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Greater Niagara Chamber of Commerce

Minimum Wage Advisory Panel Regional Public Consultations

Introduction

Niagaraʼs economy is facing many challenges. Businesses in Niagara are looking for leadership to address the real issues that are facing businesses and communities in Niagara. The goal of the Greater Niagara Chamber of Commerce (GNCC) is to be a business organization that brings together business leaders in order to effectively advocate for stronger Niagara and to help position Niagaraʼs economy for the 21st Century. As the champion of the business community in Niagara, the GNCC comprises 1,450 businesses and represents 35,000 employees. It is the largest business organization in Niagara and the third largest Chamber in Ontario.

Background

The Greater Niagara Chamber of Commerce (GNCC) has been a long-time advocate for an independent minimum wage review board/commission/panel that will ensure that any future increases are implemented incrementally and are fair and transparent to businesses and employees. This would depoliticize the setting of minimum wage in the province and provide labour cost predictability for businesses. In July, a Minimum Wage Advisory Panel was created to establish what mechanisms will be implemented to determine Ontarioʼs minimum wage in the future. The Chamber is encouraged that this six-member panel was assembled to provide advice on how the province should determine and adjust its minimum wage.

Ontarioʼs minimum wage currently sits at $10.25, a number that is slightly above the national average of $10.20 and the fourth highest minimum wage among the Canadian provinces. After being frozen from 1995 to 2003, Ontarioʼs minimum wage increased every year between 2004 and 2010, though it has been frozen since March 2010. The establishment of the provincial advisory panel on minimum wage, coupled with the fact that minimum wage has been frozen since 2010, indicates that a raise of the minimum wage in the near future is inevitable. However, the current discussion on the topic presents an opportunity for the business community to weigh-in on the process for determining minimum wage and voice support of a process that is more predictable and business-friendly than the current status-quo.

Currently, minimum wage is determined by the provincial government on an ad-hoc basis. The process is highly politicized and characterized by long freezes, sudden increases and a high degree of unpredictability. The current process makes it difficult for the business community to plan for and react to minimum wage increases, as changes can occur at any time and oftentimes with little notice.

Moreover, when the minimum wage is frozen for an extended period of time there is the tendency for the government to ʻplay catch upʼ by implementing sharp increases over a short timeframe. This practice can result in negative consequences on employment by forcing businesses to lay off workers and also have damaging effects on economic competitiveness. A 2007 report commissioned by the Government of Ontario found that a 10 per cent increase in the minimum wage was likely to reduce teenage employment by 3 to 6 per cent, with similar negative impacts on the employment of young adults.1

Though the ongoing review of the minimum wage setting process is significant for all Ontarians, it is of particular importance to the Niagaraʼs local economy, as the region has experienced significant economic challenges in recent years. From tourism to manufacturing, our dominant economic sectors have been hit hard over the past few years. The downward trend in the manufacturing industry in particular has greatly impacted the local economy.

Since the beginning of the twentieth century, manufacturing in Niagara has been an economic driver, and at its peak employed tens of thousands of workers and provided Niagara with a robust economy. Currently, manufacturing accounts for approximately 14 per cent of the Niagara economy – down from 29 per cent. Over the past two decades the dramatic loss of manufacturing jobs in Niagara has had a tremendous impact on the overall local economy. In fact, Niagaraʼs overall employment growth has been less than 1 per cent since 2000. This average places Niagara near the bottom of the province in statistics related to full time employment rates and employment income levels.

In Niagara, the retail, hospitality and leisure industries employ a higher than average portion of Niagaraʼs workforce. The 2011 National Household Survey reported that this sector accounts for over 55,000 jobs in the Niagara region, and makes up 30 per cent of Niagaraʼs workforce. Predictability in labour costs ensures that these industries are able to remain competitive.

The Canadian Policy Research Networksʼ 2006 report on the employment effects of minimum wage indicates that the retail, hospitality and leisure industries are the sectors that would experience the most detrimental effects should a sudden hike in minimum wage be implemented.2 For example, retailers would have to raise prices to compensate for increased labour costs, and as a result, cross-border shopping would increase – something that is already a considerable issue for Niagara retailers and the local economy.

As the Ministry of Labourʼs consultations move forward in the coming months, it is imperative that a transparent process for determining minimum wage is developed – one that is predictable for employers, fair for employees and subsequently promotes investment, job creation and economic growth in the Niagara region and across Ontario.

Potential Options

In the Ontario Ministry of Labourʼs A Consultation Paper On Ontarioʼs Minimum Wage released in July 2013, the following processes were outlined a potential options for determining the minimum wage in Ontario:

Option 1: Minimum wage is set by the government on an ad-hoc basis, wherein the government has the discretion to decide when to make adjustments to minimum wage without a formalized mandatory review process. (Status quo)

Option 2: A mandatory review process, wherein the government is required to conduct a periodic review of its minimum wage rate (e.g. annually or bi-annually).

Option 3: An independent advisory committee (normally composed of stakeholders and academics) meets periodically and issues recommendations to the government regarding adjustments to the minimum wage rate. The minimum wage is then determined by the government on the advice of this independent body of experts.

Option 4: Minimum wage is tied to an economic indicator, such as the Consumer Price Index (CPI), the low income cut-off (LICO) or average weekly earnings (AWE).

Recommendations:

The Greater Niagara Chamber of Commerce recommends:

  1. Tying minimum wage to an economic indicator that is familiar to businesses, by way of an indexing mechanism – specifically the minimum wage should be adjusted based on the cumulative change over the previous two calendar years. All Items CPI for Ontario.
  2. That minimum wage be adjusted once every two years beginning July 1st, 2014.
  3. That biennial adjustments to minimum wage be rounded to the nearest $0.05.
  4. That regardless of which option the government chooses to implement, minimum wage not be significantly ʻbumpedʼ over and above the new minimum wage process as a method of making up for past freezes.

Works Cited:

  1. Gunderson, Morley. 2007. Minimum Wages: Issues and Options for for Ontario.
    http://www.fin.gov.on.ca/en/publications/2007/Gunderson/Gunderson.pdf
  2. Edagbami, Olalekan. 2006. The Employment Effects of the Minimum Wage: A Review
    of the Literature. http://www.cprn.org/documents/42718_en.pdf