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The Proposed Minimum Wage Increase . .Too Much, Too Fast?
Business owners, labour leaders and economists remain divided over the impact proposed changes to provincial labour legislation, including an increase in the minimum wage, will have on businesses across the region.
While the changes in Bill 148 Fair Workplaces, Better Jobs Act, 2017
also include language changes relating to vacation time, scheduling and paid emergency leave, much of the focus has been on an increase in the minimum wage in Ontario, which will increase from $11.40 an hour currently to $14 an hour by 2018 and to $15 an hour by 2019.
Many business owners believe the increase will force them to cut staff hours or even lay off workers to maintain their bottom line in a competitive economy where they already pay high electricity prices and face cross-border competition.
A study commissioned by the Keep Ontario Working Coalition, which supports businesses across the province, concludes that as many as 185,000 jobs will be in jeopardy as a result of the changes.
But, labour leaders and many economists believe that putting more money into consumers’ hands will help stimulate the economy because most people earning minimum wage spend that money on such staples as clothing and food, they don’t invest it offshore or buy expensive vehicles.
Matt Marchand, President and Chief Executive Officer of the Windsor-Essex Regional Chamber of Commerce (located at 2575 Ouellette Place; WindsorChamber.org), says his organization is not opposed to an increase in the provincial minimum wage, but suggests it be phased in over a longer period of time.
“Small businesses are the most vulnerable because they don’t have the scale or size to deal with these added costs,” Marchand comments. “It’s not just about the people earning that minimum wage because there will also be people earning that amount now who will want a bump up.”
Marchand continues by stating, “If we’re going to increase the minimum wage, there have to be cost offsets to help businesses remain competitive. Hydro price increases, for example, are already eating away at the bottom line. And this adds yet another pressure.”
He stresses, “We don’t have to be the lowest cost jurisdiction but we need to be competitive.”
Marchand says his organization favours a five year phase-in period to allow businesses to make adjustments in their business model and cost structure, which would enable them to survive in an already competitive marketplace.
Van Niforos, long-time Owner of the successful Penalty Box Restaurant at 2151 Walker Road in Windsor (PenaltyBoxRestaurant.com), informs Biz X he will have to make major adjustments in his operations, in a hurry, since the first step-up in the new wage scheme takes effect in four months.
“We have 65 employees and the vast majority will expect a bump up of some kind or another,” says Niforos. “I think a longer phase-in period to give small businesses a better chance to adjust would make more sense.”
He adds: “The businesses which make the right adjustments will survive and the rest will struggle. I also expect that essential goods and services will increase in price so the net effect of an increase in the minimum wage will not have the impact most people think it will have.”
But, more than 50 economists across Canada penned an open letter to Ontario Premier Kathleen Wynne stating that “doom and gloom predictions” about the impact an increase in the minimum wage will have are unfounded.
According to the economists, the move makes good economic sense and could generate substantial benefits to low-wage earners and the economy as a whole.
In addition, a study by the National Employment Law Project, a U.S.-based organization, found no correlation between a higher minimum wage and lower employment in jurisdictions such as Seattle, Alberta and San Francisco, where minimum wages were recently raised.
The group’s analysis further showed that in almost 70 percent of cases, employment actually rose following a federal wage increase.
Other studies have shown that a higher minimum wage results in less employee turnover, which increases business productivity and efficiencies.
Dr. Alfie Morgan, Professor Emeritus at the University of Windsor’s Odette School of Business (Odette.UWindsor.ca), believes small businesses will have a difficult time adjusting to all of the Bill’s changes when taken as a package.
“These extra benefits will be very difficult to afford by small business owners, many of whom are barely making minimum wage themselves,” says Morgan. “Putting more money into the economy is never a bad thing but expecting small businesses bear the brunt of it is unfair and unrealistic.”
The new legislation will still leave liquor servers, who many believe make up the difference with tips, and students, earning less than their minimum wage counterparts.
Students currently earn $10.70 per hour under current minimum wage legislation and that would increase to $13.15 by January 1, 2018 and to $14.10 a year later. By comparison, liquor servers currently earn $9.90 and would see an increase to $12.20 in 2018 and to $13.05 a year later.
During a recent meeting of the Standing Committee on Finance and Economic Affairs, Tracie Edwards, Vice-President of District 9 of the Ontario Secondary Schools Teachers’ Federation, said “we shouldn’t be exploiting workers based on their age or the type of work they perform.”
“It’s long overdue and it will benefit the economy according to many economists,” remarks Edwards.
But, Executive Chef Daniele Palanca of Ambassador Golf Club at 1025 Sprucewood Avenue in Windsor (AmbassadorGolfClub.com) believes the food and beverage industry will absorb the largest hit from these wage increases.
“If hours and staffing have to be adjusted as well as price increases; then servers will be covering more tables at higher priced menu items and clients may well become upset and dine out less frequently,” warns Palanca. “We’ve already absorbed two wage increases over the past two years, we have another coming in October and then a larger one in January.”
He explains that “At Ambassador, we will notice the impact more throughout 2018 because we have already quoted prices for banquets at 2017 pricing and I am sure there will be price increases for all our fresh commodities once the wage increases are passed on by suppliers.” Palanca mentions that small businesses may place their top three or four employees on salary rather than on an hourly wage in order to achieve some measure of labour cost certainty.
Cover story continues here.