January 24, 2014 – A report released by the Ontario Chamber of Commerce (OCC) this past September called on the Ontario government to adopt a predictable, transparent, and fair process for determining Ontario’s minimum wage. The report released today by the government’s Minimum Wage Advisory is recommending indexing increases in the minimum wage to inflation.
This proposed process makes minimum wage predictable. Businesses will be able to forecast increases in the minimum wage and adjust their plans accordingly. It also would introduce a principle-based rationale for increases to the minimum wage and de-politicize the setting of minimum wage. This process would also be fairer for employers as they will no longer be forced to deal with sudden, often large hikes to the minimum wage.
It would also be more transparent and fair for workers as they will no longer have to deal with long freezes and decreases in their purchasing power (their purchasing power decreases over time because during long freezes, the minimum wage fails to keep up with inflation).
The Greater Oshawa Chamber of Commerce, in its presentation to the panel this past September, though supportive of regular increases to the minimum wage, cautioned against temporarily adopting a formula that would see rates outpace inflation.
A significant ‘bump’ in the minimum wage to something like $14, as some groups had been calling for, would cause significant harm to Ontario’s economy and many key sectors. Several Canadian studies show that a minimum wage increase as small as 10% can lead to a 4-6 percent reduction in teen employment. At a time when Ontario’s youth employment rate sits at 50%, the last thing we need to do is exacerbate the youth unemployment problem.
“Practical evidence indicates that major increases in the minimum wage with a ‘knee jerk’ reaction would have a significantly adverse effect on employment, particularly among youth,” said Bob Malcolmson, CEO & General Manager of the Greater Oshawa Chamber of Commerce. “It would also damage sectors that rely on minimum wage, including retail, hospitality, and leisure.”
Minimum wage is a ‘blunt’ policy tool in the fight against poverty. “The fact is, minimum wage helps those who are working. Hurts those who aren’t! Realistically we need to hone and get more people into training systems,” Malcolmson stated, adding “better training and more access to training – is a more effective mechanism to fight poverty.”