Ontario Wage Hike: Anyone Who Claims To Know What Will Happen Is Lying

World

As of January 1, the minimum wage in the Canadian province of Ontario rose to $14/hour from the previous $11.60/hour. The minimum wage is set to increase again to $15/hour come 2019. Cue the firestorm.

Most coverage centered around a Tim Hortons location in Cobourg, Ontario. The employees at this store, 115 km east of Toronto, received documents they were told to sign acknowledging that they were losing paid breaks, paid benefits and numerous other incentives as a result of the new minimum wage hike. This particular store is of note because of its owners - Ron Joyce Jr. and Jeri-Lynn Horton-Joyce, the son and daughter of the chain’s co-founders, Ron Joyce and the late Tim Horton respectively. Social media and public outrage abounded, especially as it came to light that Forbes estimated Ron Joyce Jr.’s father’s net worth to be around $1.4 billion US.

An employee even told CBC News that between unpaid breaks and having to pay 50% of the cost of benefits, their biweekly paycheck would actually be at least $51 lower than before the hike.

“I’ve worked for the company for a very long time, and I was very upset. I wasn’t marching down the street asking for this pay raise. Now I’m worse off,” they said. CBC did not reveal identities to protect the workers.

Soon, other stories emerged: numerous Tim Hortons locations are forcing unpaid breaks and benefit cuts on team members; popular breakfast chain Sunset Grill implemented a new 25% tip pooling policy clawback on their servers; Wimpy’s, East Side Mario’s and Canadian Tire employees are all sharing details of losing unpaid breaks and perks. All the retailers and employers are claiming these cutbacks are a result of the new minimum wage hike. So many instances were flooding in that an Ottawa labor council launched a ‘Minimum Wage Bully’ hotline for people to report these companies and publicly shame them.

Premier Kathleen Wynne capitalized on all the media controversy, telling CBC, “I think it’s the act of a bully. And if Mr. Joyce Jr. wants to pick a fight, pick that fight with me and not the people who are working at the service window of the stores.” In a desperate attempt to counter the public relations nightmare, Restaurant Brands International (RBI), the giant fast-food conglomerate that owns the Tim Hortons brand, issued a statement condemning these decisions by “a reckless few.” Their strongly worded statement tried to blame the negative decisions on “a rogue group” of franchisees.

Nice try.

When RBI finalized their $12.5-billion takeover of Tim Hortons in 2014, very few believed that things would be all sunshine and rainbows. As of ten months ago, a group of Tim Hortons franchisees created the Great White North Franchisee Association; the group boasts a membership of 50% of the franchised outlets in Canada. They proposed a class-action lawsuit back in June - which has not been certified - listing complaints about cost-cutting measures coming from RBI that have resulted in lower quality. In this particular instance, by refusing to allow franchisees to raise prices, Tim Hortons owners have few choices in how to cover the difference in wages. Additionally, for Wynne not to acknowledge her own government’s role in this ridiculousness is absurd.

After months of fighting a federal proposed tax change which could arguably have business owners paying a 73% tax rate, now Ontario businesses are being put on blast by Wynne and her provincial government. Just a few months ago, labor minister Kevin Flynn, infuriated businesses by telling a Fergus grocer concerned about the wage hike that most “decent, law-abiding Ontario businesses will be largely unaffected,” and Barrie MPP Ann Hoggarth suggested that businesses that can’t afford minimum-wage increases deserve to shut down. I’m not even a business owner, and I’m offended by those statements.

Of course, we also can’t forget that Ontario entrepreneurs were the worst hit by the Liberal’s cap-and-trade carbon tax and continue to pay some of the highest electricity rates on the entire continent. In fact, bills are so ridiculous that Wynne and her Liberals are pledging to borrow $25 billion over 30 years to subsidize power bills - money the province doesn’t have - throwing Ontario further into debt. Unfortunately, all eyes are on Ontario as many other provinces, like British Columbia, Alberta, and Prince Edward Island, prepare to hike minimum wages in an effort to help the lowest-income earners as the cost of living continues to rise.

Most Ontarians can see right through Wynne’s desperate attempts at buying votes before the next election. It’s not that we don’t want to see a minimum wage increase, but the dramatic 21% wage increase over so short a period of time could very well be the most ill-advised move Wynne has made. TD Bank estimated that the new minimum wage hike would cost 90,000 jobs by 2020. The Bank of Canada had a more conservative estimate, at 60,000 fewer jobs in the province by 2019. And the province’s economic watchdog, the Financial Accountability Office, believes more than 50,000 people could lose their jobs as a direct result of the minimum wage hike, especially concentrated among teens and young adults.

The real problem is, no one knows what is really going to happen.

Don Pittis phrases it perfectly: “We’re the guinea pigs in a real-life research project, and no one can be sure how it will turn out.” Ontario, although only one province in Canada, is Canada’s most populous and most industrialized. It includes several major urban centers as well as rural communities. Ontario has the power to damage the entire nation’s economy.

Around a third of workers are earning minimum wage in the province. A lot of the anti-$15 crowd has a common misconception that minimum wage workers are suburban teens looking to make extra pocket cash, but in reality, only 34% of minimum wage workers are of high school age. The rest are folks trying to live life and support a family. Working 40 hours a week under the old wage translated to roughly $24,128 a year before taxes. After deductions, it works out to barely more than $20,000 for a single person, and just under $42,000 for a family of four. But that figure is widely considered to be at or below the poverty line.

According to Carleton University professor Allan Moscovitch, the minimum wage was initially intended to provide enough income to support a family. Under the new wage, an individual isn’t going to be cavorting around Europe, but they would be earning around $29,120 a year. There are some predictions that claim goods and services will rise approximately 10% as a result of the new minimum wage. More frightening, labor costs will increase by 41%. It’s not just minimum wage workers who will be earning more, but experienced and knowledgeable employees will being demanding higher pay as well. It’s unreasonable to demand business owners just cut their bottom line.

The Liberals have offered a measly tax cut to businesses - 3.5%, down from 4.5% - but under what world is that enough to cover the difference? Using just the numbers from above, that’s an extra $4,992 per employee. In a small company of just ten employees, labor costs have suddenly increased by $49,920 a year. Is a business owner just supposed to just accept a $50,000 per year decrease in their bottom line? That’s not even taking into account the increased costs of operations, since predictably suppliers and vendors are raising prices to offset their own costs. Although Finance Minister Charles Sousa has announced a $500 million tax reform package to help small businesses, most business groups have argued that these offsets should have come months ago.

“Businesses will have started to increase costs, they will have started to let people go, they will have stopped hiring people that they might have hired because they’re planning now under the presumption there is no offset,” Karl Bauldauf said, the spokesman for The Keep Ontario Working Coalition. Ontario’s largest business lobby group, the Ontario Chamber of Commerce, has publicly asked Sousa for additional assistance in dealing with the increased wages. The group, which has 60,000 members in 135 communities across the province, is claiming an inflation rate of goods and services as high as 50% if they do not receive help.

With all this negativity, you may mistakenly believe I’m against this wage hike. Let me be clear: I’m not. With more than 1.7 million people in Ontario living on or below the poverty line last year according to Statistics Canada, this new wage could very well lift them above that line. A pay increase could work like the predictable happy endings, with more spending, more money in the economy, and even more jobs. That’s traditionally the expectation of raising the minimum wage. A lot of naysayers have been citing one of the most recent studies from the University of Washington (UW) that was published last year. The study looked at the impact of the wage increase in Seattle, who approved a plan to phase in a $15 minimum wage back in 2014. The Washington Post even called it  “very credible.” According to the study, the average low-wage worker in Seattle lost an estimated $125 a month because of the hike in wages. Free-market fantatics and opposers of minimum wage raises seized on the opportunity and started touting these figures to anyone who would listen, but didn’t properly read the study itself too closely, because those results are pretty much bullshit. To avoid confusing establishments that were subject to the minimum wage with those that were not, the authors did not include large employers with locations both inside and outside of Seattle. This would include any business with multiple locations, and especially large corporations like Walmart, McDonald’s and even their famous Starbucks. These companies are arguably some of the biggest employers of minimum wage workers. By excluding these businesses, the study itself excluded 40% of Seattle’s workforce. Sure, 60% is technically a majority, but I’m highly skeptical of these results.

Look, no matter which side of the minimum wage debate you’re on, there are studies to support it. Critics keep trying to use traditional economics and recent coverage of businesses cutting benefits and breaks to predict certain doom and a devastated economy.But the fact of the matter is, Ontario’s wage hike is an unprecedented move. No one has ever increased the minimum wage by 21% in so short a time. No one knows exactly what the impact of this will be. Short term, I’m sure we’ll continue to see demonizing stories be reported of business owners ‘bullying’ their employees, but breaking down the math breeds a little sympathy. Prices will inevitably go up, but the full, long-term repercussions? There aren’t really any examples to draw from to accurately predict the outcome of this. Anyone who claims to know otherwise is lying.

We’re just going to have to wait and see.