Tuesday, January 9, 2018

Ontario and the New Minimum Wage

Ontario recently raised the minimum wage from $11.60 per hour to $14 on January 1st. Immediately following the announcement there was a story that caught national attention. Some Tim Horton's announced scaling back of the limited benefits their employees received in order to compensate for the increased wages they had to pay.

While Tim Horton's purports to be Canada's friendly, neighbourhood coffee shop it is in fact a massively successful corporation that makes immense profits. Each location is a franchise and it wouldn't be surprising that individual owners need to make decisions that would benefit their interests though. The Toronto Star broke down the numbers for the cost of the minimum wage increases for a single Tim Horton's and the results are here

Retail and service businesses are actually well placed to deal with the minimum wage increase. This is an increase that will hit across the entire provincial market. No competitor will be at a strategic advantage as a result. Tim Horton's doesn't need to fear that Starbucks is operating at a different wage structure. The costs will, of course, be borne by the consumers. A simple, modest increase in the price of a cup of coffee would easily cover the added expenses.

While I don't join the chorus of those who state that raising the minimum wage has no economic impact, or only a positive one, I think it's clear that small-scale businesses like these do not quite meet the threshold for this to be a dire outcome. Companies more adversely affected would be those who have to compete against companies outside the province with lower wage structures. You could point to the hospitality and tourism industries as suffering as a result perhaps, but most export/service industries that would be competing in that way don't primarily rely upon minimum wage workers as far as I can tell.

Living on minimum wage is tough. As two business-owners recently said in the Toronto Star paying a higher minimum wage can ultimately be to the benefit of the employer. Employee retention isn't something that should be quickly dismissed. On the other side of things too, I must admit that taking a minimum wage job has just become much more attractive for a person in my shoes who is underemployed.

Ultimately, I don't like the minimum wage. I don't think it's very good public policy, but I understand why it's necessary. I hope the minimum wage helps many people across the province and helps us move towards a system that better addresses the inequalities of our economic lives.

No comments: