On January 1, the Canadian province of Ontario raised its minimum wage from $11.60/hour to $14/hour. How are businesses responding? Probably exactly how you would expect.
According to the Bank of Canada, because of the forced wage hike there will be an estimated 60,000 fewer jobs available in Ontario by 2019. Not just that, businesses are beginning to do what businesses do: react to changes in the market. Both Pizza Hut and Subway — to name a few — notified their customers that prices would increase as a result of the minimum wage hike.
According to Aaron Aerts and Laura Jones of the Canadian Federation of Independent Business, “The negative impacts will ripple throughout the economy: layoffs, reduced hours and fewer opportunities for young workers; higher prices for consumers; increased automation; and reduced investment. Pretending these impacts don’t exist is fa-la-la-la-la economics.”
A survey by the Canadian Federation of Independent Business is reporting that over 50% of small businesses are going to be raising the price of products and services in response to the wage hike. Additionally, over 50% of small business employers have already made plans to not hire any new employees for the year, while over one quarter of small businesses will be reducing the amount of staff currently hired.
Even more staggering, only 33% of small business owners have proactively responded to the minimum wage hike. In other words, the minimum wage increase is serving its intended function for only one-third of small businesses in Canada. Small and medium-sized businesses employ over 90% of Canadians in the private sector.
Aerts and Jones asked some small business owners how the wage hike would impact their business. This is how they responded:
“{We} won’t be able to hire the same number of students next year — we normally hire eight or more; this year we are thinking maybe two.” Another says: “We have decided not to hire students coming out of university or college but focus more on experienced workers over the age of 40.” Yet another: “We will be shortening our hours of operation and decreasing the number of student workers. There will be less customer service available.”
By the way, despite all of this, the Ontario government plans to increase the minimum wage to $15/hour by 2019. Will the negative impacts and unintended consequences of this current wage hike cause the Liberal-run government of Ontario to reconsider increasing the minimum wage to $15/hour in 2019?
I’m going to go with a hard no. But, hey! Good intentions and stuff . . .