Why Drastically Raising the Minimum Wage in Ontario is a Bad Idea

Kathleen Wynne

Kathleen Wynne’s Ontario Liberal Government has announced reforms to the provinces’ labour laws. The most impactful change will see a rise in the minimum wage to 14 dollars an hour on January 1st 2018, and again to 15 on January 1st 2019. Wynne sighted social justice and workplace equality for justification of the rise. She believes it will increase the standard of living for minimum wage earners – allowing them to more easily support their families in the face of increased living costs.

Wynne’s call for equity in the workplace sounds like a compassionate appeal to the working class, and a call to action against corporate greed and exploitation. However flattering this proposal sounds, her measures present numerous uncertainties and potential consequences.

The minimum wage issue always centers on overall economic health. The Ontario government failed to provide an extensive cost-benefit analysis of the proposed changes, leaving many unanswered questions. It remains to be seen whether or not this measure will lead to fewer jobs available. A minimum wage increase would be pointless if it forces employers to hire less people in order to cut costs.

One argument in favour of the increase is that more purchasing power will lead to higher sales for businesses. But higher operating costs will also lead to a rise in the price of goods and services – hence causing no change to the consumer’s ability to buy. It may also contribute to inflation in the economy overall. This argument also presumes that increased purchasing power among those earning minimum wage would somehow directly rectify losses in the operating costs of businesses.

Smaller businesses would be heavily affected by forced higher wages. The ability to make payroll will be much harder for small businesses to achieve if they are forced to spend more on remedial labour; along with the taxes and regulations that make it difficult enough for small businesses to start in the first place. Larger corporations will be able to eat these extra costs, and benefit when smaller competition is potentially forced to shut down.

People who already earn 15 or more may be negatively affected by the change. It could cause their wages to either decrease or stagnate as employers are forced to cut costs at the expense of minimal earners. This would impose equal pay for workers with different capabilities and levels of work ethic, thus rewarding those who are less driven and less likely to get promotions or raises. A raise in the minimum would also mean that businesses could be forced to cut hours all together – potentially contributing to less overall take-home pay.

Teenagers and students entering the workforce will also feel the consequences of a minimum wage increase. Not only will low level positions be less readily available, but increases in pay would force employers to hire older and more experienced individuals – making inexperienced young workers expendable and not worth the risk of hiring.

High real estate prices and cost of living in the Greater Toronto Area is the only place where this increase would see any beneficial results for minimum wage workers. But the Liberals are enacting this change all over the province – in places where the cost of living is not as high. Cities like Windsor, London, Kitchener-Waterloo, Sudbury and Ottawa will see setbacks in economic growth, as smaller businesses are potentially forced to enact new costs.

The farming industry in rural Ontario will be adversely affected as well. Farmers will be forced to pay their farm-hands more. Due to Canadian supply management subsidies and cost setting on certain industries, farmers in certain industries will not be able to raise their prices in order to compensate for higher operating costs. In all likelihood, farmers will turn to illegal unemployment in order to fill basic positions.

This relatively large leap in minimum pay also raises ethical issues regarding the government’s ability to dictate the outcome of private negotiations between employers and employees. If someone is willing to sell their labour for less money, with the alternative of not being hired at all, then they should have that right within reasonable means. The current arbitrary increase in Ontario makes it impossible for workers to acquire positions which would otherwise not be available if they were not willing to work for less.

A workers value should be determined by the person offering a specific opportunity. Workers can earn the right to be paid more as they acquire experience, show initiative and consolidate the required skills to occupy higher paid positions. Mandating an inflated minimum wage is debilitating to those who work hard, have distinct acumens and capabilities, and want to be responsible for their own labour mobility.

Advocates of an inflated minimum wage often point to countries like Australia as a sparkling example of the policies success. However, Australia is rampant with illegal employment and the use of foreign worker visa programs. Illegal employment will likely continue in Australia, as many desperate employees will refuse to inform the authorities of their situations in order to remain employed.

Despite all the glaring problems and unanswered questions with raising the minimum wage, Kevin Flynn, The Ontario Minister of Labour, claims that the increase would be great for the economy. He of course fixates upon typical class baiting and vote buying buzz phrases like: “The little people are getting left behind” and “we don’t have a fair economy.” Flynn claims that the increase would lead to economic growth, without actually sighting any evidence. Also without evidence, he points to San Francisco and Seattle as examples of where it has increased economic output – failing to mention the presence of under the table undocumented immigrant labour in both those cities.

So why are the Ontario Liberals doing this? The simple answer is that there is an election coming up next year, no later than June 7th 2018. Given the timing of this legislation, this seems nothing more than a ploy to pander to minimum wage earners, and an attempt to earn back Premier Wynne’s failing approval ratings. Given the timeframe of the Liberal government plan, the true impact of the mandate may conveniently not be felt until after the 2018 election.

Minimum wage is not meant to be something to survive off of, but rather a starting point to gain better employment in the future by acquiring experience. The government’s goal should not be to mandate inflated wages, but rather to foster an environment for the economy to grow and offer more options to those participating in it. This current legislation in Ontario is not well thought through and ripe with wrong intentions. It remains to be seen whether or not it will contribute to another Liberal victory in 2018.

References and Sources: 

https://www.thestar.com/news/queenspark/2017/05/29/more-paid-vacation-coming-premier-kathleen-wynne-vows.html

https://www.theglobeandmail.com/news/national/what-to-expect-as-ontario-prepares-to-unveil-new-labour-legislation/article35145675/

https://www.thestar.com/news/queenspark/2017/05/29/ontario-liberals-to-unveil-sweeping-labour-reforms-tuesday.html

http://www.torontosun.com/2017/05/29/province-to-raise-minimum-wage-update-labour-laws-tuesday-wynne

http://www.cp24.com/video#1135509

http://www.couriermail.com.au/news/peter-dutton-foreign-workers-get-the-flip-from-australian-fast-food-jobs/news-story/bc9281f0dca75fc60a1733958e8d71bb

 

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