A hot topic of discussion in the small business community has been the provincial government’s recent announcement of their desire to see the minimum wage raised to $15 per hour (the current minimum wage is $11.40 per hour). The first proposed increase to $14 per hour would be effective January 1, 2018 and then the increase to $15 would be effective January 1, 2019. The proposed plan also included annual increases based on the annual rate of inflation.
Many small business owners have taken to various media platforms to denounce the increase. One of the concerns is that the increase is too much, too soon. I’d be inclined to agree. That’s a 30% increase in only 18 months. For a small business, that represents up to a 30% increase in their wage budget with very little time to react and plan. If the increase were rolled out over a longer period, let’s suggest $12.50 by January 1, 2018, $13.75 by January 1, 2019 and $15 by January 1, 2020, this would give small businesses much needed time to prepare and plan for their future.
Another objection has been that it’s simply too much to pay employees in service based businesses like retail stores, fast food restaurants etc. (which are common in North Grenville) and that some businesses will have to close because of it. After paying for accommodation, low income and lower middle income Canadian families (who would potentially most benefit from an increased minimum wage) spend 90-105% of their remaining annual household income on the types of goods and services that these businesses provide (food, clothes, entertainment etc.). Plainly, the customers who frequent service businesses most often, potentially have more income to spend at these same businesses. According to the provincial government, the minimum increase would give more than one quarter of the Ontario workforce a raise. That’s a lot of potential revenue available for small businesses to capture.
Additionally, some claim that people will lose jobs because small businesses can’t afford to pay them. From a report posted by Business Insider in 2016, the National Employment Law Project studied every federal minimum wage increase in the United States since a minimum wage was established. Reviewing “simple before and after comparisons of job growth trends 12 months after each minimum wage increase”, the researchers found that of the two dozen minimum wage hikes that happened since 1938, year-over-year employment actually increased 68% of the time. The number of retail sector jobs increased 73% and low wage hospitality and leisure jobs increased 82%. Of the eight times industry-specific employment declined, the U.S. was either in recession (five times) or just entering/exiting a recession (three times). The report further states that “opponents’ perennial objections of job losses are rooted in ideology, not evidence”, citing similar findings in other more sophisticated academic research studies.
The final argument (that we’ll address here) against the proposed increase, is that it will drive up the cost of all goods and services. This may be true, but it would be difficult to determine to what extent. However, despite numerous minimum wage increases in Ontario and other provinces over the years, the highest annual federal inflation rate in the past twenty years has been 2.9%. So, even if inflation grew at the highest rate over the next three years, the benefit of the increased minimum wage would vastly outweigh the increase in inflation. If prices were to increase more than inflation, then that’s a whole other topic of discussion about corporate greed and taking advantage of paying workers less than a livable wage.
Some people think that this announcement is a political move on the part of the provincial government, to help their re-election chances. If it is, that wouldn’t be any different than any other government in history facing an election. If the intention is to improve the statistic that one in four children in Ontario is currently raised in poverty or to ensure that people (especially seniors) have a livable income, then perhaps it’s time for a minimum basic income. Though minimum wages have an obvious positive impact as already explained, this does not help people who can’t work for various reasons such as physical and mental disabilities or health problems. The results are clear, the more money that low income to lower middle income families have, the more it benefits the Canadian economy.