Ontario’s minimum wage hike will mean fewer opportunities for vulnerable workers
Premier Kathleen Wynne has confirmed her government will dramatically increase Ontario’s minimum wage. The wage floor currently stands at $11.40 per hour and will rise to $15 by 2019. All told, this represents a 31.6 per cent increase in the minimum wage in just two years.
Premier Wynne claims hiking the minimum wage—along with other changes to labour laws—will mean Ontario workers will have the opportunities they deserve. But in reality, it will make it harder for inexperienced and low-skilled workers to find employment and therefore hurt many workers the government seemingly wants to help.
Minimum wage increases have significant well-documented negative consequences on the employment of low-skilled workers because higher minimum wages raise the cost of hiring such workers, which makes it harder for prospective employers to do so. In short, Canadian research shows that when the minimum wage rises, less-skilled workers—particularly younger workers—have fewer employment opportunities.
The reason is straightforward.
When the price of something rises, either due to market pressures or new government regulations, people tend to buy less of it. This is true for business owners and their expenses like it is for consumers of goods and services. So when the government mandates an increase in the price of less-skilled labour, and if there’s no commensurate increase in their productivity, employers tend to respond by reducing the amount of labour they employ. This can translate into fewer jobs created or fewer hours of work offered to existing employees.
This is why Canadian research shows that a 10 per cent increase in the minimum wage leads, on average, to a three to six per cent decline in youth employment. Given that Ontario is contemplating a relatively rapid and significant increase (31.6 per cent), this policy choice will clearly reduce the number of job opportunities and work hours available to young and less-skilled Ontarians.
For many young people, minimum wage jobs represent a first rung on the economic ladder, leading to further steps as they gain skills and experience. Making that first rung harder to reach by increasing the minimum wage can therefore impede their ability to begin earning a living and launch independent financial lives.
Moreover, the negative consequences of raising the minimum wage to $15 will be magnified by the fact that Ontario will implement the marked increase in a very short time period (less than two years). This means employers—including many small businesses—will have little time to plan and adjust accordingly, which will likely exacerbate the negative economic consequences compared to a scenario where the increase is gradually phased-in over a longer time period.
Advocates for a higher minimum wage mean well. But in reality, Ontario’s proposed minimum wage will mean fewer job opportunities, particularly for the least-skilled and most vulnerable workers in the province.