Debating Ontario’s Minimum Wage Increase: Part I

By Isabel Zucchero, LPRC Centre Coordinator

This month, the Ontario government announced that the province’s minimum wage will be raised to $15 per hour by 2019. This increase is just one of a series of changes that Kathleen Wynne’s Liberals have made to Ontario labour legislation, prompting supportive praise from some, and concerned backlash from others. Whether you support or oppose these recent changes, the debate over minimum wages highlights some critical issues that are becoming increasingly important in today’s economy and job market: how do we begin to tackle the very broken parts of a dysfunctional system, without damaging other parts in the process?

The logic behind raising Ontario’s minimum wage seems simple enough in theory: Ontarians living in low income will continue to depend on various types of assistance, with low chances of moving out of that low income bracket if they are not payed a basic living wage. Raising the minimum wage is one obvious way to directly address the problem, by injecting the bottom portion of Ontario’s economy with currency to ensure that people who work jobs that pay minimum wage are making enough to live on in an increasingly expensive Ontario economy. A recent Maclean’s article details several positive effects, including increased cashflow offsetting the initial impact on employers as low-income earners begin to have more money to spend. It also debunks the myth that increasing minimum wage will hurt jobs. With these positive outcomes in mind, raising minimum wage makes sense, right? But if this is the case, why are so many people, especially in Ontario’s business community, opposed to the change?

If the goal of the new legislation is to bring people earning low incomes out of poverty, we immediately assume the simplest solution is to increase wages. Changing one piece of the machine, however, makes the whole system function differently. Those who oppose increasing the minimum wage object not because they are against paying people a fair living wage, but because they see the Ontario economy as a “big picture” that they feel has been largely ignored by the Ontario government during the decision making process. In this regard, critics have a fair point. The argument here is that the ripple effect initiated by minimum wage increase will have far-reaching negative consequences for other parts of the system – especially small businesses – that were not thoroughly considered before making the changes. Again, the logic here is simple in theory: small businesses with narrow profit margins will be forced to choose between keeping their current number of employees and paying them more, reducing their profits, moving toward increased automation, or managing with fewer employees. Each option includes risks, and all are less than ideal for businesses facing these challenges.

So, we are left with two options, neither of which fix the whole problem of thousands of Ontario families living on less than an adequate annual income. This leaves those of us working in poverty reduction faced with an even more difficult question: what are the alternatives? The answers are complex, elusive, and challenging. Still, we must continue to pursue them if we are to ever come up with policies and changes that help everyone – without harming other parts of the system.

Overcoming these challenges is easier said than done. When considering all possible outcomes of raising minimum wage, we must look at the root of the problem from all perspectives. When we do this, it becomes clearer why the topic has been met with such mixed reactions. Much of the doubt surrounding the benefits of minimum wage raise comes down to one unfortunate misperception: that low-income earners, and those living in poverty in general, will mis-manage their newly increased incomes to the point that it cancels out positive impacts for the economy. In part two of this article, we will explore stigmas associated with poverty in greater detail, and discuss some potential outcomes of minimum wage raise in Ontario.