Social Policy in Ontario

Some 534,000 Ontarians work 35 hours or more each week in fast-growing retail and service industries, earning the provincial minimum wage of $10.25 an hour. Indeed, with annual earnings under $20,000, these workers will never even crack the paltry official low-income measurement of $23,000 a year. That means a lot of people are working very hard just to remain in poverty.

The emergence of such a huge underclass does not bode well for Ontario. There are many complex reasons for it – including long-term challenges facing the province’s old industrial economy and the lingering effects of the Great Recession. But the Liberal government didn’t helped matters by freezing the minimum wage for the past three years.

It needs to stop stalling. To both alleviate poverty and increase consumer spending, the government should move as quickly as possible on minimum wage reform. It should speed up the work of the advisory panel it set up on the issue this summer and get ready to make a substantial increase in Ontario’s minimum wage.

The Liberals had a good record on this issue between 2004, just after they took power, and 2010, when the government last hiked the minimum wage. It had been frozen for nine years by the Harris government at $6.85 an hour. The Liberals raised it by 50 per cent to $10.25 – during a period when prices rose just 17.5 per cent.

The least the government should do is continue the same trend of raising the minimum wage 2.5 times faster than the rate of inflation. That would mean an increase of 13.5 per cent, to catch up since 2010. It translates into an increase of $1.40 an hour, bringing the minimum wage up to about $11.65.

That would still leave many full-time workers stuck in poverty. And it would disappoint activists pushing for an immediate increase to $14 an hour – the level that would bring earnings just above the poverty line. But it would mean a hike of almost 40 per cent, a huge burden on many businesses.

Even a much smaller increase would upset business, whose lobby groups are pushing for regular, predictable raises tied to the Consumer Price Index. The problem, of course, is that with inflation running at historically low levels, such a formula would lock the lowest-paid workers into a perpetual cycle of poverty. That’s unacceptable.

The government should also ignore the familiar warning that minimum wage increases are job killers. The Ontario Chamber of Commerce warns that “any increase to the minimum wage is going to cost Ontario jobs.” By that logic, there would never be a good time to raise wages. And the record shows that unemployment fell in the past decade at times when the minimum wage was being regularly increased.

In fact, giving the poorest workers a few extra dollars in their pockets could actually help create jobs, particularly when the economy needs additional consumer spending. Unlike many corporations, low-income workers aren’t going to hoard their extra cash. Instead, it will go right back into local businesses on necessary purchases. And we all know that where consumer spending begins, job growth ensues. Surely the Liberals don’t need reminding that Kathleen Wynne now wants to be known as the “jobs premier.”

Still, the government should not force restaurants and retailers to solve poverty through wage hikes alone. There are many policy tools – such as raising personal tax exemptions – that could help low-income workers keep more dollars in their wallets.

The minimum wage advisory panel appears to be exploring such possibilities, providing worthy opportunities for tangible change when it reports back to government.

The Liberals have a solid track record in creating economic gain for low-income workers. It’s time for them to renew those efforts. The workers, and the economy, will be better for it.

< http://www.thestar.com/opinion/editorials/2013/09/18/dont_wait_boost_minimum_wage_editorial.html >