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Ontario’s Minimum Wage Increase: Good or Bad?

The proposal of the minimum wage increase in Ontario is one of the more hot topic items in 2017. Ontario’s legislative committee is travelling the province throughout the summer to have public hearings to listen to the supporting and neglecting reasons behind this proposal. Not astoundingly, the majority of outcry has been that of the terror that this legislation would cause to small businesses and the negative effect it would have on the economy.

Here is the breakdown of the minimum wage increase from now until 2019:

Minimum Wage Categories Current to Sept. 30, 2017 Oct. 1, 2017 to Dec. 31, 2017 Jan. 1, 2018 to Dec 31, 2018 Jan 1 2019 to Sept. 30, 2019
General Minimum Wage $11.40 per hour $11.60 $14.00 $15.00
Students under 18 (who work less than 28 hours/week while in school $10.70 per hour $10.90 $13.15 $14.10
Liquor Servers $9.90 per hour $10.10 $12.20 $13.05
Hunting and Fishing Guides $56.95: Rate for working less than 5 consecutive hours in a day $58.00 $70.00 $75.00
$113.95: Rate for working 5 or more hours in a day whether or not the hours are consecutive $116.00 $140.00 $150.00
Homeworkers (employees doing paid work in their own home for an employer) $12.55 per hour $12.80 $15.40 $16.50

The general minimum wage is currently $11.40/hour and is set to increase to $15.00/hour by 2019, which is a 31.5% increase in minimum wage. Wages typically increase at approximately the rate of inflation, which is expected because the purchasing value of money decreases and people need more to purchase the same goods. However, never has their been a minimum wage increase over a 2 year period of 31.5%. Since the increase is so drastic and arbitrary compared to historical wage increases it remains unseen the effects it will have if passed.

Although Canada has never seen an increase in minimum wage of this nature, Seattle, Washington had a similar increase from $11/hour to $13/hour in 2016. Many small businesses responded to the increase by cutting low-wage workers hours and letting go of employees. The legislation had the opposite effect of what was intended because the reduced hours resulted in workers yearly earnings going down and not up.

Who will this affect?

It is uncertain who this will directly affect as the change has not happened yet. However, many economists have provided insights into the possible repercussions. This wage increase will definitely affect small business owners such as restaurant owners that have many minimum wage and student workers. For most small employers the calculated increase in payroll is the difference between profit and loss. This is going to have a negative effect in either of two ways; either the price for product at the business will need to go up to counteract the large payroll, or the low-wage employees will need hour reductions or possibly be let go. More than likely the move to $15 will result in higher prices everywhere so is anyone really further ahead? I don’t think so.

Regardless of whether the changes are going to be good or bad for the economy, it seems that Ontario’s legislative committee is going to pass the proposed legislation. Ontario’s legislative committee is currently touring Ontario stopping in Thunder Bay, North Bay, Ottawa, Kingston, Windsor, London, Kitchener, Niagara Falls, Hamilton and Toronto. If you want your voice to be hear go to the community hearings and let the committee know how you feel about the proposed increase. Because we know how many of our small business clients feel and it is not good to see.

Employment Insurance

The other question that arises is how will employment insurance respond to the proposed change. The increasing of minimum wage has some suggesting that the amount contributed to employment insurance will have to increase. Otherwise, for the reasons mentioned above, less people will be able to retain their positions and this could result in more frequent payouts.

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