The Unintended Consequences of a $15 minimum Wage

What we are hearing from our members:

​Local Manufacturer – “I’ve just won a contract to supply another local company with my product. This is a major order that will require an expansion of my businesses, including hiring more people. At $15/hr, I am no longer competitive and will have to walk away from the work and the expansion. I thought hydro rates, now my largest business expense, was hard enough to deal with. This is impossible.”

Local Tech Company – “Layoffs likely and price increases for sure”

​Local Not For Profit with 35 employees during the Summer – “Our labour costs just went up 30%! We will use a combination of hiring fewer people, shortening shifts and increasing prices to adapt. Unfortunately, hiring fewer students for the summer will be the first move”

​Local Retailer – “Increasing Minimum wage to $15 will affect our entire pay scale. An employee currently making $15 an hour has earned it through experience, training and proving themselves. They certainly won’t be happy making the same money as en entry-level employee. Our costs will increase approximately 8% and while we can increase prices over time, it has to match our competitors, so our only tool in the short term is an equal reduction in the number of hours.”

​Local Restaurant – “At $14/hr payroll increases by $70k, at $15/hr an additional $23k… I see hiring fewer people, increasing prices, phasing out employee benefits such as group benefits, free uniforms, free meals, etc. This is the most devastating cost to hit the hospitality industry – ever…”

The call will continue for an economic impact analysis around the proposed changes to the Employment Standards Act (ESA) and the Labour Relations Act (LRA).  The provincial government is planning to introduce legislation today (Thursday, June 1) to put in motion the changes announced on Tuesday.   
That means over the summer months the legislation will make its way through committee.   Yes, the proposed changes are the result of a two year review by two special advisors, and the Ontario Chamber of Commerce and by extension the Peterborough Chamber of Commerce participated in those discussions, but the challenge is we’ve yet to see or know of an economic impact analysis of the changes.  This information is vital to ensuring that the province is moving forward with eyes wide open.   

“Minimum wage was explicitly left out of the Changing Workplaces conversation, so we’re not sure what’s guiding today’s announcement,” says Stuart Harrison, President & CEO, Peterborough Chamber of Commerce. To suddenly legislate the most dramatic minimum wage increase in Ontario’s history creates serious concern about unintended consequences.”
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In the announcement of the Fair Workplaces and Better Jobs plan, Premier Kathleen Wynne highlighted five main changes to the Employment Standards Act: 

• Minimum Wage will be increased to $15/hour over the next 18 months.

                    As of January 2018 it will rise to $14/hour
                    As of January 2019 it will rise to $15/hour
                    After that increases in minimum wage will be tied to inflation (as is currently the case)

• Equal pay for equal work 

                    This change is aimed at ensuring part-time, casual and seasonal employees are paid the same rate as                       full-time employees on a pro rata basis

• Increased vacation time to 3 weeks after five years of service with the same employer
• Fairer rules for scheduling

                    An employer must pay an employee for 3 hours of work if a shift is cancelled without 48 hours notice

• Changes to Sick Days

                    Employees will receive up to 10 sick days each year, of which two must be paid

• Temporary workers

                    Will have to be paid the same as a full-time employee doing the same job.  If legislation is passed this                       will come into effect on April 1, 2018

Under the Labour Relations Act some of the changes include: 

• Exclusions from Collective Bargaining

                     The Ministry of Labour will work with affected Ministries to consult with stakeholders to review the                                Special Advisors' recommendation to remove the exclusions under the LRA, taking into account                                  ongoing litigation. Currently, the following professions are excluded from collective bargaining:                                    domestics, hunters and trappers, members of the architectural, dental, land surveying, legal or medical                      profession and agricultural and horticultural employees. The Special Advisors recommend that these                          groups should be covered by the LRA.

• Measures to Increase Unionization

                     Including extending card-based union certification to the temporary help agency industry, the building                        services industry and the home care and community services industry

Enforcement and Education

• Hiring of 175 more Employment Standards Act officers to enforce and educate both employees and small and medium businesses.  

​All of these changes will have compounding costs which the government has not yet fully understood. That is why the Chamber Network and the Keep Ontario Working Coalition have called on the government to conduct a comprehensive economic impact analysis. This analysis should have clear acceptability thresholds, and the reforms implemented should be limited to those that pass such thresholds or are being implemented with a commensurate economic offset measure, in order to help businesses transition into any regulatory changes. 

We have heard from members who say the impact will be felt throughout their businesses.  

“We are really good local employers in the not-for-profit sector, during peak season we have 35 employees.  Our staff is well respected in our workplace, we are generous with our current benefit plans, and we offer great summer employment options to university/college students (full time throughout the whole summer). 18 months, and a 30% plus rate increase --- how could any business adapt to that without sacrificing customer service, increasing prices AND reducing overall staff level?”

As the provincial government moves this legislation through the committee process over the summer we urge them to truly understand the economic impact of these changes that have great potential to hurt job creation, consumer costs, and economic growth.  

How will this affect your business? Let us know: [email protected]

Provincial Government Statement

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​Local Retailer – “At this point we have estimated that this increase will cost us upwards of $50,000.00 a year. Where is that coming from, profit, that is used to scale our business, and for the creators/the risk takers to feed our families.”

​Local Multi-Business Owner – “We have always operated our businesses with a view to a one, three, and five year strategic plan, uncertainty about general economic conditions, makes planning difficult at best. The proposed changes were not on anyone's radar 12 months ago so we are left re-evaluating our plans. We had planned a fairly major expansion to begin in the next 6-12 months, those plans are now on hold and possibly cancelled. We will in all likelihood be forced to freeze hiring and possibly implement some layoffs, hopefully these will not be permanent in nature. We are in a competitive sector but we will, like our competition, be forced to pass along increased costs to our customers where possible. Some of our business ventures are price regulated, so we are vulnerable here to the decisions of the regulators.”

​Local Property Management Group – “We may need to look at price increases across the board, but for our residential properties it will be more costly housing as we increase the market rent of our units as they turn over; ultimately a cycle – we have to increase housing amounts accordingly and those making the new minimum wage still may not be able to afford the accommodations and, it will ultimately affect anyone on a fixed income. In any event, I expect many of our expenses would increase as the increase in minimum wage will also affect their business and they in turn will pass that cost along to us.”