Ontario minimum wage hike: Good idea, bad execution

By Stuart Rudner

This article was originally published by The Lawyer’s Daily, part of LexisNexis Canada Inc.

Is a 20 per cent increase in the minimum wage good for the economy, or a devastating blow to some businesses that will lead to the elimination of large numbers of jobs? On one hand, individuals should be paid a living wage. On the other, an increase in your hourly wage is meaningless if your hours are cut, or your job is eliminated altogether. As is usually the case, there is no simple answer. The problem may not be the fact that the minimum wage was increased, but the manner in which the increase was introduced.

Since the first of two increases to the minimum wage in Ontario came into force on Jan. 1, the issue has dominated our social discourse. Conservative pundits decry the government’s decision as a blow to small business, while social activists celebrate it as a small step toward improving the lot of those who work for a wage that can barely sustain them and point out the dramatic wage inequality in our country.

Unfortunately, Tim Hortons, our nation’s unofficial coffee chain, has become the poster child for corporate greed, as reports of franchisees reducing or eliminating paid breaks, cutting back on benefits, charging for uniforms and otherwise clawing back the pay increases have led to widespread backlash. While other businesses have implemented similar measures, Tim’s has received the most attention. The majority have decried these tactics as unfair, oppressive, and generally un-Canadian. “These actions against minimum wage earners are particularly galling in light of the ’Canadian values’ branding that Tim Hortons trades upon,” wrote Ontario Federation of Labour president Chris Buckley.

As we all know, the Liberal government in Ontario implemented a large-scale overhaul of employment legislation last year. One of the items that received the most attention was the decision to increase the minimum wage, which went from $11.60 to $14 per hour on the first day of this year and will increase to $15 on Jan. 1, 2019.

For employers with a substantial number of minimum wage workers, this will dramatically increase their labour costs. The Great White North Franchisee Association, which represents a number of Tim Hortons franchisees, has claimed that the legislative changes will cost the average franchisee $243,889 annually.

Some businesses have reduced staff hours or reduced their workforce, sometimes in conjunction with automation of services. For example, some grocery stores have augmented their self-checkout facilities, replacing the now more expensive staff with machinery. Anecdotally, some small business owners have claimed that they will simply close up shop, as these increased labour costs will render their business unviable.

The public reaction has been interesting, as it often is. For the most part, the sentiment has been outrage at the Tim Hortons franchisees and other businesses that have tried to claw back compensation to reduce the additional labour costs. Some, including our minister of Labour, have suggested that one option would be to raise prices, which raises its own concerns — after all, many of the people consuming those products are the same minimum wage employees, so their increased pay may not result in a better standard of living if that were to occur.

Ever since the wage increases were announced, there has been debate and speculation regarding its impact on the economy. Some espoused the view that it would stimulate the economy and be a boon for us all. Others warned that jobs would be lost and some businesses would close or go elsewhere. We are less than two weeks into the “new era,” so we cannot say with certainty what the impact will be. However, it is clear that the changes have led to much controversy.

As an employment lawyer and mediator, I can see both sides of the argument. On the one hand, individuals should be paid a living wage. The concept of the “working poor” should not exist in Canadian society, especially when, as many critics have pointed out, some business leaders are paid thousands of dollars for each hour of work. The divide between our upper and lower classes has increased dramatically in recent decades.

At the same time, businesses that employ minimum wage workers just had a 20 per cent cost increase imposed upon them, with a scant few months to prepare. Whether you have thousands of employees, or operate a family business with one or two, that will dramatically impact your bottom line. Some of the acts of employers like Tim Hortons franchisees might have been avoided if our government had provided more warning.

It is far too simplistic to say, as Andrea Horwath did, that “Millionaires are taking away minimum wage earners’ paid breaks, clawing back more of their paycheques for things like benefits that used to be covered or calling workers contractors, instead of employees, to get out of providing some pay or benefits.” My firm works with businesses small and large. Most of them are owned by people that are nowhere near being millionaires; they work long hours to make ends meet, and have far more in common with their employees than the CEOs that are paid millions of dollars each year.

Perhaps raising the minimum wage was a good idea. In Canada, we should not have people who are working but unable to afford the necessities of life while others are paid far more than they could ever need. At a societal level, something needs to be done to rectify the increasing disparity between rich and poor. Increasing the minimum wage is one way to address the issue, although the timing of this measure suggests it was primarily an effort to garner votes. There appears to have been little consideration of how the increase would impact small businesses and, by extension, how those business owners would react.

It is notable that while Bill 148 was based upon an extensive set of recommendations gathered over a period of consultation, those recommendations did not even mention an increase to minimum wage. This was a measure that the Wynne government decided to throw in on its own. Perhaps more time should have been taken to study the potential impact, and if the decision was made to increase wages, businesses should have been given more time to prepare, so that we might not be seeing seemingly hasty reactions such as those of some Tim Hortons franchisees.

I recently read the comments of the Ontario Chamber of Commerce, which echoed my thoughts: this was done too quickly, and small businesses are scrambling to figure out how to deal with dramatic cost increases. As they said, “The implementation was too much, too fast. It is clear that the government of Ontario must take further action to mitigate the unintended consequences of Bill 148.”

 

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