Law changes will hurt young workers the most

The Wynne government recently proposed a series of changes to Ontario labour laws including a significant hike of the minimum wage to $15 per hour.

The government’s stated goal is to help vulnerable workers. But unfortunately, the proposed changes will, on balance, hurt the very workers they are meant to help.

Let’s start with the most headline-grabbing change — the proposal to rapidly increase the minimum wage from its current rate of $11.40 to $15 by 2019. This is a 32 per cent minimum wage hike in less than two years, on top of several other hikes in recent years. In 2019, when the new increases are fully implemented, Ontario’s minimum wage will have increased 110 per cent since 2004, much more than what would have been required to keep pace with inflation.

But here’s the problem. Despite good intentions, the Canadian evidence consistently shows that minimum wage hikes result in fewer job opportunities for inexperienced and low-skilled workers.

Just as consumers tend to buy less of a product if its price increases, employers will hire fewer workers and/or reduce labour costs if government regulations make it more expensive to employ workers without corresponding improvements to workplace productivity. It’s the least skilled workers — often those ages 15 to 24 — who lose out on employment opportunities because they tend to be the least productive due to their dearth of work experience and skills.

In fact, Canadian research consistently finds that for every 10 per cent increase in the minimum wage, youth employment fell by three to six per cent. Even the Wynne government’s own Minimum Wage Advisory Panel acknowledged this. Considering that the Ontario government plans an increase of 32 per cent, the negative effects on youth employment will be stark.

And because Ontario will implement the marked increase in a very short period (less than two years), the negative effects will be magnified as employers — including many small businesses — will have little time to plan and adjust accordingly.

The Wynne government plans to increase labour costs in other ways including mandated higher benefits for employees (more paid vacation, paid emergency leave) with likely similar negative effects — fewer job opportunities for low-skilled workers.

Indeed, research published by the International Monetary Fund (IMF) covering 97 countries from 1985 to 2008 finds that increasing the cost of hiring — including mandated increases to leave and paid vacation — contributes to higher unemployment. The same study finds that more stringent and restrictive labour market regulations in general lead to higher unemployment, particularly among youth.

Crucially, the Wynne government plans to mandate higher labour costs at a time when Ontario businesses already face high electricity prices, in part due to provincial government policies. In fact, the proposed labour law changes are just the latest in a series of government policies that make the province a less-attractive place to do business.

The Wynne government has explicitly said it wants to help vulnerable workers across Ontario. Yet its proposed labour policies will hurt, and not help, many workers in the province — especially Ontario’s youth.