Ontario’s minimum wage hike raises questions over labour market impact

Theglobeandmail.com
May 30, 2017
By Rachelle Younglai

About a quarter of Ontario’s workers will get a pay raise with the provincial government’s plans to dramatically hike the minimum hourly wage to $15 within two years.

Canada’s most populous province is already home to the largest number of low-income earners. Just over 9 per cent of Ontario’s employees, or 540,000 people, earned the minimum hourly rate of $11.40 last year.

But a much larger share of the labour market - 25 per cent of Ontario employees or 1.46-million people - earned less than $15 an hour last year.
Other parts of Canada do not come close to Ontario’s levels. The second-highest is Quebec, with 828,000 workers under $15.

It is unknown how the hike will impact Ontario’s labour market, which currently has low unemployment but sluggish wage growth. Some of the lowest-paid industries, such as accommodation, restaurants and retailers, are big employers in the province.

Three-quarters of the employees in the accommodation and food-services industry earned less than $15 an hour last year. About 60 per cent of retail workers had similar earnings.

The fear is that although the higher minimum wage is designed to boost incomes for the working poor, it would trigger employers to slash jobs to compensate for the higher labour costs.

This happened when Alberta started hiking the minimum rate, with plans to reach $15 next year. Restaurants scrambled to mitigate the increased expenses. Some owners said they laid off employees, put entry-level jobs on hold and asked their kitchen and wait staff to take on additional duties.

Since Alberta increased its minimum wage by $1, to $12.20, last October, the number of employees as well as weekly earnings have declined in accommodation and food services.

Over the six months to March, the number of seasonally adjusted employees in this sector in Alberta fell by 1,227 positions to a total of 165,672, according to Statistics Canada’s Survey of Employment, Payrolls and Hours. Average weekly earnings, including overtime, dropped about 1 per cent to $411.42 over the same period.

However, the job losses could have been as a result of the economic slowdown in the province, not the higher labour costs.

Over the long term, Statscan data shows no correlation between increasing the minimum wage and job losses in the industry. Data shows both job creation and losses when provinces raise the minimum wage.

What is different this time is the steep increase over a relatively short period of time and the sheer number of employees who will fall into the $15 cohort.

In Ontario, the minimum hourly rate will increase by a third in less than two years. Certain students under the age of 18 and liquor servers will also see their minimum wage increase, though it will remain below standard.

In Alberta, the minimum rate will have risen nearly 50 per cent over four years by the time it goes fully into effect in October, 2018.

The percentage of Albertan workers earning minimum wage rose to a record high of 4.5 per cent last year from 2.7 per cent in the previous year after remaining below 2 per cent for more than a decade, according to Statscan.

However, it is unknown whether the surge in minimum-wage earners was due to the higher rate or because the energy downturn forced people to take lower-paid jobs.