Ontario’s wages of sin
When f ormer Ont ario PC l eader Tim Hudak wisely proposed in 2014 rescuing the province’s finances by reducing public sector employment by 100,000 jobs, Premier Kathleen Wynne called the plan “disastrous.” So how then should we describe Wynne’s own plan to raise the minimum wage, which is likely to destroy far more than 100,000 jobs, the vast majority of which will be in the private sector?
On Tuesday, Wynne announced plans to legislate a $ 15 minimum wage by 2019. By calculating roughly according to estimates in a report commissioned by the Ontario Ministry of Finance when the Liberals were raising the minimum wage a decade ago, we can project the new wage will kill an estimated 80,000 to 155,000 jobs just among young workers ( aged 15 to 24), without even counting the number of jobs lost to older workers.
That report, authored by minimum wage expert and University of Toronto economist Morley Gunderson, warned against raising the minimum wage by pointing out that anadian studies generally estimate that a 10- per- cent minimum wage hike would reduce youth employment by around three to six per cent.
We can t herefore expect that Wynne’s plan to hike the minimum wage by 32 per cent would reduce youth employment by around nine to 17 per cent. Multiply that by the number of young workers in Ontario, and that’s 80,000 to 155,000 jobs lost.
But wait: it actually gets much worse. That estimate doesn’t take into account the fact that Ontario’s minimum wage will be much higher than in other provinces. Gunderson’s 2007 report said this would have a negative employment effect “over and above the effect from the higher minimum wage it s el f .” This extra negative effect is the consequence of employers being encouraged to relocate to provinces less hostile to business.
And remember that the 80,000 to 155,000 estimate is only for the jobs lost by young workers, aged 15 to 24. Add in all the jobs that will be lost by older workers as well, then add in all the jobs that will be destroyed by the other regulatory burdens Wynne is heaping upon workers with new labour rules to go along with the minimum wage hike, and there is no telling how much high the economic casualty toll might skyrocket.
Even current minimum wage earners who do manage to keep their jobs might be worse off if their employers offset wage increases by decreasing non- wage compensation (like job training) that young workers prefer. These negative effects on employment and training are a large reason why, as Gunderson’s 2007 report put it, “minimum wages are, at best, an exceedingly blunt instrument” that could actually end up i ncreasing poverty.
The 2014 Minimum Wage Advisory Panel established by the Ontario Labour Mini ster reported much the same as Gunderson did in 2007: that raising the mini mum wage reduces employment and is a bad way of reducing poverty. Indeed, the panel noted that some studies “find that a higher minimum wage leads to an increase in poverty.”
For example, it cited a 2011 study which found a 10- per- cent minimum wage increase was “associated with a 4 per cent– 6 per cent increase in the percentage of families living under Low Income Cut Offs (LICO) in Canada between 1981 and 2004” — a statistically significant result. “The higher minimum wages trigger higher unemployment,” the panel explained, “which results in more poverty as household incomes drop among lowincome families.”
Some might refer to these deleterious effects as “unintended consequences” of higher minimum wages. But calling these consequences unintentional is like saying the $ 45 billion ( or as much as $ 93 billion) the Liberals are spending to “save” electricity ratepayers $24 billion is an “unintended cost.”
Just as the Liberals know their hydro scheme is costly, they are also well aware their minimum wage hike will kill jobs.
Two reviews they’ve commissioned in the past decade told them so. But they have evidently decided that the massive job losses are worth the electoral support they will receive from the public sector unions, even if it’s a policy that will prove dire for Ontarians.
WYNNE’S LIBERALS ARE WELL AWARE THEIR MINIMUM WAGE HIKE WILL KILL JOBS.