Minimum wage meets maximum politics in pre-election Ontario

Posted on March 31, 2022 in Debates

Source: — Authors: – Politics/Political Opinion
March 30, 2022.   By Martin Regg Cohn, Political Columnist

It’s almost as if Doug Ford took an economics course during his last four years in power, Martin Regg Cohn writes.

With a provincial election campaign coming up, rival politicians are talking up the minimum wage — boasting about boosting the hourly rate for the working poor.

If you think that’s a pre-election perennial, you have a short memory.

Lest we forget, Doug Ford’s Tories did the precise opposite four years ago. As promised, they cancelled a planned minimum wage increase — imposing a 26-month freeze on the old hourly rate of $14 an hour, shortchanging hundreds of thousands of working poor.

Belatedly, Ford has ratcheted the rate back up to the previously scheduled $15, albeit about three years behind schedule.

Now, after watching the premier play catch-up ahead of the June 2 Ontario election, the opposition parties are leapfrogging ahead of him:

Liberal Leader Steven Del Duca announced over the weekend he’d bring the minimum wage up to $16 next Jan. 1 if elected, with regional increases thereafter. The NDP’s Andrea Horwath beat him to it a few months earlier with an election commitment to reach $16 this October, rising to $20 over the next four years.

Minimum wage, maximum politics. But moderate economics as it turns out.

For all the political posturing of 2018, culminating with Ford’s misconceived freeze, the emerging economic consensus over a higher minimum wage is hard to ignore. The only difference is in degree and timing — a political calculus more than an economic accounting.

Back in 2018, Ford campaigned hard against an increase, describing it implausibly as a “tax grab” that imperiled economic growth. His preferred slogan when appealing to Progressive Conservative voters: “Ontario is open for business.”

What changed?

It’s almost as if Ford took an economics course over the course of his last four years in power. Where once he crusaded against the evils of the minimum wage,last November he heralded its benefits — and reversed course — by embracing the $15 benchmark. “For many people, take-home pay has not kept up with the cost of living,” he said.

Left unsaid was that the hourly wage would already have reached $15.75 an hour had he not cancelled the plans of the previous Liberal government. Also left unspoken was that Ontario’s working poor had forgone the difference in those wage rates for years — picked from their pockets by Ford’s political parsimony.

Back then, the Tories were clinging to the old economic orthodoxy that higher minimum wages would kill jobs. Business and bank economists had warned hundreds of thousands of jobs were at risk.

Instead, when the previous Liberal government raised the minimum from $11.60 to $14 an hour, unemployment declined to record lows. It should not have come as a surprise, because the explanation was there all along.

Last year, Ontario-born academic David Card won the Nobel Prize for economics in recognition of his groundbreaking research. Studies showed that when U.S. cities increased the local wage rate, employment did not suffer compared to surrounding jurisdictions (after excluding other factors).

Now, COVID-19 has also created new economic realities on the ground. Despite pandemic pressures on low-wage sectors of the economy — from restaurants to retail — an ongoing labour shortage has made fears of job losses moot.

In short, businesses big and small can’t afford not to pay workers more.

In essence, politicians are only recognizing economic reality when they talk about adjusting rates upwards.

Wages are rising regardless of whether the minimum increases. Which is one reason why the NDP has laid out a four-year plan to bring it to $20 an hour by 2026.

Interestingly, the latest Liberal proposal by Del Duca is a two-stage approach — first raising the minimum to $16 an hour next January, then devising regional variations thereafter. There is undeniable economic logic to wage rates that reflect local realities in high-priced Toronto versus cities with a lower cost of living.

Many American cities (with rates far higher than here) have already implemented wage differentials (fodder for economic researchers). Canada’s 10 provinces already have significant variations in wage rates (creating a contrast between neighbouring cities such as Ottawa and Gatineau), so the concept is hardly revolutionary.

For all the politicking and policy-making that goes into wage rates, especially at election time, the biggest variable will be inflation. Much of the debate over minimum wages over the past decade took place against the backdrop of minimal inflation, so when workers finally got an increase, it translated into real dollars.

Now, with inflation rising, count on the Tories to make a show of automatically raising minimum wage rates — without the working poor getting much further ahead (due to eroding purchasing power). That’s the political and economic reality to factor in, pre-election and post-election.


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