December 2, 2018
On November 21, Bill 47 was enshrined in provincial law. The much-maligned bill eliminates a bevy of provisions passed under the preceding government’s Bill 148, the Fair Workplaces, Better Jobs Act. The crux of the controversy surrounding the bill is that it freezes the minimum wage at a substantial $14 an hour, instead of the previously planned $15 an hour.
Many progressives, including students, have voiced their concern over the bill. But given the state of the economy following Kathleen Wynne’s tutelage, this freeze is Doug Ford’s best option and the right path forward for Ontario.
Legislation cannot overwrite the market
As pure as the intentions may be in advocating for higher wages vis-à-vis government mandates, it is not possible to legislate away poverty. Economic intrusions like artificial wage hikes always come prepackaged with unintended consequences.
At the end of the day, one individual’s wage is another person’s cost. Employment is the voluntary contract between those two individuals. The agreed upon wage is ordinarily set by basic market forces: supply and demand. Efforts by government to intervene in this contract cannot benefit the employee without affecting the employer.
As their costs of doing business increase, employers react. Industries such as food and entertainment lay off staff, cut their hours, or hike prices. As reported in the Financial Post, Ontario restaurants hiked prices in response to Wynne’s wage hike. Accordingly, in January, the province saw “food inflation [rise] to its highest annualized increase in nearly two years.”
As also noted by BMO Capital Markets’ senior economist, Robert Kavcic, the restaurant price hikes were a direct result of the Liberal government’s policy. In the same period that saw the province’s minimum wage jump 21 per cent, Ontario’s restaurant prices grew at a faster rate than any other province in the country.
Restaurants weren’t the only industry to feel the economic ripples of Wynne’s progressive proclivities. The Canadian grocery conglomerate Metro estimated its costs incurred from the wage hike to exceed $40 million. As a result, the firm said that it plans on cutting staff hours, in addition to reducing the number of 24 hour stores in the GTA.
The service sector also felt the pinch of rising costs. In Collingwood, Little People’s Daycare closed its doors permanently, citing the steep and swift spike in minimum wage.
The hike hurts low-wage workers — including students
A coterie of minimum-wage proponents argues that their preferred policy benefits university and college students by helping them pay off tuition loans. This too is a folly proposition. If the presumption is that you can simply give people more money with innocuous wage hikes, it could be argued that the minimum wage ought to just be $50.
An oft-cited claim is that $15 reflects what is considered to be a ‘living wage.’ However, this argument requires bifurcating economic policy from its indirect outcomes. As previously described, raising Ontario’s minimum wage to whatever politicians at Queen’s Park determined to be the ‘living wage’ increases the cost of living, arguably negating any positive results the wage hike bestowed.
The latest Ontario labour market report indicates that nine months following the wage hike, the youth unemployment rate in Ontario increased to a whopping 12.2 per cent. That’s a 15 per cent increase from a year ago when youth unemployment was already at 10.6 per cent.
The unemployment rate increased for the very same demographic minimum-wage proponents preen about supporting. Moreover, the minimum wage hike has also increased these now out-of-work university students’ cost of living, making cafés, restaurants, and groceries more costly.
In addition to affecting students and younger members of the workforce, the hike also priced people with certain disabilities out of jobs entirely. The previous Liberal government eliminated an exemption for sheltered workshops — a place where people with mental or physical disabilities could find work.
Setting the minimum wage at $15 makes accepting a job that pays $14 illegal. Individuals who can’t compete for the higher wage effectively have their minimum wage reduced to zero. This was what happened at the sheltered workspaces, where people with disabilities were priced out of the job market.
There’s a reason electricians, plumbers, and other professionals don’t earn minimum wage. It’s called minimum wage because earning it requires minimum skill. I earned $15 an hour in my first job, and even that required laborious lifeguarding certifications.
If you want to help unskilled workers earning minimum wage increase their wages, the solution isn’t to blithely hijack the economy and inflate their wages. It’s to help them find better jobs. Unskilled labour was never meant to be the mainstay of the economy.
A far more effective solution is to empower individuals by helping them acquire skills that make them competitive for higher paying jobs. Furthermore, it is necessary to foster an environment where people can rise in the workforce. The onus is on government legislators to tackle tax and regulation burdens shackling businesses from potential growth. Ford’s Bill 47, in conjunction with his proposed tax cuts, puts Ontario on the path to achieving just that.