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Greater Niagara Chamber of Commerce

Financial Accountability Office of Ontario Warns of Employment Losses from Minimum Wage Hike

Today, the independent Financial Accountability Office of Ontario (FAO) issued its commentary on the proposed minimum wage hike – and the results are quite sobering.

Although the higher minimum wage would raise total labour income by 1.3 per cent by 2019 (adjusted for inflation), only a quarter of that income would directly benefit low-income families, which the FAO states makes the minimum wage hike “an inefficient tool for reducing overall poverty.” 40 per cent of the gains would go to households already making above-average incomes.

The commentary also confirms what a lot of businesses and business advocacy organizations such as the GNCC and the Ontario Chamber of Commerce have repeatedly stated: higher payroll costs will lead to job losses among lower income workers. Even after including the projected job gains from increased labour income and higher household spending, the FAO believes that the Ontario economy will shed a net total of 50,000 jobs, mostly amongst teens and young adults. They caution that this estimate is conservative, and there is evidence that the job losses could be even worse.

The FAO’s commentary lists accommodation and food services, retail trade, and agriculture as the industries which will be most affected, and these industries are three pillars of the Niagara economy. Together, they employ 63,000 people in Niagara – almost one in three working people.

The article cited previous research indicating that in Canada, a 10 per cent increase in minimum wage results in a 3-6 per cent reduction in teen employment. As we noted previously, that research also finds that the larger the minimum wage increase is, the larger the increase in teen unemployment.

The GNCC has previously advocated a more measured and considered approach to minimum wage and to tackling poverty in general. We asked that the rollout be slowed down to the pace seen in other jurisdictions moving to $15/hr, so that businesses have a chance to adjust. We have also asked the government to address public sector shortfalls which greatly affect the working poor, such as a lack of decent public transit, affordable childcare, and affordable housing. Finally, in order to prevent or reduce the projected loss of 50,000 jobs, we have asked for offsetting measures for businesses to help them adjust, such as tax cuts or payroll tax credits, or industry-specific initiatives aimed at helping businesses in the most-affected sectors of the economy.

Read the FAO’s full commentary here.

Read the GNCC’s submission to the Standing Committee on minimum wage increases here.