Business lobby alarmist on Ontario minimum wage

The minimum wage in Ontario was increased from $11.40 to $14 an hour on January 1 and will rise to $15 a year from now, and that means that the sky is falling according to a coalition of business groups called Keep Ontario Working (KOW). The name implies everything — by raising the minimum wage Premier Kathleen Wynn will kill jobs. Alberta will increase its wage to $15 in October 2018 and there have been similar predictions of doom there.

Flawed analysis

In Ontario, KOW released a flawed analysis which claimed that the increases would lead to $23 billion in new business costs, place 185,000 jobs “at risk” and cost each Ontario household $1300 a year. The latter figure turned out to be a basic calculating error which would have been caught by most high school students.  Beyond that the study used a proprietary economic model which lacked transparency and could not be peer reviewed. In other words, they threw out numbers but did not back them up.

The KOW document focused almost entirely on the costs to business while ignoring the beneficial effects of raising the incomes of 1.5 million Ontario workers, a number equivalent to 25-30 per cent of the workforce. The vast majority of these workers are not, as the business lobby implies, teenagers living at home but rather a variety of adults and a demographic skewed toward women and new immigrants.

Enormous importance

Even at the newly-minted rate of $15 an hour, a full time worker will in 2019 make only $600 a week, or $31,000 a year. However, this amounts to a raise of about $5,000 a year and is of enormous importance to the individuals and families involved.  It will have beneficial effects beyond that as well, because almost everything low income earners make is spent almost immediately in the local economy.

Fast and furious

Still, the response to wage increase has been fast and furious. The business lobby has used its privileged access to newspapers and the media to peddle its message that the increased wage will mean layoffs and other cutbacks that will actually hurt the employees it is supposed to help. The chief economist for the Canadian Federation of Independent Business (CBIF) wrote sarcastically about Premier Katherine Wynn in The Globe and Mail. Essentially, he accused her of being a liar who created “unfulfillable expectations” with the minimum wage hike.

Time is never right

We have heard all of this before. In 20 years of journalism, communications work and in politics, I do not recall even once when the CFIB, the Canadian Taxpayers’ Federation or the Fraser Institute supported a hike in the minimum wage in any province.  For them, the time is never right. Nor is it ever right for improvements to the Canada Pension Plan, in which employers and their workers would contribute jointly toward retirement security.

The business lobby insists on each occasion that improved wages or pensions are “job killers” and they predict ruin and woe as they did when Finance Minister Paul Martin improved the Canada Pension Plan in the 1990s. The lobby was proven completely wrong when the economy took off soon after. They were wrong again in B.C. in 2011, when the provincial government raised the minimum wage by an amount equivalent to Ontario’s current increase.  Despite the foreboding of lobbyists, in the following year B.C. added 50,000 jobs.

Will they confess?

Jobs and economic growth depend on many factors, and wages are just one of them. But don’t expect the business lobby to confess to alarmism and self-interest if in the case of Ontario they are proven wrong once again.