By David Goodings
August 24th, 2017
BURLINGTON, ON
Cindy (not her real name) is a woman of about forty with a winning smile and a full head of long brown hair.
She has been working at minimum wage jobs for many years, often juggling several jobs at the same time. You have to be tough to survive in today’s world of precarious employment and Cindy is a survivor. A few months ago while talking about her present life and her struggle to make ends meet, Cindy was asked what it would be like to make $15 an hour. “That would be awesome,” she replied matter-of-factly. “That would be pretty sweet, I think.” [1]
Isabella Daley is another woman in her forties, well educated and highly articulate, with a wry sense of humour. She knows how tough it is to raise her children (and her condescending cat) while employed at minimum wage jobs. In a candid video produced for Living Wage Hamilton she imagines how her life would change if she were paid a living wage, currently $15.85 per hour in Hamilton. Not only would she be able to pay the rent and utility bills, she could do something for her toothache before it became unbearable, and let her daughter have a friend come for dinner. Isabella knows well what it is like to be one of the “working poor”. [2]
The Ontario Government’s proposed legislation, the Fair Workplaces, Better Jobs Act 2017, includes raising the minimum wage to $14.00 in January, 2018 and to $15.00 a year later. It will be warmly welcomed by Cindy and Isabella and hundreds of thousands of other people as roughly 30 percent of Ontario’s workers are paid less than $15.00 an hour. [3] The government is also legislating that part-time workers be paid the same as full-time workers, and is allowing employees two paid emergency days and five unpaid ones each year.
As expected, the business community, represented by the Chambers of Commerce, is sounding the alarm about catastrophic job losses and dire effects on the economy. One recent study [4] predicts that approximately 185,000 jobs will be put at risk across the province. However, job losses on this scale are, literally, unbelievable as there is abundant evidence from past experience in the US and Canada that minimum wage increases have almost no effect on overall employment. A recent article in the Toronto Star [5] cites research in the US that examined 22 federal minimum wage increases between 1938 and 2009. It found “no correlation between those increases and lower employment levels.” A similar Canadian study [6] covering the years from 1983 to 2012 “found almost no evidence of any connection whatsoever between higher minimum wage levels and employment levels in Canada.”
So, who benefits from keeping the minimum wage low? First, executive officers and shareholders of large corporations—the source of about half of minimum wage jobs in Ontario. For example, the Weston family’s conglomerate, Loblaw Companies Ltd. which includes Loblaws, No Frills and Shoppers Drug Mart, estimates that raising the minimum wage to $15 will cost $190 million in additional wages. But last year the company paid shareholders $1.1 billion, almost 6 times the cost of the wage increase. [7] It looks as though the business community is asking Cindy and Isabella to accept “poverty wages” in order to make the executives and shareholders a bit wealthier.
Secondly, let’s consider the case of small businesses such as restaurants and independent retailers. The owners may respond by laying off employees or reducing their hours, or by raising prices, all of which have consequences for the successful running of their businesses. Alternatively, they may be able to absorb some of the cost of increased wages, or will eliminate jobs through automation. In any event it is very unlikely that the owners will feel much hardship from having to adjust their business models.
Corporations and small business owners should also be aware that when their employees receive fair wages they tend to be more productive, have better morale and better health, and are less likely to leave for another job. Businesses may also benefit from the fact that minimum wage workers spend almost all their wages locally.
Thus the debate on raising the minimum wage comes down to a straightforward choice: significantly improve the lives of Cindy and Isabella and thousands of other people like them, or maintain the financial returns of shareholders, executives and business owners. Fortunately the Liberal Government is in no doubt about what is the right thing to do.
David Goodings was born in Toronto and studied mathematics and physics at University of Toronto and Cambridge. He was a Professor of physics at McMaster University for thirty years and has been a resident of Burlington since 2001. He is an active member of Poverty Free Halton and Living Wage Halton. Married to Judy for 37 years which may be why his favourite piano piece is: Ain’t Misbehavin’ by Fats Waller.
Sources:
[1] Working on the Edge, a video on precarious employment: www.livingwagehalton.ca
[2] Isabella Daley video, What a living wage would mean to me, on youtube.com
[3] Why politics drives a minimum wage wedge, Martin Regg Cohn, Toronto Star, May 31, 2017
[4] Bill 148 causing greatest chaos among business community in over a decade: chamber president, Kathy Yanchus, Burlington Post, August 17, 2017.
[5] Minimum wage hike won’t bring ‘doom and gloom’, economists say. Open letter by 40 Canadian economists endorses proposed provincial wage increase. Sara Mojtehedzadeh, Toronto Star, July 4, 2017.
[6] Wage Mythology. The minimum wage and the impact on jobs in Canada, 1983-2012, by Jordan Brennan and Jim Stanford. Report from the Canadian Centre for Policy Alternatives, October 2014
[7] Yes, Mr. Weston, you can afford a living wage, Angella MacEwen and Cole Eisen, Hamilton Spectator, August 14, 2017
Mr. White has most of it right. Small businesses are the ones going to pay the price for this and they are the backbone of our country, but why is automation a good solution for businesses to cope with the minimum wage increase? Automation means less jobs and the reason more companies are automating is because labor is so expensive. No one is asking the hard questions like why are these people trying to live off minimum wage jobs. Minimum wage jobs like McDonalds are starter jobs for young people to get started in the workforce, learn basic work skills to move up the ladder to a better higher paying profession, not pay for a family. If you haven’t progressed then you need to re-evaluate what your doing because there are lots of jobs out there looking for skilled people paying way higher than minimum wage. The city of Seattle did a recent study of their $15/hr minimum and found that overall the poor people lost $125/mth on average as a result, which is a 9% reduction in hours worked. We need to stop letting politicians making decisions for us and let us negotiate our own salary. The more we crank up the minimum wage, the less jobs there are for kids to get started, the more everything will cost and the less likely we are to see an actual people at checkouts, gas stations etc.
The U.K put off bringing in a minimum wage for years saying that it would put a lot of small companies out of business. When they eventually decided to do the right thing, surprisingly very few businesses suffered. A drawback was that rather than pay a minimum wage, small business owners found people who would work for a lower wage and be paid “under the table.” No-one should have to go hungry or forgo dental treatment at the expense of company profits in this day and age. If you are prepared to go out and work, you should expect to be paid fairly for that. Dignity before profits.
I don’t put much stock in the analysis of economists because economists don’t own, operate or manage small businesses. I would much sooner trust the analysis of the Chamber of Commerce and the Canadian Federation of Independent Business, both of whom represent small business owners…the folks who will have to pay the increased wages.
Here is what is not captured in this article. A retail business does not just hire people and keep paying them at the minimum wage. More often than not they have a pay scale with a range that has a minimum, a maximum, and a midpoint. They may hire a worker at the minimum, but as that worker gains more experience he or she progresses up the pay scale. When the government raises the minimum wage to $15 an hour, the employee who is currently earning $13 an hour as say, a Team Lead, is not going to move to $15. The business will adjust the pay scale accordingly so as to maintain the differential between the minimum wage and what the Team Lead should be earning…whether that be $17, $18, etc. It is then going to have to adjust all the other wages on the pay scale so as to avoid salary compression (i.e. an inadequate differential between an employee and his/her supervisor).
Here is the other factor not considered. The profit margins for many small business owners are tight. Most small business owners (i.e. < 10 employees) cannot afford a 33% increase in wages in less than 2 years. They will either have to cut staff, increase prices, cut services, or automate. Those are really the only four options. Three of these options do not bode well for people seeking employment.
The increase is not going to negatively impact large corporations like Wal-Mart or Staples, but the folks in small "mom and pop" industries are going to get sacrificed. The Cindys and the Isabellas may find themselves unemployed, or no better than they were beforehand after factoring in price increases on goods across the board.
Frankly, the provincial government would have been further ahead to adopt the guaranteed annual income program province wide which it originally announced as a pilot in March. This program was piloted in Manitoba in 1974 and worked, is being implemented in Finland now with plans are to roll it out in the Netherlands. This initiative would help those in need and have less negative impact on consumer prices.
The cost of Labour is a tax deductible expense for business isn’t it? The “business community” would like to ignore that fact; i.e., they will not be affected as much as they claim by a minimum wage increase .