Ontario Chamber of Commerce calls for a process that’s predictable, transparent, fair
By Claudine Kapel
How best to set the minimum wage has been a subject of long-standing debate.
The Ontario government has embarked on consultations to help it define how best to move forward with managing the province’s minimum wage.
Given minimum wage represents an input affecting organizations’ compensation expenditures, it may make good sense to incorporate some good compensation management principles into the process.
In fact, this seems in essence, to be what the Ontario Chamber of Commerce (OCC) is suggesting as it weighs in with its own perspectives on the potential path forward. After consulting with its members, OCC concluded there is “broad consensus that the current process – or lack thereof – governing the minimum wage does not work for employers and workers.”
Instead, OCC says its members want a process for setting minimum wage that’s based on four principles:
- Predictability – so employers can plan, grow and invest with confidence.
- Transparency – so the process is open and de-politicized.
- Fairness – so the process considers the impact on both employers and workers.
- Promotes Ontario’s competitiveness – so decisions around minimum wage do not discourage investment, job creation and economic growth.
What’s noteworthy about OCC’s recommendations is that they reflect sound principles that are commonly used by organizations to manage compensation in general. For most employers, compensation represents a significant expenditure that needs to be mindfully managed so organizations can develop budgets and plan for increases in a well-orchestrated manner.
Fairness and transparency are also key considerations when managing compensation, as is the need to ensure the organization can compete effectively in the market. That involves effectively balancing the need to attract and retain talent with the need to manage costs.
These types of principles make for reasonable considerations when it comes to managing minimum wage as well.
One of OCC’s concerns is that Ontario’s minimum wage has historically been managed in more of an ad hoc manner. It says the minimum wage has been characterized by long freezes followed by sharp increases as governments play catch up.
OCC argues this approach has not served anyone’s best interest. “Sharp increases, especially when implemented over a short period of time, force many businesses to lay off workers.”
OCC adds that during the last 10 years, “ad hoc changes to the minimum wage have been frequent and in retrospect appear to be unprincipled, with little indication of the criteria that government used to determine changes to the rate.”
It cautions that an ad hoc approach can lead to increases that significantly outpace inflation, pointing to British Columbia where the minimum wage increased by nearly 30 per cent between 2011 and 2012, from $8 to $10.25.
As a result, OCC is proposing Ontario tie minimum wage increases to an economic indicator, such as the Consumer Price Index (CPI).
OCC notes this type of approach has already been adopted in Alberta, Nova Scotia and the Yukon, and it’s being considered in Saskatchewan as well as Newfoundland and Labrador. Such an approach has also been adopted by 10 states in the United States.
The consensus recommendation from OCC members is for Ontario to adjust the minimum wage once every two years, on July 1, based on the cumulative change to the previous two calendar years referencing “All Items CPI” for Ontario. Notes OCC: “Businesses indicated a certain comfort level with the CPI as an economic indicator of choice; many businesses tie their own cost and price increases to the CPI.”
While OCC recommendations don’t address other contentious issues related to minimum wage – including where the actual rate itself should be set – at least some important dialogue is unfolding about how this compensation element should be managed.
Claudine Kapel is principal of Kapel and Associates Inc., a Toronto-based human resources and communications consulting firm specializing in the design and implementation of compensation and total rewards programs. For more information, visit www.kapelandassociates.com.