Fraser Forum

Rather than name-calling, Premier Wynne should take responsibility for her government’s minimum wage policy

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Ontario Premier Kathleen Wynne recently accused Tim Hortons franchise owners of being bullies for reducing employee benefits in response to the province’s sharp minimum wage hike. This sentiment is echoed by others who have called for a boycott of the restaurant.

But instead of calling Ontario employers names, Premier Wynne should accept responsibility for this unintended-yet-predictable consequence of her government’s policy to raise the minimum wage by 21 per cent on January 1, from $11.60 to $14.

After all, this is not an isolated incident. Other businesses are also cutting benefits and recent media reports have shown multiple other ways businesses are responding including reducing staff, cutting hours, raising prices and increasing automation.

The reason is straightforward. When the cost for low-skilled labour artificially increases (in this case, by government mandate), without a commensurate increase in worker productivity, businesses will inevitably respond by finding ways to reduce labour costs or pass costs on to customers. In other words, when the price of something rises with no quality improvement, people tend to buy less of it. This is true for business owners and their expenses, just like consumers of goods and services.

Indignation on the part of the premier runs a little thin given that her government knew businesses were likely to reduce benefits in response a minimum wage increase. Or at least the government ought to have known since it was explicitly mentioned by their 2014 advisory panel on the minimum wage.

When discussing the likely outcomes of a minimum wage hike, that panel, which included business and labour representatives noted: “[Employers] could reduce non-wage labour costs such as fringe benefits or hours worked or expenditures on on-the-job training and development opportunities for minimum wage workers.”

In other words, the advisory panel warned the Wynne government that businesses would do exactly what they have done: cut benefits to pay for the government-mandated wage increases.

The panel also warned of job losses among young and low-skilled workers: “In the Canadian context, researchers have generally found an adverse employment effect of raising minimum wages especially for young workers… Typically those studies find that teen employment would drop by 3-6 per cent if the minimum wage is raised by 10 per cent.”

Indeed, this is a recurring finding in multiple research studies that have examined the employment effects of past minimum wage hikes in Canada.

Premier Wynne also said that if employers “want to pick a fight, pick that fight with me not the people who are working at the service window of the stores.” While it isn’t clear that the business owners are picking a fight with anyone, Premier Wynne’s government should be held accountable for the unintended-yet-predictable consequences of its policy.


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