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Greater Niagara Chamber of Commerce

GNCC Open Letter to Premier Wynne

Chamber asks Premier for consideration of business in new minimum wage legislation


 

 

Dear Premier Wynne,

On behalf of over 1,600 members representing 50,000 employees in Niagara, and the business community that the Greater Niagara Chamber of Commerce (GNCC) represents, I would like to express my concerns about the changes your government has recently announced in regard to labour law and the minimum wage in Ontario.

While we focus on advocacy for businesses, as befits our position as a regional Chamber of Commerce, we believe the common goal we all share is the economic well-being of Ontario. By building a solid foundation for business in policy and legislation, we believe that all will prosper. At the GNCC, we value data-driven and evidence-based policy that serves to build prosperity. We ask that legislators make rational decisions after careful data-gathering and analysis.

Our first objection to your announcement of a $15/hr minimum wage in Ontario, then, is that this is not the result of evidence-based decision making. Your government has recently concluded its Changing Workplaces Review, a two-year study of Ontario labour law. However, we note that the Review specifically did not touch the question of minimum wage, stating that it was outside its scope. Knowing that there was no data or evidence gathered regarding a revision of minimum wage, we wonder how the proposed figure was arrived at, and whether due consideration has been given to the side-effects that this increase will have.

The speed and magnitude of this change – the greatest in four decades, and due to take effect with a mere six months of warning to Ontario’s businesses – is alarming and raises further questions about the study and consideration that went into it. Previously, minimum wage increases were to be annual and tied to inflation via the consumer price index. We applauded this decision. It made wage increases fair to employer and employee alike, and produced a predictable pattern that businesses could plan for. The new increase strips predictability away and creates a new wage environment wherein business expansion and investment will be stymied by a lack of certainty concerning their future payroll expenses.

To guess at the unintended consequences that are likely from this abrupt policy shift, we need only reference the minimum wage advisory panel that the Government of Ontario convened a few years ago. The findings of that panel, issued in January of 2014, found that with every 10 per cent increase in minimum wage, youth employment dropped 3-6 per cent. The panel also found that the larger the minimum wage increase, the larger the effect. Here in Niagara, this means that as a direct result of this minimum wage policy, as many as 4,500 young people could lose their jobs. In the province as a whole, there are currently 2.3 million people aged 15-24 in the workforce. The findings of the panel indicate that up to 400,000 of them might join the ranks of the unemployed due to this minimum wage increase.

Our own inquiries confirm that there is truth to this. As an example, one local grocery store in Niagara, currently employing around 60 people (most voluntarily part-time), would have to either cut back the hours they offered to staff by 25 per cent, introduce price increases of similar magnitude, or a combination thereof as the margins of the business are already too thin to simply absorb the cost. This does not include the additional costs the business would incur from mandatory sick leave and increased vacation allowance. In this case, be it through higher prices for essential goods or through reduced hours for working Ontarians, this policy will hurt many of the people it aims at helping.

The minimum wage panel also found that the negative effects of a minimum wage hike were greatest amongst recent entrants to the labour market, such as youth, immigrants, and recent graduates. They also fall harder on women than on men. Adverse employment effects were felt almost exclusively by long-term, permanent minimum wage workers. This is the group that is mostly likely to be using a minimum wage job as their primary livelihood, and the group probably most in need of financial assistance. Many members of this group will benefit enormously from a minimum wage increase, but many more will lose their jobs or have their hours cut back, leaving them worse off than before. What protections will be put in place for them?

We have seen much citation of evidence from Seattle, New York State, and other American jurisdictions where $15/hr minimum wages or similar are already in place, but the Ontario panel found that U.S. evidence was inconclusive. We would tend to agree – American minimum wage policies cannot be divorced from their socioeconomic context and applied in Ontario to get the same results. On the other hand, the panel found that Canadian and OECD evidence shows that minimum wage increases definitely have a negative employment effect. The data from the United States does not tell us what to expect, but the data from Canada tells us to expect unemployment.

Given that the Ontario panel reported that there will be significant and negative employment effects from this new minimum wage, we ask that due consideration be given to other measures which could offset these effects. It should be noted that this minimum wage increase comes on the heels of cap-and-trade, of increased pension contributions, and of rising electricity costs. Ontario’s businesses cannot absorb constant cost increases like these and continue as normal. There will be adverse economic effects, and these will be felt in increased unemployment and poverty. This is not to mention the foregone growth and opportunity that minimum wage increases produce which (as the panel noted) are the primary effect of such increases in a growing economy – not necessarily job losses, but fewer new jobs and opportunities. Given Ontario’s growing population, can we afford to slow job creation at this time?

To compensate for its recent announcement of a $15/hr minimum wage, the Government of Alberta has pledged to cut small business tax rates from 3 per cent to 2 per cent, introduced the Enhanced Innovation Voucher and Small/Medium Enterprises Support programs, provided more capital for ATB Financial and Alberta Enterprise to encourage investment in Alberta businesses, expanded the mandate for the Alberta Investment Management Corporation, reinstated their Summer Temporary Employment Program, implemented the Canada-Alberta Job Grant, and introduced a Capital Investment Tax Credit. All of these measures will help offset the cost of their minimum wage policy, and similar measures would be welcomed in Ontario.

We appreciate the efforts of you and your government to make Ontario a better place to live. What we ask is that you consider the cumulative impact of these measures on Ontario’s employers, and the results that they will have on jobs and the cost of living. Ontarians need jobs, and we ask you to seek options that pursue your policy goals without such a heavy impact on those aspects of Ontarians’ lives.

 

Yours sincerely,

Mishka Balsom
President & CEO, Greater Niagara Chamber of Commerce