By Jaclyn Irvine
Ottawa’s business community is voicing concerns that the announced raise to Ontario’s minimum wage could end up hurting the workers it’s supposed to help.
Late last month, the provincial government announced the minimum wage would be raised to more than $10 an hour over the next three years. The wage will increase to $8.75 next year, $9.50 by 2009 and finally $10.25 by 2010.
The government says it hopes that implementing the increases gradually will help businesses adjust to the costs. “It could have been devastating if it was done overnight so that’s a small reprieve,” says Gail Logan, president of the Greater Ottawa Chamber of Commerce.
With the increase in minimum wage will also come an increase in payroll taxes and other associated costs including higher Canadian Pension Plan payments and higher employment insurance benefits, explains Logan. Also, people currently being paid above minimum wage may expect their wages to be raised as well. “It’s not just an hourly wage cost,” says Logan. “A lot of people don’t do the math.”
Small businesses will feel the effects of this decision the most, says Logan. She says she has been fielding calls from concerned business owners, mostly in the service and retail industries. “They will have to rationalize their costs which could mean loss of jobs because labour costs are most significant in any organization’s budget,” she says.
Ontario began increasing the minimum wage in increments of 25 or 30 cents in 2003, after it had been frozen at $6.85 for eight years. The NDP and anti-poverty organizations have been fighting for what they call a living wage.
Despite concerns from businesses, a raise in minimum wage is necessary, says Rob Rainer, of the National Anti-Poverty Organization. “At the end of the day, businesses have to have bodies to do work, they will have to fill their labour needs,” he says.
Had minimum wage kept pace with the rate of inflation since the 1980s, he says it would already be at $10 an hour. “All we’re asking is to restore minimum wage to the value it used to be.”
But some say this could make job hunting more difficult.
“If you’re already having trouble getting entry-level jobs to begin with, this could be an additional barrier,” says David Young, executive director of Line 1000, a non-profit organization that helps disabled people find work in Ottawa.
Currently, 65 per cent of disabled people in Ottawa are under-employed or unemployed but finding work could become harder after the wage goes up, he says.
In addition to disabled people, most minimum wage earners in Ottawa are seasonal or student workers, says Logan.
“I don’t think it’s going to help people,” says Ron Potter, owner of Modern Dry Cleaners on Bronson Avenue. Potter currently has seven employees but says he might have to reduce staff with the increase. “I will look for machinery that will make it easier and eliminate hiring staff because machinery doesn’t get paid and doesn’t go on holidays,” says Potter.
Many people are concerned that businesses like Potter’s will cut back on the amount of people they hire, increasing unemployment.
Logan is also concerned consumers will end up paying for the increased wage. Some businesses might not be able to pass along costs to the consumer because they will have to remain competitive, she says.
Potter agrees, saying he might have to raise the cost of dry cleaning to pay his employees which he fears could drive away customers.
Rainer acknowledges it will be tough for small businesses to compete but says it’s worth the risk.
“Anyone working full-time should be able to meet their basic needs and that principle has become overlooked in the grand struggle to be competitive.”