By Cassandra Plourde
Since Bill 148 came into effect in Ontario on Jan. 1, raising the general minimum wage from $11.60 to $14 per hour, there has been a vigorous public debate regarding the interests of business owners versus those of students and workers in low-skill jobs.
With the Ontario general election coming this spring, increasing the minimum wage may have seemed like a potential political benefit, but recent data from Statistics Canada shows there may be more than one side to this decision.
While the historical connection between minimum wage increases and job losses is contentious, Statistics Canada reported that Ontario lost more than 59,000 part-time jobs in January.
Although there is a variety of factors behind these numbers, it is clear that the wage hike played a role in the job declines.
Evidence of this is substantial in a survey of local Ottawa restaurants.
For example, five weeks after the mandatory wage hike, Ottawa-based Archan Consulting surveyed 36 local business owners and found that 64 per cent have had to reduce hours for staff earning an hourly wage, shifting more responsibility to full-time employees.
It also revealed that 89 per cent of the restaurants surveyed have had to increase their menu prices — 44 per cent of those polled increased their prices between six and 10 per cent, with more than a quarter saying they raised them even higher.
The study also suggests menu prices and losses of part-time work are likely to increase over the course of the year if local businesses continue to struggle with the added costs of Bill 148.
None of this is very surprising, because finding ways to decrease overall labour costs and increasing prices are the most logical reactions to the sharp rise in the minimum wage.
Many Ottawa restaurants appear to have decreased the number of staff scheduled at certain times and increased menu prices by a dollar or two per item, while keeping portions the same. They did not modify tip-out processes, and business continued more or less as usual.
However, many other Ottawa restaurants have not been as lucky. According to the study, even a $1 raise in the minimum wage increases the likelihood by 14 per cent that restaurants with an average 3.5-star Yelp rating will be forced to shut down.
When considering the impacts of the minimum wage increase, 42 per cent of the Ottawa restaurants surveyed said they are “very concerned” about the ability of their business to survive.
Legislated wage increases like Bill 148 initiate a chain reaction in the business ecosystem that can result in other cost increases.
For example, payroll taxes such as Employment Insurance, Canada Pension Plan, vacation pay, personal emergency leave and other expenses, as well as collateral costs such as payouts to suppliers, cleaners, delivery services and others have all risen with the minimum wage.
But isn’t this to be expected?
Although it’s normal for the cost of many other products and services to rise in response to a minimum wage increase, Ontario’s 21 per cent pay hike on New Year’s Day seems to have been more than anyone was prepared for.