Hiking minimum wage could cost 50,000 jobs: Watchdog

Increasing the minimum wage to $15 an hour could cost 50,000 jobs, warns Ontario's independent fiscal watchdog.

Thestar.com
Sept. 12, 2017
By Robert Benzie

Increasing the minimum wage to $15 an hour could cost the province at least 50,000 jobs, warns Ontario's independent fiscal watchdog.

The Financial Accountability Office on Tuesday released a six-page assessment of the Liberal government's forthcoming hike to the $11.40-an-hour wage, which will jump to $14 in January and $15 in 2019.

"On net, the FAO estimates that Ontario's proposed minimum wage increase will result in a loss of approximately 50,000 jobs (0.7 per cent of total employment), with job losses concentrated among teens and young adults," the office said.

"The higher minimum wage will increase payroll costs for Ontario businesses, leading to some job losses for lower income workers," it continued, echoing the concerns of the Ontario Chamber of Commerce and other business groups.

"At the same time, higher labour income and household spending will boost economic activity leading to some offsetting job gains."

The FAO estimates the number of minimum wage workers will climb from about 520,000 to 1.6 million by 2019.

"As well, under a $15 minimum wage, adults and those with full-time jobs would represent the majority of minimum wage workers," it said.

"By comparison, under the current minimum wage of $11.40 per hour, teens and young adults and those with part-time jobs account for the majority of minimum wage workers."

The non-partisan office noted "there is evidence to suggest that the job losses could be larger" than 50,000.

That's because "Ontario's proposed minimum wage increase is both larger and more rapid than past experience, providing businesses with a greater incentive to reduce costs more aggressively."

But the FAO cautioned that its analysis "did not consider other potential non-economic benefits of a minimum wage increase, including improving workers' well-being and health outcomes."

Labour Minister Kevin Flynn argued Ontario's economy is growing and can absorb the higher wages.

"Our economy created more than 30,000 jobs last month and the unemployment rate is sitting at 5.7 per cent, the lowest level in more than a decade," said Flynn, noting offsets are coming to help business.

"People in Ontario support the notion that you work 35 or 40 hours a week ... you deserve to be able to pay rent, to buy food, put shoes on your kids' feet," the minister said.

"The job-loss numbers are something that would be disputed by other economists," he said, referring to research the OECD, the U.S. Center for Economic and Policy Research, and the Canadian Centre for Policy Alternatives.

Flynn emphasized that "low wages are bad for the economy."

But Progressive Conservative Leader Patrick Brown said the Liberals' "rushed plan" is too much too soon and said the jump to $15 should be postponed to 2020 or even 2021 — as British Columbia's new NDP government is doing.

Brown said the expedited $15 wage is "Kathleen Wynne's job-killing plan."

"What I'd like to see is just a level of reasonableness. Why does it always have to be the premier's way or the highway," he said.

NDP Leader Andrea Horwath, who has long backed the $15 rate, blamed the Liberals for giving ammunition to critics like Brown and the FAO by not doing their homework before implementation.

"The government didn't do a lot of work with small business to make sure that small business was stabilized so the FAO looked at the minimum wage without that kind of context," said Horwath.

"We think the $15 minimum wage should be going ahead - that's why we announced it almost two years ago now - but there needs to be that work done," she said.

Julie Kwiecinski of the Canadian Federation of Independent Business said the FAO report "reinforces the need for the Ontario government to halt its reckless $15 minimum wage plan and conduct an economic impact analysis and fulsome consultations before taking any further steps."

"We encourage the Ontario government to step back and take the time to find a solution that actually addresses the problem, without putting 50,000 Ontarians' jobs at risk, predominantly those of teens, young adults, and new immigrants," said Kwiecinski.