When a government tells businesses how much they must pay employees, it runs the risk of decreasing the amount of positions available or eliminating them altogether. Most businesses are comfortable with paying their employees a reasonable and accessible wage, but when the minimum gets hiked up, they tend to look at automating aspects of the workplace to eliminate human employees.
The concept of a minimum wage is meant to protect employees from being taken advantage of by those who they work for, but by implementing one it risks harming both employees and the employer.
Take a step back
The concept of minimum wage was introduced in Canada around a decade ago, and back then it was intended as a method of preventing children and women from being exploited for their work. It was never really intended to serve as a guideline of how much someone needs to make to support themselves or their dependents, which is what the "living wage" has set out to do. Minimum wage was designed to be an entry point for employees to start at, before working their way through the ranks to a higher and better paying position.
Today minimum wage is criticized because it doesn't represent the true amount that it takes for someone to afford housing, food and other necessities. The $15 minimum wage that will be implemented next year comes into reach of what 55-60 percent of people in the province make already, according to CBC, but still manages to fall short of the $18.50 living wage recommended in Toronto.
Minimum Wage and Consumer Price Index from 1998-2018
It has been stated that the reasoning behind the large wage increase is partially to provide people with a better means of paying for basic necessities, as well as catching up with the increased inflation. While the amount of inflation goes up by roughly the same amount each year, the wage increase has stayed relatively stagnant since the last major wage increase in 2014.
The impacts of a higher wage
Both businesses and governments are struggling to come up with ways to deal with the increased wages, with some raising menu prices as a result while local governments are increasing taxes to cover the difference.
Take Hamilton for example. In the 2018 budget, they discovered that the $14 minimum would result in an increase of $400,000 to the final numbers. Next year when the wage rises to $15, it will add $900,000 to the budget. The city proposed a 2.3 percent increase in tax, resulting in $77 of additional taxes on a property valued at $300,000.
Then there's grocery stores like Metro and Walmart that are beginning to test scan-and-go technology and are adding more self-checkouts.
Metro estimates that the increased wages will cost it $35 million for the current financial year, and will increase its costs by $45-50 million when the $15 minimum wage is implemented, the Toronto Star reports. The company has also began to trim the hours of select stores, such as ones that had previously been open 24/7, and will put a focus on increased automation in the company's new distribution centre.
There are alternatives
Instead of raising minimum wage, there are several alternatives that could be examined.
The first is a guaranteed basic income program, which is already being trialled in Hamilton, Brantford, Thunder Bay and Lindsay, which provides participants with a guaranteed income of $17,000 for individuals. The program is intended at people who are unable to work, but when people do find jobs, they continue to receive the income but essentially have their wage reduced by half. This program has yet to be widely implemented and likely will not be for quite some time, but it seems to be effective because it provides someone with a guarantee of the money they'll take home each day while still being mindful, both financially and socially, of their ability to work.
The second alternative is along the lines of the above program, but instead effectively the reverse. Increasing the income tax credit for people who are unable to meet a provincially set living income could have their pay topped up at the end of each month with the difference. There's a few benefits to something like this, with the main one being the lowered risk of job elimination from wage increases — by allowing the government to top up employees wages either through increased business taxes or shuffling benefits around, you remove the onus from employers to pay their employees more, while still paying them more.
The minimum wage increase has the support of all major political parties and a large amount of Canadians and besides Ontario, a few other provinces have been mulling the idea. There isn't a question of when the wages throughout the country as much as how they will be raised.