It’s early on a Saturday morning when Heather Barnes walks through the front door of Debrodnik’s bakery. The bell rings and she can smell the fresh bread and sandwiches wafting around the small store. The 22-year-old grabs her apron off a hook and ties it around herself. She pulls back her black hair and gets behind the cash register, ready to work for the next six hours.
The Kitchener, Ont. bakery employs just seven people, four of them part-time. Like many small businesses, it takes in only a few hundred dollars profit each day.
Barnes works about 18 hours a week and earns minimum wage. The $10.25 an hour goes towards her food, rent, and to pay off her tuition debt. But when Ontario’s minimum wage jumps 75 cents in two months, she said she is concerned it might affect the number of hours she works.
“For the bakery, this will be the difference between keeping someone on or not keeping someone at all,” she said. “It’s not like the bakery is swimming in money . . . It’s a huge struggle to pay staff as is.”
Swinging high
The minimum wage in Ontario will rise to $11 an hour on June 1, Premier Kathleen Wynne said in January. Her announcement comes on the heels of a report from Ontario’s Minimum Wage Advisory Panel. While the report did not suggest raising the minimum wage, it did say the province should link future wage increases to the rising costs of goods and services, otherwise known as the Consumer Price Index. It measures changes in how much household products will cost each year.
Until now, Ontario’s minimum wage has increased erratically. During the Mike Harris government, it stayed at $6.85 an hour for nine years. But when Dalton McGuinty became premier in 2002, it rose rapidly. From 2004 onwards the wage went from $7.15 an hour to the current $10.25 an hour in 2010.
Yasir Naqvi, the minister of labour, formed the advisory panel in July 2013. Its mandate was to come up with a formula the province could follow to raise minimum wage.
“We needed to put a system in place to calculate minimum wage based on sound ideas so there is no debate moving forward,” Naqvi said.
Five organizations sat on the panel: an anti-poverty group, a union federation, a student, and two industry groups. One of these industry associations is the Retail Council of Canada, a lobby group representing 45,000 stores in Canada.
The Retail Council keeps an eye on the money
As the June 2014 deadline to raise the wage draws closer, Debrodnik’s, like other small businesses, might feel a squeeze. These stores will need to pay their workers more, the council said, but it’s not clear where this money will come from.
“The raise has a ripple effect through the system,” said the council’s vice-president Karl Littler. “It’s either prices or profitability, it’s going to affect one or the other.”
If the lowest paid workers’ wages go up, other workers’ wages will also have to increase, he said. That will affect prices and drive away customers. Instead, they will seek out stores across the border or use mail order shopping.
Monte McNaughton, the Progressive Conservative labour critic, echoed these concerns. The Liberal government is focusing on minimum wage jobs, he said, rather than higher paying jobs.
“The focus for government has to be to create the economic climate for employers to expand and for employers to come,” he said.
Both McNaughton and Littler praised the advisory panel’s report and agreed future raises should be pegged to the Consumer Price Index.
“It takes the politics out of it, which is always a good thing,” Littler said.
Working student
Yet, a minimum wage increase will affect a lot of Ontarians.
Almost 600,000 workers earned between $10.25 and $12.30 an hour in 2013, the advisory panel’s report said.
This is more than 10 per cent of people working in Ontario.
Assad Maci, a second-year political science student at Carleton, is one of those workers. Maci is employed part-time as a shift supervisor at an Ottawa Tim Hortons and earns minimum wage. When minimum wage goes up, he said he’s looking forward to working slightly fewer hours but still taking home the same paycheque.
“I can save that time and put that time into my studies for school,” he said. He said he is also not concerned the wage might result in dramatically reduced hours at the store. Because Tim Hortons is a larger corporation, Maci said it can afford to pay their workers more and still keep prices the same.
“And it’s not only students working at Tim Hortons who rely on this wage,” he added. “I know some older people who need this raise to help pay for their house, their car, their groceries.”
Takin’ care of (a small) business
Small businesses are voicing concerns about paying workers after the raise. Justin Paulson, an associate professor of economics at Carleton University, said if they have to lay off workers, perhaps they shouldn’t have hired those workers in the first place.
“I don’t have a whole lot of sympathy for people that scream ‘my profit is more important than my employees being able to eat,’ which is effectively what that argument is,” he said.
Maci agreed.
“I wish this raise was one dollar or more,” he said. “That would really make a difference.”
The raise will not really affect inflation either, Paulson said.
“The kinds of factors that lead to inflation are all over the board,” he said. “The minimum wage turns out to be one of the smallest.”
In fact, the public end up paying more when minimum wage is lower, said Paulson. In Ontario’s case this is especially true, as those who earn the wage do not earn above the poverty line, he said. He said with added health care and social service costs, the province actually saves money by increasing the minimum wage.
The Dauphin, Man. experiment, conducted from 1974 to 1979 proved this further, Paulson said. The project, set up by the federal government, looked into the plausibility of “mincome.” This is an economic theory where the state gives every of age person in a community a living wage, regardless of whether they’re employed or not.
In the experiment, the federal government paid everyone in the community a minimum income to figure out if it affected productivity or created a disincentive to work.
The results showed a slight impact on the community’s labour market, with working hours dropping one per cent for men, three per cent for wives, and five per cent for unmarried women. But by and large, Paulson said, the experiment worked, and resulted in higher continuing education, lower drop-out rates, and more family time. This, Paulson said, is a much better alternative to minimum wage.
I want to take (your wages) higher
The Association of Community Organizations for Reform Now (ACORN) in Ottawa was one of the first groups to put a number to how much the raise should be.
It argued for a $14 an hour wage in February, more than five months before the minimum wage panel formed. This wage would put workers 10 per cent above the poverty line, the association said.
“I’m disappointed the raise isn’t more,” said Diane Rochon, a board member for the group. “I don’t understand why there’s all this debate over the marginalized when CEOs are making record profits.”
Other groups also said wages should increase to $14 an hour.
Data from the Canadian Centre for Policy Alternatives shows a minimum wage raise would benefit many workers in the province, not just those in the lowest wage bracket.
The centre’s report, “Making Every Job a Good Job,” describes an hour-glassing of Ontario’s labour market. This means there are a few more people netting bigger bucks in higher paid jobs, but many more are earning around minimum wage. As such, there are significantly fewer middle income jobs.
“Raising the minimum wage wouldn’t fix this hour-glassing,” said Kaylie Tiessen, an economist with the centre. “But it would ensure that we have a higher wage floor to make sure that anyone who’s working in Ontario wouldn’t be living below the poverty line.”
It’s difficult to have a solid wage floor without a job and that possibility seems more real every day, Barnes said.
“The bakery needs the help it has but if it can’t afford it, then it will have to fire the part-timers,” she said. “Less pay per hour is better than no pay an hour.”
