Ontario’s $15 minimum wage will have many layers of unintended consequences
By Howard Levitt
It is the law of unintended consequences. Or is it? In this case, the consequences will be both intended and unintended. Kathleen Wynne passed a 32 per cent increase in the Ontario minimum wage over the next 18 months to $15, with 23 per cent of it in only six months. Of course, the full 32 per cent will only occur if the Wynne government remains in power. So the intended consequence, like the other Hail Mary passes of that wounded government, such as rent control, negative shocks to the housing market and easier unionization, is the purchase of votes in the next election, mostly from the NDP, which Liberal voters had been cratering toward. Insofar as 25 per cent of Ontario workers are potentially affected, it is not a bad ploy. And it is not just workers earning less than $15 per hour who are affected. Other workers earning at or over that amount will require salary increases to stay above their lower income coworkers.
Minimum wages are also scheduled to increase to $15 over four years in Alberta, a 47 per cent increase. BC’s NDP government has been openly musing about the same thing. I have had one union in B.C., where my client’s workers earn just over $15, demand higher increases on the basis that they cannot be seen to accept wages just over the minimum wage.
What about the unintended consequences of this legislation? I have already had clients advising me that this move will require them to shut their doors, their thin profits leading inexorably to losses as result of the higher wages costs and without the ability to pass on those costs in higher prices. Some clients have talked with me about relocating across the border before they go broke, taking advantage of the now lower wage costs there, a bonus being they would be closer to their customers.
Trump’s Buy America policy makes this more attractive. Their Canadian patriotism subordinated to the bottom line. Of course, U.S. and other foreign employers will immediately write off Ontario, Alberta and B.C. as places to setup shop. The minimum wage plus the new-easy unionization in Ontario will frighten off even the most stalwart. Other employers will stay afloat by automation or by making do with fewer employees, resulting in layoffs and extra work for those few lucky enough to keep their jobs. So much for protecting “vulnerable workers” as the Wynne government proudly described the change. The number of truly vulnerable workers will increase as employers avoid hiring and turn increasingly to contract workers.
Past minimum wage increases have disproportionately impacted teen unemployment, thereby both depriving them of a stepping stone into work skills and marketability and ending their financial contribution to lower income families And, of course, there is the impact on our EI and welfare systems.
Businesses in trouble will have to compensate for the higher wages at their lowest end by preserving salary costs through lower bonuses or lower wage increases for higher earners. The reality is that government policy, and in particular this one, does not increase employers’ ability to pay.
What impact will this increase have on young workers trying to get their foot in the door, to obtain valuable experience, or older workers attempting to re-engage in the workplace?
When these unintended consequences occur, as they inevitably will, it may have one other unintended consequence — a backlash against the governments by the very people whose votes they intended to garner.