Fraser Forum

Minimum wage hikes—negative effects may hit lower-wage regions of Ontario particularly hard

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Between now and 2019, Ontario will increase its minimum wage to $15 per hour. In total, this will be an increase of more than 30 per cent in less than a year-and-a-half.

Canadian evidence consistently shows that higher minimum wages tend to produce negative effects on employment, especially for younger and less-skilled workers. So this evidence suggests that large increases in the minimum wage are likely to significantly and adversely affect youth employment in the province.

While there are likely to be negative effects provincewide, these effects are likely to be particularly severe in regions of the province where prevailing market wage levels are lower. International and Canadian evidence shows that the negative employment effects from minimum wage increases tend to become worse as the wage floor climbs higher relative to prevailing median or average wages. This suggests that the likelihood of substantial disemployment effects are even higher in lower-wage regions of Ontario.

Ontario is a large economy with various regional labour markets, the health and performance of which vary substantially from one to the other. Specifically, average wage levels vary considerably across Ontario. As the chart below shows, average hourly wages are much higher in Toronto than in many other parts of the province. For example, in Kingston-Pembroke, Muskoka-Kawarthas, Hamilton-Niagara, London and Windsor Sarnia, the average fulltime hourly wage was at least 15 per cent lower than in Toronto in 2016.

Again, the Canadian evidence suggests that a $15 minimum wage will likely create adverse employment effects throughout Toronto. However, because employment effects tend to worsen as the minimum wage climbs closer to the average wage in a given labour market, there may be particular cause to worry in lower-wage regions.

Over the past decade, job creation and labour market performance have generally been weak throughout southwestern, northern and eastern Ontario. A dramatic and speedy escalation in the minimum wage may hit these parts of the province particularly hard.


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