Government passes buck in fighting poverty

If you’re in Ontario, please spare a thought for the local coffee shop owner or dry cleaner if they’re looking a little more stressed than usual to start of the year. 2017 was a tough year for governments coming down on business owners, and there haven’t been many signs that 2018 is going to be much brighter.

As soon as the clock struck midnight on Jan. 1, the news was dominated by reports that a Tim Hortons franchise outside Toronto had cut back on some employee benefits, such as a paid day off for birthdays and paid breaks, in response to a provincewide increase to the minimum wage. The wage floor, which had been pegged to inflation and was $11.60 in 2017, shot up to $14.

Minimum wage increases happen all the time across the country, with plenty of warning — regularly scheduled, tied to inflation, or done after consultations with the people who sign the paycheques.

Most businesses can cope with this kind of predictable increase. In fact, many of our members support the government’s wage increase in principle, but say the accelerated timeline “goes too far, too fast.”

Of course, if you listen to the premier, labour minister and labour unions, they dispute any data that shows minimum wage hikes would have any negative effects on workers. They claim all CFIB (Canadian Federation of Independent Business) and academic reports suggesting a scaling back of benefits, hours and jobs are hogwash.

But faced with evidence that these exact, predictable outcomes are happening — and happening fast — they accuse business owners of heinous crimes, suggesting they will sic the labour cops on any firm making any changes to accommodate the increase.

Governments and unions can’t have it both ways. They can’t keep claiming a minimum wage increase will have zero negative effects, and then say the sky is falling the second these exact negative effects happen.

Job losses

It wasn’t just employer groups raising alarm bells. The Bank of Canada predicted more or less the same result. In a report released in December, it said minimum wage increases across Canada between 2017 and 2019 would cost about 60,000 jobs.

TD bank put the number between 40,000 and 80,000, and the Financial Accountability Office of Ontario pegged it at 50,000.

So, what are the early effects of Ontario’s giant minimum wage experiment? 

In a December survey of nearly 3,000 Ontario business owners by CFIB, more than half said they were scaling back hiring plans, particularly for young people.

About one-third said they were either reducing the number of hours they offer employees or reducing the number of staff. Nearly one in five said they were cutting employee perks.

No employer takes joy in rolling back benefits or hours. They aren’t gleefully cutting costs to put more money into their pockets; they are being forced to suddenly and dramatically increase their payroll.

The increase isn’t limited to people who were making $11.60 previously: In addition to raising wages for anyone earning under $14, many workers earning $14 or slightly more will expect a similar 21 per cent increase.

The Tim Hortons franchise in Cobourg, Ont., is just one example of how business owners are trying to cope with the increase.

Impact on young workers, prices

I’m even more concerned by the finding that half of small business owners will have to reduce opportunities for young or inexperienced workers. 

Minimum-wage jobs have long been an on-ramp into the labour market, with owners happy to provide on-the-job training to promising teenagers and young adults.

I started my career making $3.33 per hour (then Manitoba’s minimum wage) washing dishes at a Winnipeg pizza place.

If you put too high a price on providing those training opportunities, employers may opt for someone with more experience. Not only does this hurt business owners, who take great pride in training new employees, but it could be devastating for the next generation of workers.

Businesses owners are also starting to increase prices — you might have seen a sign taped to the till at your local coffee shop. Proponents of the hike say the price increases will be offset by minimum wage earners’ greater purchasing power, which sounds nice but doesn’t hold water.

Only eight per cent of the population earns the minimum wage, according to the same Bank of Canada report. Everyone else has just seen the cost of groceries and other goods go up, without enjoying the same pay bump as those earning minimum wage.

While some people say they are happy to pay extra for their morning coffee, we’re already hearing stories of daycare fees rising by $360 a month due to the cumulative effect of the minimum wage hike. Reports of large hikes in personal care home fees are also starting to hit the news.

Irresponsible approach

There is no question the objective behind a minimum wage increase — to reduce poverty by lifting up those in the lowest income bracket — is a noble one. It’s one that business owners share; in fact, most of our members were already paying staff above $15 per hour.

But the idea that poverty can be legislated away by imposing a rushed, arbitrary wage increase on employers is both wrong and irresponsible.

There are other ways of addressing poverty that don’t punish business owners. Governments could, for example, increase the threshold people have to cross before paying income taxes. While the vast majority of minimum wage workers are students or secondary incomes, more support for training should be offered to those who feel trapped in a minimum wage job while trying to support their families.

But those ideas don’t sound as nice at the ballot box. So, while some workers may be better off due to this pre-election goodie, struggling small business owners and other low-wage earners will pay the price.