Unsurprisingly, mixed feelings accompanied the provincial government’s recent announcement that the minimum hourly wage in Ontario will be raised to $15 by January 2019. Labour movements reacted with both applause and skepticism, while some businesses and economic conservatives expressed concern.
There are numerous critics of Bill 148, the piece of legislation bringing forth the wage increase; it has been argued that raising the minimum wage kills jobs and raises prices, thus increasing students’ living expenses while making it more difficult for them to find work.
Let’s put these worries to rest. Bill 148 and the incoming adjustments to the province’s labour standards will ease the affordability crisis and ensure that hard work will finally pay off for students in Ontario.
While economists remain divided on the potential beneficial and harmful effects of the raise, almost all agree that life in Ontario has become increasingly unaffordable for young people. A Generation Squeeze report published in April suggests that, after British Columbia, Ontario’s economy is the second-worst for young people. Rent is unaffordable, childcare costs amount to a second mortgage for some families, securing a well-paying job is increasingly difficult, and the cost of tuition has risen by 65 per cent since 2003. Ultimately, though students and young people in the province are working hard, they continue to struggle to get ahead.
With the new minimum wage, 90 per cent of workers aged 15-19 and 54 per cent of workers aged 20–24 will get a raise. A higher minimum wage makes it more likely that low-wage workers can make ends meet. As of 2015, Ontario workers living on minimum wage and working 35 hours per week were earning 12 per cent below the low-income cut-off, the statistical threshold where a family must devote a larger percentage of its income — 20 per cent — to basic necessities than the average family.
Furthermore, despite panicked opinions to the contrary, many economists note the overall economic benefits of a $15 minimum wage. Evidence from other countries, including Denmark and Australia, demonstrates that higher wages do not hurt job creation or increase prices. Instead, a higher minimum wage builds the economy from the bottom up: when families have more money in their pockets, they spend it in the local economy, increasing demand.
In countries like Germany and Denmark, higher minimum wages have encouraged increased labour market participation and productivity, translating into higher employment rates than those of Canada or the US. In Germany, only 18.4 per cent of workers are in jobs that pay wages two-thirds less than the median wage of a full-time worker, and the employment rate is 75.1 per cent. In Canada, which mirrors the US more closely than it does Europe in workplace standards, 22.2 per cent of workers are employed in jobs matching the aforementioned description, and the employment rate — 72.9 per cent — is lower than in Germany.
Basic economics also tells us that when you raise wages or business expenses similar to wages, the costs are passed to customers. Accordingly, conservative entities like the Fraser Institute often propose that wage increases have minimum positive effects, or even adverse effects, given that they threaten to raise the cost of the most basic necessities. Yet businesses are more complex than simple supply and demand — when Seattle raised its minimum wage to $15, the prices of goods remained stagnant or rose only slightly. It’s possible that competition ensures businesses don’t price themselves out of the market, thereby keeping prices reasonable.
Given that paying employees more will bring higher labour costs, some fear that managers will slowly replace employees with machines in order to save money. Indeed, the replacement of human labour with mechanical labour in restaurants like McDonald’s and in the warehouses of stores like Zara is difficult to ignore, seeing as this phenomenon may decrease the amount of part-time, low-skill jobs — jobs that are often occupied by students.
At the same time, people have feared machines replacing workers since the luddites of the Industrial Revolution more than 200 years ago, and most North Americans are still working 40 hours per week. Admittedly, self-ordering and self-checkout machines may become more popular with a wage increase, but instead of killing jobs, they are likely to create more skilled positions to fulfill the more diverse options they offer customers. McDonald’s franchise owner Jason Trussell, for example, told CBC News he has hired more staff since the introduction of new automated kiosks in order to fulfill increasingly numerous and complex customer demands.
The potentially harmful effects of the incoming wage increase are therefore overstated. It is hard to ignore that the increase comes with weeks of progressive policy announcements from the increasingly unpopular Liberals under Kathleen Wynne. However, the new minimum wage is still a success for provincial advocates who have been encouraging the government to pursue this update for decades.
Instead of letting the unlikely negatives occupy our minds, we should focus on identifying what else needs to be done to make life more affordable in Ontario. While Bill 148 adopts many of the demands of organized labour, including fairer scheduling practices and paid leave, it also falls short in a number of ways. For example, it fails to establish the seven paid days of leave that activists were calling for, and it does not set a flat minimum wage, meaning liquor servers and students under the age of 18 will still earn less. Consequently, Ontario will remain one of the few provinces where equal time worked will not translate into equal pay. The fight for fairness is far from over.
James Chapman is an incoming third-year student at Innis College studying Political Science and Urban Studies.
