Ontario’s Minimum Wage Debate and Advisory Panel’s Final Report

Ontario’s government recently reviewed the province’s minimum wage and how it should be set in the future. There was speculation that the minimum wage could increase to $14 per hour, which several advocacy groups argue would ensure adequate income to meet basic needs. According to these groups, no one working a full-time job in Ontario should be living in poverty. So First Reference asked in a poll, if the minimum wage in Ontario increases to $14 per hour, will it affect your company?

Out of 378 respondents, 204 (54 percent) said yes it would, while 145 (38 percent) said no; 29 (8 percent) respondents were not sure or did not know.

What is the current minimum wage in Ontario?

The current general minimum wage in Ontario is $10.25 per hour for employees 18 years of age and over; $9.60 for employees under 18 who work fewer than 28 hours per week; and $8.90 for liquor servers. These rates were last increased three years ago, on March 31, 2010.

Homeworkers must receive 110 percent of the general minimum wage, $11.28 per hour. Homeworkers are employees who do paid work in their own homes. For example, they may sew clothes for a clothing manufacturer, answer telephone calls for a call centre, or write software for a tech company. Students of any age (including students under the age of 18 years) who are employed as homeworkers must be paid at least the homeworker’s minimum wage.

Hunting and fishing guides’ minimum wage is $51.25 per hour for fewer than five consecutive hours in a day or $102.50 per hour for five or more hours in a day whether or not the hours are consecutive.

The Ontario Employment Standards Act requires employers to pay employees at least the prescribed minimum wage rate.

Why the cry for an increase from $10.25 to $14?

Statistics Canada classifies families and people who live alone or with non-related others as having low after-tax incomes when they spend 20 percent or more than the average on food, shelter and clothing. This low-income cut-off (LICO) is sometimes called the “poverty line.”

Based on the LICO, the overall poverty rate in Canada in 2011 (the latest year for which figures are available) was at 8.8 percent, a 0.2 percentage point improvement from 2010. As recently as 1996, it was at 15.2 percent. In 1965, the first year for which LICO rates were calculated, it was 25 percent. A rate of 8.8 percent means between three and four million people in Canada are still living in poverty.

About 571,000 children under 18 (8.5 percent) lived in low income in 2011. For children in lone-parent families headed by a woman, the incidence of low income was 23 percent; for children living in two-parent families, the incidence was 5.9 percent. Many Canadians living alone fall below the poverty line. In particular, about 199,000 seniors (14.9 percent) and 1.2 million persons under the age of 65 (32.3 percent) lived in low income in 2011.

Ontario had an overall poverty rate of 9 percent (1,182,000 people) in 2011 and a child poverty rate of 13.8 percent. Between 2007 and 2011, the overall poverty rate in Ontario increased slightly from 8.8 percent to 9.0 percent. The peak was 10.1 percent in 2009 following the recession.

(Source: Statistics Canada, The Daily, June 27, 2013, Income of Canadians, 2011)

Food bank usage in 2012 also increased, rising from 374,000 people per month in 2008 to 413,000 in 2012, and then dropping to 375,814 in 2013. (Food Banks Canada, “Hunger Count 2013,” November 2013)

In addition, it was recently announced that a greater proportion of Ontarians are working for minimum wage in 2013 than in 2003, with over 40 percent of Ontarians over 25 making minimum wage.

In 2011, the before-tax LICO was $22,229 for a single person, $27,674 for a single parent with a child and $41,307 for a family of four, in large cities like Hamilton. Social assistance rates are far from providing a basic standard of living. A single person on Ontario Works assistance receives less than $8,000 per year, which is only 35 percent of the poverty line.

These are staggering and dismal statistics to say the least.

According to several advocacy groups, a person working full time at minimum wage cannot lift themselves out of poverty, either as a single person or as a lone parent (even when taking into account all tax benefits). Only when a family has two full-time minimum wage earners would their income be slightly above the poverty line and only due to child tax credits.

Any increase to minimum wage must bring workers above the poverty line. And a minimum wage increase of $14 an hour is a good start and would set the minimum wage at 10 percent above the current poverty line. Furthermore, the minimum wage should be increased each year with the cost of living.

Many are opposed to an increase to the minimum wage, arguing the costs of an increase are too much for businesses to bear. They note that the increased costs would be passed on to consumers, resulting in increased prices for services and goods. In addition, opponents argue that the costs of labour are already the most significant component of business costs. Increased labour costs via a minimum wage increase and any resulting snowball effect on the wages of other workers would lead to the loss of hours and jobs and more part-time work, particularly in industries such as retail, hospitality and leisure. Some business owners say they are still dealing with previous minimum wage increases and could not continue operate if the minimum wage were to increase to $14.

Minimum wage advisory panel

In June 2013, the government appointed a minimum wage advisory panel which prepared a consultation paper asking a number of questions about factors that should be considered in determining the minimum wage. These factors include:

• Economic conditions in the province, including job growth, unemployment rates, average wages and family incomes
• The cost of living, including taxes and average household expenditures
• The characteristics of minimum wage earners, including their age, sex, family status, industry and employer size
• The overall impact of previous minimum wage increases on low wage earners, including employment levels and hours of work
• The overall impact of previous minimum wage increases on business, including business productivity by sector and industry
• Trends and developments related to minimum wage in other jurisdictions, including the analysis of approaches and mechanisms used in those jurisdictions
• Results from consultations with stakeholders, the public and other departments in government

The Minimum Wage Advisory Panel’s final report was tabled with the government on Monday January 27, 2014. The report points out that the minimum wage is not solely a statistical or economic debate, it is also a benchmark, “a wage floor” that establishes a bare minimum for society. While the minimum wage cannot do it alone—child care, affordable housing, tax credits and tax exemptions are also essential—it is also a key component of any realistic anti-poverty strategy, no matter how blunt or inefficient it might be. This said:

There was broad agreement within the Panel that the basis for revisions to the minimum wage should be easy to understand and administer. The Panel also identified strongly with the public input that the revision process should be predictable, fair, transparent and somewhat removed from government’s near-term concerns.”

With these criteria in mind, the panel has reached a consensus around four recommendations:

1. Minimum wages should be revised annually by a percentage equal to the percent change in the Ontario Consumer Price Index.
2. Minimum wages should be revised annually, and a minimum of four months’ notice of any wage change should be provided. The effective date of minimum wage changes should be April 1 of the following year. This would result in notification by December 1 of the previous year.
3. The government should undertake a full review of the minimum wage rate and the revision process every five years. This review should be conducted by a panel of stakeholders and a neutral chair. The mandate of this panel would be to review Ontario’s past experience with minimum wage revisions within the context of Ontario’s social and economic progress and prevailing practices in other jurisdictions to recommend changes that could better serve Ontario’s future needs.
4. To aid the full review process, and to ensure that Ontario’s minimum wage policies are in step with the needs of its citizens, the government should establish an ongoing research program for data and information gathering and its subsequent analysis to address policy-relevant minimum wage issues.

The panel did not feel it should recommend what the new rate should be.

After receiving the report, the government indicated that it is set to increase the minimum wage but not to $14 an hour. The cumulative inflation rate since 2010 is 6.7 percent, putting the new minimum wage at $10.94. For convenience, it is likely that the government will round it up to $11.

This indicates that the government has endorsed the panel’s first recommendation to tie the annual minimum wage increases to inflation (Consumer Price Index). Premier Kathleen Wynne said it is fair to base future changes on the CPI since it is a key indicator of how the economy is doing and would offer some predictability for businesses.

On Wednesday January 29, 2014, her cabinet will decide on a new mechanism to compensate minimum wage earners for both future and past inflation and confirm the minimum wage increase on Thursday January 30, to about $11 an hour. A morning media conference in Toronto is scheduled.

However, it seems it is not just Ontario debating about the minimum wage. According to an article in the Globe and Mail, the debate about the lot of low-wage workers is a global one.