimum — which Alberta will have in place in October — would increase a low-income worker’s after-tax pay by $1,553. The Ford scheme would amount to just $859. A $15 minimum wage does not get Canada to the healthiest workforce possible. The CCPA calculates that the “living wage” in Saint John, N.B is $18.18 and hour and in Greater Vancouver is $20.91 an hour. That’s why Alberta describes its $15 an hour minimum wage effective Oct. 1 as “a move toward a living wage for every Albertan.”
Doug Ford is, of course, a small-business person. There might be eight small-businesspeople in the country who don’t have a visceral dislike of minimum wages. And so, we have a Ford policy driven by ideology and not empirical facts.
“Ford Nation” is largely populated by low-income folks. On the minimum wage issue, the premier is set to betray that constituency with the gesture politics he is playing with their lives.
David Olive is a business columnist based in Toronto. Follow him on Twitter: @TheGrtRecession