Policy changes have potential to gut small business

A double whammy or a one-two punch - that’s what businesses are facing in Ontario with two significant public policy changes at play provincially and federally.  It’s a challenging time to be in business in Ontario with the potential impact and ripple effect of these changes creating a lot of uncertainty.

Provincially, Bill 148 the Fair Workplaces, Better Jobs Act is forcing businesses to look at their business model and make tough decisions such as fewer hours, fewer jobs and consideration of automation.  “Too much; too soon” has been the mantra from the business community throughout the summer, since the announcement of proposed sweeping labour and employee relations changes.

But this response is not in a vacuum.  There are three recent studies that are now part of the conversation and they present the same concerns as business owners.

The latest updated report from the Ontario Chamber of Commerce and CANCEA shows that extending the time frame of the minimum wage increase over five years will result in 75% fewer jobs at risk.  The CANCEA study also finds that Ontario’s 400,000 small businesses (those with less than 100 employees) are exposed to 46% of the increased costs associated with the Act. While the economic analysis indicates the province will see an economic boost of $11 billion in wage stimulus in the next two years, there will remain a $12 billion cost for business to absorb.

A recent report from TD Economics says “the relatively rapid speed of the implementation and its timing within the economic cycle are two factors that will likely accentuate the negative hit to Ontario employment.” It goes on to say that they are expecting “a net reduction in jobs of around 80-90,000 positions by the end of the decade”  and that “these estimated impacts could be mitigated by extending the implementation timeline.”

The Financial Accountability Office has also weighed in on the impacts of Bill 148, raising some new points in the discussion:

• The government’s proposal to raise Ontario’s general minimum wage to $15 per hour will dramatically increase the number of minimum wage workers from just over 500,000 currently to 1.6 million in 2019. As well, under a $15 minimum wage, adults and those with full-time jobs would represent the majority of minimum wage workers.
• By comparison, under the current minimum wage of $11.40 per hour, teens and young adults and those with part-time jobs account for the majority of minimum wage workers.
• The FAO estimates that the higher minimum wage will raise total labour income (after adjusting for price inflation) by 1.3 per cent by 2019. However, the FAO estimates that just one-quarter of the higher labour income would directly benefit low-income families. Since the income gains would not be concentrated on low-income families, raising the minimum wage would be an inefficient policy tool for reducing overall poverty.
• The higher minimum wage will increase payroll costs for Ontario businesses, leading to some job losses for lower income workers. At the same time, higher labour income and household spending will boost economic activity leading to some offsetting job gains.  On net, the FAO estimates that Ontario’s proposed minimum wage increase will result in a loss of approximately 50,000 jobs (0.7 per cent of total employment), with job losses concentrated among teens and young adults.
• However, there is evidence to suggest that the job losses could be larger than the FAO’s estimate. Ontario’s proposed minimum wage increase is both larger and more rapid than past experience, providing businesses with a greater incentive to reduce costs more aggressively.

Add to the commentary the multitude of remarks from businesses themselves and there is an overwhelming message of concern.  From its own members, the Peterborough Chamber of Commerce gathered up 15 pages worth of comments and sent them to the Standing Committee on Finance and Economic Affairs.  This document shows a consistent message from all sectors of the business community as to the impacts of the speed of implementation of Bill 148.

“Small businesses are telling us the tools they have to work with are limited, and include fewer hours, fewer jobs, delayed expansions, and closing for the winter months,” says Stuart Harrison, President & CEO, Peterborough Chamber of Commerce. “Some have even speculated they’ll be forced out of business entirely…”

Offsets for businesses, to help with the transition this legislation will require, are expected to be announced in the coming weeks.  The hope is that these offsets, which our counterparts at the Ontario Chamber of Commerce have been speaking to government about, are offered using tools such as the tax system to make it easy for business to access and complete.  Offsets in the form of grants will only add to the regulatory burden facing small businesses in our community.

Add to this provincial legislation new proposed corporate tax changes at the federal level.  These proposed
tax changes present serious concerns for incorporated businesses in how passive income is dealt with, along with the ability to pass a business on to the next generation and income sprinkling.

Both levels of government are creating a negative message about business. Considering the feedback from the business community, this is a dangerous gamble.  With over 400,000 small businesses in Ontario alone this group is truly the backbone of our provincial and federal economy, creating jobs and investing in the social fabric of our communities.  Understanding their needs and ability to adjust to regulatory burden, market pressures locally, provincially, nationally and internationally is key to finding a balance that works for everyone.

To learn more: Peterborough Chamber Advocacy Page on Bill 148

---