Americas, Canada, Opinion

How Canadians Lose With The $15.00 Minimum Wage Increase

In the last ten years, Ontarians in Canada have seen a whopping $3.40 cent minimum wage increase from $8.00 per hour in 2007 to the $11.40 per hour we see today. Now, Kathleen Wynne wants to increase the minimum wage to $15.00 per hour — a $3.60 cent increase in less than two years. Many are shocked, most are appalled, and all business owners are deeply concerned.

Minimum Wage in Canada

In the past few years, we have seen small increases in the minimum wage to match the growth in inflation and the cost of living. Last October we rose from $11.25 to $11.40 per hour and this year we are projected to see an increase to $11.60 per hour. These wage increases are reasonable, justified and predictable. However, a minimum wage increase of this degree in such a short amount of time poses severe consequences for the working class and business owners alike.

Effects of Minimum Wage Increase On People

When wages increase, so do prices. It may seem great to have an extra $3.60 per hour in your pocket, however, at the end of the day, you will be paying most of this back with the price hikes that will go along with the wage raise. Most businesses which pay workers minimum wage often have thin margins and are only able to keep afloat by paying workers those lower wages. When the wage is increased, they need to raise their prices to pass onto customers to continue generating profits within similar margins. A drastic minimum wage increase could mean drastic price increases at your favorite coffee shop or store.

Earning more money seems lovely at first glance, however, what most may not realize is that once you venture into a new tax bracket the amount of taxes you will pay will be higher as well. Although someone earning $15.00 per hour may not see this happen, we can expect to see a ripple effect for earners higher up on the spectrum. Again, these workers will be earning more money in-pocket but will be paying more money in taxes back to the government – which may be just what they want.

So prices will be higher and taxes will be higher, but how about unemployment?

As wages and costs increase – and quickly at that – businesses need to take action to cut costs in other areas. This could potentially lead to more automation in the workplace to reduce labor costs and evidently a loss of jobs (an estimated 185,000 jobs may be affected), especially for young people. It is expected, with the minimum wage increase, that companies will reduce hiring efforts, complete hiring freezes, and even layoffs.

Effects of Minimum Wage Increase On Businesses

If implemented, companies will need to pay their employees $3.60 more per hour than they are currently paying. This change will be in effect in less than two years, which many businesses argue is not sufficient time to plan and execute strategies on how to absorb these costs. Many smaller companies will be forced to close their doors, unable to account for the lost profits due to the higher wages. This raises concerns for small, local businesses shutting down as this could have major implications on our economy.

Additionally, the companies that survive the wage hike will be raising their prices – higher prices could mean a decrease in sales for businesses. Although employees will be earning more, they will be taxed more and spending more on goods which could have consumers budgeting and penny-pinching, which could have adverse consequences on our economy.

Wynners or Losers?

If Wynne’s party remains in office, there is a good chance this could go through, regardless of the backlash it has received. Many small businesses are facing shutdowns and bankruptcies while others are trying to sort out a solution to the problems that come with the minimum wage increase. Although not entirely opposed to the minimum wage increase, business owners have stated their main concern with this is the timeframe in which it will be implemented. Having such a significant increase in such a short amount of time leaves businesses unable to plan accordingly to absorb the costs and offset their expenses.

Additionally, Ontarians could face challenges finding employment as employers will aim to cut labor costs. This means fewer job vacancies and more competition for work, ultimately increasing the unemployment rate. So, who is the real “Wynner” here?

About Bri Michelle

Bri is a Human Resources professional by day and a blogger and author by night from Ontario, Canada. She is easy-going and enjoys being creative and writing on a variety of topics that peak her interest.

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