Ontario’s minimum wage hike isn’t controversial: It’s just good for business

Ontario’s Liberal government of Kathleen Wynne raised the minimum wage by nearly 50 percent in just under four years, from $11.60 to $14. It was controversial—small business groups complained that it would hurt job creation, while the cost of living rose at the same time. But when opponents can’t find a compelling argument against one of its policies, it usually means that the policy is doing its job. And, in the case of Wynne’s minimum wage hike, it seems to be both financially and politically good for the province.

Ontario’s Liberal government of Kathleen Wynne raised the minimum wage by nearly 50 percent in just under four years, from $11.60 to $14. It was controversial—small business groups complained that it would hurt job creation, while the cost of living rose at the same time. But when opponents can’t find a compelling argument against one of its policies, it usually means that the policy is doing its job. And, in the case of Wynne’s minimum wage hike, it seems to be both financially and politically good for the province.

Ontario’s minimum wage is now $14. It jumped to $15 last year. I don’t know whether it will be going to $15 in January, because Wynne is in a precarious position heading into the election scheduled for June. (One poll found that if the election were held today, voters would prefer a Conservative government, even though Ontario has the third-highest minimum wage in the country.)

A good starting point for discussing the matter might be to start at the federal level. Prime Minister Justin Trudeau’s government is increasing the minimum wage for federally regulated workers to $15 an hour by January 2019, then raising it $1 an hour every January after. The big challenge for the government’s labour minister—this year’s is Patty Hajdu—is that there’s no industry-specific group to lobby for the increase. The group that typically defends this type of hike is the United Food and Commercial Workers International Union, which is the United States’ largest private-sector union. The federal minimum wage was $9, but has risen to $11 an hour, except for January 2017, when it increased to $10.25 an hour. Since then, the estimated U.S. consumer price index has risen 8.7 percent.

Trudeau’s target, two years hence, is higher than Ontario’s goal. But the pace of increases is the key here. (Wynne’s government increased its minimum wage by $1 an hour every January since 2013, and saw it nearly double in a little more than four years.) The key here is that a higher U.S. inflation rate now isn’t the signal we were used to from our government for quite some time. Back in 2011, for example, when that $10.25 an hour was first indexed to inflation, many observers argued that it was too low, that the U.S. was nearing a point where it would surpass the annual increase in its economy’s hourly compensation—and so, where the fastest rate of increase in minimum wages would be. (Some economists, however, argue that the real rate of increase in compensation is more sensitive to inflation than the nominal rate, and so, that annual increases should be at or below the annual rate.)

Even when nominal federal minimum wages are rising at an annual rate, they have the power to shrink, too. As people come closer to the right to appeal a minimum wage increase, for example, an increase’s durability starts to decline. When I wrote about them back in 2007, most of Canada’s minimum wages were indexed to inflation—something that is difficult to do at the state level. Quebec’s minimum wage, for example, had not been indexed to inflation in more than 15 years, and the province’s low unemployment rate may be one reason. Other countries, such as the U.K., Australia and New Zealand, have indexed their minimum wages years ago.

By and large, minimum wages have a substantial effect on minimum wages at the state level. Canada’s Employment Insurance program helps people who can’t find work, but it provides less of a safety net than U.S. Unemployment Insurance. Under the system that Wynne introduced in 2013, individuals who are out of work for longer than half a year and don’t find work don’t collect EI. About 50 percent of Ontario’s annual minimum

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