How should minimum wage be calculated?

Ontario looking at options, could join other jurisdictions that tie it to CPI
By Liz Bernier
|Canadian HR Reporter|Last Updated: 11/03/2013

The proportion of minimum wage earners in Ontario is climbing — the share has more than doubled since 2003, rising from 4.3 per cent to nine per cent in 2011.

And those numbers don’t just represent teenagers flipping burgers for pocket change.

“Forty per cent of minimum wage workers are over the age of 24, and so that’s telling you that these are people who are trying to support themselves and possibly their families on minimum wage work,” said Sheila Block, director of economic analysis at the Wellesley Institute, a Toronto-based non-profit that advocates for population health, and author of the report Who is Working for Minimum Wage in Ontario?

The province recently created an advisory panel to provide advice on how the wage should be determined. And the Ontario Chamber of Commerce (OCC) is recommending tying it to the consumer price index (CPI).

“Frankly, it’s transparent, it’s predictable and it’s fair,” said Allan O’Dette, president and CEO. “Through the research that we did, we really discovered that probably the most effective tool would be tying it to something that everyone understands, and CPI is (it).”

Other jurisdictions that already do this include Alberta, Newfoundland and Labrador, Nova Scotia, Saskatchewan and the Yukon, he said.

“Frankly, there’s a lot of problems with the current (system) which, on one level, is just picking numbers out of the sky,” said O’Dette. “Employers want a process that gives them some predictability so they can plan, grow and invest with a degree of confidence. The transparency is (that) everybody sees that it’s not political, and fairness is that we need a process that considers the impact on employers and workers, and finally something that promotes competitiveness.”

Increasing the minimum wage too much too quickly would hurt businesses, he said.

“When you look at who would be significantly impacted here, it’s retailers, the leisure sector... (these) sectors are not growing by leaps and bounds. The economy has been relatively flat for the last number of years and the net impact of such a significant increase would absolutely lead to a reduction in jobs.”

Instead, increasing the wage gradually may be the best option, according to Tom Zizys, a fellow at the Metcalf Foundation, a charitable organization in Toronto. But it needs to catch up to the market before it is locked into a measure such as CPI, he said.

“If there are regular, staged increases — not all at once but over time — those can be absorbed by the labour market without having too much impact,” said Zizys. “It’s worth the payoff — even if a small number of jobs are lost, overall the benefit of having more money in people’s hands is good.”

Minimum wage

Who’s earning minimum wage in Ontario?

Nearly one-half of minimum wage earners are over the age of 24. But if those workers earning barely more than minimum wage — between $10.25 and $14.25 — are taken into account, the number of low-wage earners over the age of 24 swells to 60 per cent.

“(So) minimum wage is no longer a kind of transition. Often, people continue to work at minimum wage,” said Sheila Block, director of economic analysis at the Wellesley Institute in Toronto.

And many of those low-wage earners disproportionally represent certain demographic groups.

“When we look at the distribution of minimum wage workers, what we see is that it’s not equally distributed across the population. If you’re a woman, you’re more likely to be working at minimum wage, if you’re racialized you’re more likely to be working at minimum wage, and you’re much more likely to be working at minimum wage if you’re a recent immigrant,” she said.

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