TORONTO – Protests, labour unrest and a public feud between Tim Hortons and the premier of Ontario have erupted in the wake of the province’s recent minimum wage hike, raising questions about the wisdom of raising the standard by 30 per cent in just two years.
The experiences of Alberta and Seattle, two jurisdictions that share Ontario’s $15 an hour goal, offer some lessons on how to adjust to a higher minimum wage: that is, if Ontario businesses can weather the short-term storm.
Ontario’s rate increased to $14 per hour from $11.60 – a 21-per-cent jump- on Jan. 1. The province aims to get to $15 by Jan. 1, 2019.
Measures taken to offset Ontario’s changes have landed several businesses, including the country’s iconic Tim Hortons, in hot water after it was revealed that some franchisees cut employee benefits, breaks or tipping to offset the impact of minimum wage hikes.
A similar scene unfolded three years ago in Seattle when that city’s minimum wage legislation went into effect.
The city committed to phasing in a $15 minimum wage increase, using a tiered system that gives small businesses several more years to adjust than large corporations.
Still, reports suggest some businesses levied surcharges to cover higher wages, while others discouraged customers from tipping.
The backlash has mostly subsided, but economists are divided on what the early findings suggest about the economic fallout from the substantially higher standard.
A University of Washington study published last year revealed Seattle’s wage hike triggered higher salaries but a reduction of hours for lower earners, with a net effect of reducing low-wage workers earnings by $125 per month.
However, the research methods of the study have been called into question by some economists who argue that it failed to account for a booming economy that pushes more workers into higher paid jobs, resulting in a decrease of hours for minimum wage workers.
The University of California, Berkeley, published a conflicting report around the same time finding the predicted doomsday scenarios had not materialized.
“So far there is nothing alarming happening in Seattle due to minimum wage,” said Sylvia Allegretto, one of the authors of the report.
“Certainly we don’t see any effects to be concerned or worried about.”
The June 2017 study by Allegretto and two colleagues on Seattle’s restaurant industry found that for every 10 per cent that the minimum wage rose, pay in the overall industry rose by about one per cent, with no impact on employment.
Allegretto said she’s working on updating the study, which will contain observations from five other cities rolling out minimum wage increases – including San Francisco, Los Angeles and Chicago.
A broader U.S. study published in May 2016 from the National Employment Law Project looking at 22 federal minimum wage hikes over seven decades found no connection between wage increases and dips in employment rates. It further revealed that in 68 per cent of the cases examined between 1938 and 2009, employment jumped after a hike.
Elsewhere in Canada, companies in Alberta appear to be adjusting to the hike from $12.20 to $13.60 last October and are getting ready for plans to further increase it to $15 this year.
James Boettcher, the CEO of Calgary ice cream purveyor Fiasco Gelato, said Ontario businesses will see challenges with the hike, but “good companies will find a way to make it work.”
Still, he said he’s frustrated that governments haven’t taken tipping into account or considered a lower wage for teenagers still attending school or living at home when it comes to setting new standards for minimum wage.
Carolina Lopez, owner of Calgary’s Minas Brazilian Steakhouse, initially tacked on a four per cent “small business support fee” to bills after the province’s minimum wage hike but instead decided to raise menu prices after receiving some backlash. At her own favourite restaurants, she said she’s seen “a decrease in the quality of the product and the amount.”
To Ontario business owners she said to remember: “There is always a way, but there is also a limit and it won’t be easy.”