Ontario's planned minimum-wage hike to $15 per hour is likely to threaten a disproportionate number of jobs in areas outside of the Toronto region, according to a new study from the Fraser Institute.
The study from the non-partisan think tank found that the closer a minimum wage gets to an area's average wage, the harder it becomes for employers to afford the wage hike without cutting jobs or curtailing hours. The planned wage hikes by January, 2019, will leave employers in Ontario's North and rust belt facing one of the smallest gaps between those two wages of any area in North America, according to the study being released on Tuesday.
"If your average wages are lower, if you're a lower-wage region, then a higher minimum wage is going to have worse effects on employment," said Ben Eisen, one of the study's authors.
According to the study, a $15 minimum wage will have less of an effect on employers where workers are paid more, such as highly paid areas in downtown Toronto, while employers in areas with lower prevailing wages will struggle to make up the difference. In 2016, the average wage varied in Ontario from a low of $24.15 around the Bruce Peninsula to $30.40 in Toronto.
Ontario's financial watchdog warned in a report released on Sept. 12 that more than 50,000 people could lose their jobs in the province due to the wage hike.
Most of the job losses would fall on young adults and teens while the number of Ontarians paid the minimum wage would balloon from about 500,000 to 1.6 million.
According to the study from the Fraser Institute, the relationship between the minimum wage and median wage is often expressed as a ratio between 0 and 1.
The higher the minimum wage increases relative to the median wage, the closer the ratio gets to 1, and the more likely there will be "severe adverse employment effects" from further increases, it warned.
The ratio for Canada's largest provinces is currently between 0.49 and 0.52, matching most industrialized jurisdictions. However, after Ontario's planned hike, the province's ratio will rise from 0.51 to 0.63 – one of the highest minimum wages in the world relative to the median wage a local economy can support. Most states that are Ontario's main economic competitors have ratios below 0.5. The study accounted for other wage increases that have already been announced.
What that means for companies in Ontario's lower-wage areas is that they will have to react "by looking for opportunities to automate where possible or by reducing the number of people hired or the hours they are hired for," Mr. Eisen said.
Announced in May, the minimum-wage hike is a central plank of a more wide-ranging labour plan from Ontario Premier Kathleen Wynne that also guarantees extra vacation time and equal pay provisions for workers. The province's opposition parties and some businesses have criticized the speed of the minimum-wage increases, which boost the minimum from $11.40 to $15 in 2019, a 32-per-cent hike, in under 18 months.
Ontario will be the second province to adopt a $15-minimum wage, three months after Alberta.