Rough-road ramifications of minimum wage hike

Friday, January 5, 2018
Chris Woodward (

minimum wage illustrationWith every action there is an equal and opposite reaction – and that's what some workers are experiencing in Canada following news of a minimum wage hike.

On January 1, 2018, Ontario increased its minimum wage to $14.00 an hour. It will rise to $15.00 on January 1, 2019. Meanwhile, employees of some Tim Hortons locations have been notified the company is reducing benefits. Employees of the donut chain will also not be compensated for breaks, according to the Toronto Star.

"That's not unreasonable as an economist," says Aparna Mathur of the American Enterprise Institute (AEI). "I don't see firms being able to just absorb the cost and not have it come out in the form of lower wages or lower benefits. It makes sense to me that this is what we are likely to see not just across the globe, as we see a hike in minimum wages, but also in states or U.S. cities planning to hike the minimum wage in 2018."


Do federal, state, and city lawmakers or voters who approve wage hikes take these things into account? Mathur doesn't think so.

"Those who are for minimum wages, they see the pros and they discount the negative economic impacts that are likely to arise," answers Mathur. "Even though this is a policy that is aimed at helping low-wage workers, we need to be especially careful that when we do this we understand the negative outcomes as well as we understand the benefits."

The word 'idiotic' comes to mind

Philip Cross, senior fellow at the Macdonald-Laurier Institute in Canada, offered some comments in an interview with OneNewsNow. He said "it's extremely bad policy," for any number of reasons:


"This government has a long history of implementing policies and not consulting with the business sector and then being surprised when the business sector has a bad response to it.

"It's always a mistake to have government try to get business to implement social policy for them. If the Ontario government wants to reduce poverty, [which is] a laudable goal ... it could offer tax credits, it could offer wage subsidies, it could cut taxes.

"But because the Ontario government after decades of overspending doesn't have any money left, they're basically asking the business community to implement social policy for them.

"That's just a terrible mistake. What right does government have to tell these firms that they have to pay their workers way above the market rate? And the result is [that] we're going to see firms are not just going to idly sit there and implement social policy for the government – they're going to take lots of steps to cut costs.

"In the longer run, we're going to see more automation and fewer jobs .... And firms are going to expand in other low-cost, low-tax jurisdictions [like Michigan or Ohio or even Quebec]. So it's just a recipe to drive firms in the long run out of Ontario. It's just ... I think it's a very, very ... the word 'idiotic' comes to mind.

"It's certainly not going to be good for the economy. I don't think any serious economist is predicting this will boost growth in Ontario."

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