Essay: What Actually Happens When Minimum Wage Increases? by Shanice Small

Fight for $15 & Fairness protest at Queens Park, Toronto. Image source: http://www.socialist.ca/node/3110

 

For many years there has been an ongoing battle between Ontario’s government and its citizens over the living wage. Ontario workers continue to struggle to get by on low, stagnant wages while big corporations and large businesses continue to break records and capitalize on profits at the expense of their employees. Campaigns like the “Ontario Minimum Wage Campaign” and the more recent “Fight for 15 and Fairness” has fought for many years in an effort to get the Ontario government to take a stand a create a living wage. 

In 2001, the “Ontario Minimum Wage Campaign” was created as a Toronto-based labor-community project to increase the minimum wage to $10 per hour.[1] Although the OMWC initially started in 2001 it did not receive much attention or have a significant effect until 2007. In 2007 the OMWC campaign was briefly revived and was now fighting again to increase the wage to $10.00 after many years of being stagnant. However, this time they decided to take a different approach an facilitate a protest at Queens Park. After a long back and forth battle the McGuinty government finally increased the wage to $10.25 in 2009 as well as passed a legislation that would increase the wages each year to reflect the Consumer Price Index every October 1^st.[2]

In addition to the Ontario Minimum Wage Campaign success with the 2009 minimum wage increase of 10.25, they were also able to spark conversation with the public about the nature of work for part-time workers who make up over 70% of the paid-labour market in Ontario.[3] Many of the protestors joined together at Queens Park because this victory made people optimistic about the progress in the labour market and Liberal governments promises.  

Fast forward to 2011, the Ontario government announced a wage freeze that created another hindrance in the progressiveness of the initial legislation.

In 2013, after the freeze had been in place for almost 3 years, hundreds of workers in communities across Ontario came together on the 14^thof every month in an initiative to “melt the freeze” and proposed a new $14 living wage.[4] Two years after this initiative, the Fight for $15 and Fairness campaign was launched. 

What is the “Fight for 15 and Fairness”?

The launch of “Fight for 15 and Fairness”, was developed in light of an initial campaign called “Fight for 15” in New York City, USA. Thousands of retail, fast food and other service workers walked off their job to petition in one of the biggest wage-related protests.[5]20% of the population was still living under the poverty line and citizens were outraged that the government was doing absolutely nothing about it. This campaign grew significantly in a two-year span and was able to capture attention from over 300 cities across the United States and Canada. 

The “Fight for 15” campaign was launched in Canada in 2015 under a revised name “Fight for 15 and Fairness. In addition to fighting for $15 wages they were also emphasizing a focus on better working conditions which was called fairness. Fairness meant that part-time employees should be guaranteed: paid sick days, an adequate number of paid hours, advanced notice of scheduling, and more.[6]

Since this campaign was launched workers, students, health care providers, and even religious leaders has traveled across communities in Ontario petitioned and collected thousands of signatures, protested on picket lines, and sent numerous letters to government officials and news outlets demanding change.  

What has changed since this campaign?

Ontario minimum wage 2017, 2018, and (projected) 2019. Source:http://moneytalks.net/article-and-commentary/michael-campbell/mikes-dail...

 

In November 2017, Kathleen Wynne and her party announced that as of January 1, 2018, the minimum wage in Ontario would increase from $11.60 to $14.00 per hour and would increase again in January 2019 to $15.00 per hour. [8]In addition to this wage increase is the introduction of Bill 148, the fair workplaces, better job act 2017. Also, a part of this legislation is changes to the Employment standards act, 2000, the labour relations act, 1195 and occupational health and safety act. 

Bill 148 ensures that there is equal pay for equal work across all casual, part-time, temporary or seasonal workers. Fairer scheduling laws allowing employees to take minimum 3 weeks’ vacation after being with the same employer for 5 years. 10 additional days of leave of absence up to a maximum of 15 weeks for cases where the employee or child is threatened due to domestic or sexual violence. As well as, unpaid leave of absence to take care of a family member who is critically ill.[9]

What does research suggest? 

Leading up to when the minimum wage hike came into effect, there have been many debates over whether this increase will be beneficial or detrimental to the economy. Generally, news outlets and economists frame minimum wage increases as being bad for business but good for the workers. One of the most prominent arguments supporting minimum wage increases is that it is beneficial for creating a living wage to assist those who are still living below the poverty line. However, research seems to suggest otherwise.  

One research study on the benefits from a wage increase used data from the Survey of Labour Income Dynamics in Canada from 1997 to 2007 and found that wage increases do not cause a significant decrease on poverty.[10] What actually happens after an increase is that approximately 30% of a worker’s earnings gained in the increase actually enter their pockets while the other 70% ends up into the hands of the “non-poor”, thus creating a financial spill-over.[11]

Looking at the effects of wage increases on a global level, we can also look at a research study conducted in Thailand that shows similar results. In this study on the wage increases from 1985 to 2010 show results that parallel those of North America. Minimum wage increases do not have full potential of reducing wage inequalities because they fail to put regulations on other aspects of business laws which enables businesses to alter their policies in light of these increases.[12]

More recently, after the actual wage increase in Ontario, TD Bank released a new report that estimates that the economy could lose approximately 90,000 jobs by the year 2020 as a result of this significant hike.[13]

 

VIDEO: Ontario’s Minimum Wage Hike: Winners and Losers

Derek Burleton, Deputy Chief Economist, TD Bank, discusses the implications higher wages could have on Canadians and the economy.[14]

 

What do people in Ontario think about the increases?

The idea of these changes appears to be optimistic in the eyes of part-time working-class individuals, especially students, and people under 30. An opinion poll found that approximately 60% of Ontarians highly support the minimum wage increase, and about 30% were opposed to it, with 10% having no opinion at all.[15]Campaigns like the Ontario Minimum Wage Campaign and the Fight for 15 and Fairness have been fighting for many years so the fact that over 50% of the province supports this increase comes as no surprise. 

How are businesses responding? 

Overall, the wage increase has left many businesses with a negative perception about the Liberal party’s decision to increase the wages. Although Kathleen Wynne has approved of a cut in the corporate tax rate from 4.5 to 3.5% to try to negotiate, many businesses have been seeking alternative ways to deal with this increase.[16] Since the increase, many businesses have chosen to cut costs by eliminating some of the previous perks that their employees used to benefit from as seen the recent Tim Hortons protest.

Protests outside of a Tim Hortons franchise in Coburg, Ontario. Source: http://www.hrreporter.com/dynamicdata/images/img4923_Tims_protest_LR.jpg

In Coburg, Ontario a Tim Hortons Franchise owned by Ron Joyce Jr. and Jeri-Lynn Horton-Joyce, the son and daughter of the chain's co-founders, Ron Joyce and the late Tim Horton, decided to eliminate some of the perks that their employees describe as making them now making them worse off than before the hike.[18]

Before the fare increase employees benefitted from having paid uniforms, paid breaks, fully covered benefits, and tips.[19] Since January 1^stemployees at this franchise were forced into signing an agreement that states that a lot of these perks and benefits were completely removed or cut in half. Workers who had been with the company for more than 5 years were not required to pay for benefits, but under this new hike were required to pay 50% of the cost.[20] As well as, breaks would no longer be paid for, employees were now responsible for their uniform costs and accepting tips was now prohibited.[21]

This is just one example, of the ways in which businesses have responded to the Ontario Wage increase. On the other hand, smaller businesses who do not create as much profit as these bigger businesses end up taking drastic measures as well which include job cuts, layoffs and sometimes even business closures.

This brings about one of the biggest issues with the addition of Bill 148, and changes to the Employment Standards Act, 2000, the Labour Relations Act, 1195 and Occupational Health and Safety Act, as there were no regulations of laws put into place that prevent businesses from making such changes. This enables many companies to alter their policies at their own will, even if it is detrimental to their employees. 

References

Movement. Fight for $15 and Fairness. Retrieved February 15, 2018 (http://www.15andfairness.org/movement).

Breen, Kerri. 2018. "60% Of Ontarians Support $15 Minimum Wage, Poll Finds." Global News. Retrieved February 15, 2018 (https://globalnews.ca/news/3936185/60-of-ontarians-support-15-minimum-wa...).

Campolieti, Michele, Morley Gunderson, and Byron Lee. 2012. "The (Non) Impact Of Minimum Wages On Poverty: Regression And Simulation Evidence For Canada." Journal of Labor Research 33(3):287-302.

Frache, Pam. 2016. "The Growing Fight For $15 & Fairness." Socialist.ca. Retrieved February 15, 2018 (http://www.socialist.ca/node/3110).

Fraser, Max. 2015. "Franchise Fratricide And The Fight For $15." New Labor Forum 24(3):95-98.

Global News. 2017. "$15 Minimum Wage Could Cost Ontario Economy Up To 90,000 Jobs By 2020: TD Bank Report.". Retrieved February 15, 2018 (https://globalnews.ca/news/3770319/ontario-minimum-wage-td-bank-report/).

Hovenga, Claire, Devaja Naik, and Walter E. Block. 2013. "The Detrimental Side Effects Of Minimum Wage Laws." Business and Society Review 118(4):463-487.

Saltzman, Aaron. 2018. "Tim Hortons Heirs Cut Paid Breaks And Worker Benefits After Minimum Wage Hike, Employees Say." CBC. Retrieved February 15, 2018 (http://www.cbc.ca/news/business/tim-horton-s-tims-timmies-doubledouble-m...).

Smith, Jessica, and Allison Jones. 2018. "Ontario To Increase Minimum Wage To $15 An Hour In 2019." CTV NEWS. Retrieved February 15, 2018 (https://www.ctvnews.ca/canada/ontario-to-increase-minimum-wage-to-15-an-...).

Weakliem, David, Robert Andersen, and Anthony Heath. 2005. "By Popular Demand: The Effect Of Public Opinion On Income Inequality." Comparative Sociology 4(3):261-284.

Wilmot, Sheila. 2012. The Social Organization Of The Ontario Minimum Wage Campaign. Ottawa: Library and Archives Canada = Bibliothèque et Archives Canada.

Legal Reference: 

https://www.ontario.ca/page/plan-fair-workplaces-and-better-jobs-bill-148#section-0