Wrestling with the minimum wage

OttawaCitizen.com – business – Ontario Chamber of Commerce favours regular cost-of-living increases in new paper
September 11, 2013.   By Don Butler

t’s not quite a man-bites-dog story, but it may surprise some to learn the Ontario Chamber of Commerce — the mouthpiece for 60,000 businesses in the province — favours regular increases in the minimum wage.

In a paper to be released Wednesday, the chamber urges the provincial government to adjust the minimum wage every two years based on the change in the Consumer Price Index in the previous two calendar years.

The chamber’s decision to go public with its recommendation comes as the debate over Ontario’s minimum wage — frozen at $10.25 an hour since 2010 — heats up.

In July, the provincial government appointed a six-member panel to provide advice on how Ontario should determine the minimum wage in future. The panel will hold hearings in Ottawa Sept. 27. Here are some key facts and arguments:

Is Ontario’s minimum wage too low?

The anti-poverty group ACORN Ottawa certainly thinks it is. “At $10.25 an hour, many minimum wage earners fall 19 per cent below the poverty line,” says Ria Rinne, chair of the group’s Vanier chapter.

ACORN wants an immediate increase to $14 an hour to make up for the freeze and to push those who work for the minimum wage to 10 per cent above the poverty line, with annual cost-of-living increases thereafter.

Business groups must hate that idea.

Oh yes. Despite the three-year freeze, Ontario’s minimum wage is still among the highest in Canada, says the Chamber of Commerce. Nunavut, at $11 an hour, has the highest minimum wage, followed by Yukon and Nova Scotia. Ontario is fourth, tied with Manitoba and British Columbia, slightly above the national average of $10.20.

So who’s right?

Christopher Worswick, an economics professor at Carleton University, thinks the current minimum wage is “at a reasonable level” and doesn’t see a compelling reason to raise it significantly. “My concern would be job loss,” he said. Canadians need more wage growth, but it has to be driven by economic fundamentals, he said. “It can’t be something just legislated by the government.”

What about the freeze? Isn’t an increase overdue?

An increase of the magnitude ACORN advocates would increase labour costs for some businesses by nearly 40 per cent, said Josh Hjartarson, the Ontario Chamber of Commerce’s vice-president of policy and government relations. “Who can function under that sort of cost-certainty structure?”

It would also discourage businesses from hiring at a time when youth unemployment is at record highs, the chamber’s paper says. “For many employers — particularly those in the retail, hospitality and leisure sectors — a decision to ‘make up for lost time’ would exacerbate the challenges they face and hinder Ontario’s economic recovery.”

But Rinne said the threat of job losses is overblown, and argued that sharply raising the minimum wage would stimulate the economy and might even create jobs.

Why is the Chamber of Commerce calling for regular inflationary increases in the minimum wage?

It’s the “least worst option,” Hjartarson said. “The minimum wage seems to be a permanent reality in Ontario. The question is, how do you make the process more effective and how do you integrate the needs of business?”

At present, the Ontario government lurches from freezes to abrupt increases as its ideology and political needs dictate. In a survey done this May, only three per cent of the chamber’s members thought that was a good way to handle it.

Instead, the chamber says adjusting the minimum wage every two years to allow for inflationary increases is the most predictable, transparent and fair approach — and the one least likely to hinder the province’s economic competitiveness.

“Everyone will benefit,” the chamber’s paper asserts. “Workers won’t be subject to long freezes and deterioration of their purchasing power. Employers won’t be subject to sudden and unforeseen increases in the cost of doing business.”

What do others think of the idea?

Tying increases in the minimum wage to the CPI “seems like a sensible approach” if your policy position is that it shouldn’t rise in real terms over time, Worswick said.

While ACORN’s Rinne said the chamber’s proposal is a “good step,” using the current rate of $10.25 an hour as a base and increasing it in line with inflation is not enough, she said. “I would like to see them actually raise the minimum wage right now, or as early as possible, and from there increase it on an annual basis in line with inflation.”

Labour Minister Yasir Naqvi, the man who appointed the advisory panel, declined to comment at this time. “We are soliciting advice from Ontarians across the province,” he said Tuesday. “I’m very encouraged and heartened that the Ontario Chamber of Commerce is participating in that process.”

What comes next?

By late December, the advisory panel will submit its recommendations to Naqvi, who expects to introduce changes next year. “Our aim is to have a system that is fair to Ontarians who live on minimum wage and predictable for businesses who create jobs in our economy,” he said.

“The question for the government is, what’s the next step?” Naqvi said. “How does one determine minimum wage? We should get politics and politicians out of that determination and have some sort of more objective criteria to do so.”

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