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Wynne's Tiny Tax Cut Won't Save Small Businesses From $15 Minimum Wage

If the Liberals were serious about Ontario reaping the benefits of a more livable wage, they wouldn't be dropping $500 million on window dressing.

11/29/2017 13:39 EST | Updated 11/29/2017 13:40 EST

The Ontario Liberals are at it again with more "something for nothing" economic populism in advance of next year's electoral reckoning. Just days before passing their minimum wage increase, the Liberals offered a tiny tax cut to small businesses. It is a meaningless gesture that will do nothing to help real businesses at risk of closing or laying off staff, and what's worse, it blows $500 million, over three years, on a non-solution to a real problem that the Ontario Liberals have created.

Their knee-jerk massive minimum wage spike has rightfully worried many small business owners, who are unlikely able to absorb a 22 per cent increase in labour expenses over a period of less than two years.

Mark Blinch / Reuters
Ontario Premier and Ontario Liberal leader Kathleen Wynne.

The cost of staffing a minimum wage job in Ontario will be $5,000 more in 2018 than it cost in 2017, and more than $7,000 by 2019 than it is in 2017.

The government to date has offered zero solutions to help small businesses survive the wage spike after promising help was on the way for months. Kathleen Wynne now says they are going to wait for the impacts to be felt by businesses before deciding what to do about it. This is deeply irresponsible planning on the part of a government, but par for the course as Wynne's deathbed-contortion approach to policymaking these days.

To be clear, I believe that everyone who works full time should be able to live a life outside of poverty, and this minimum wage increase is a step in that direction, but that only works if small business employers can maintain their cash flow, meet payroll and keep the lights on.

It seems the Ontario Liberals may have found a problem they don't believe is the government's job to solve.

Ontarians will find themselves thrown out of work because of the government's latest pandering effort.

If the government was genuinely motivated by helping those who struggle in low-paying jobs, they would be doing more to protect these jobs from being lost in the economic mess they are about to create for small employers.

Multiple reports suggest between 50,000 and 185,000 Ontarians will find themselves thrown out of work because of the government's latest pandering effort.

Living on $11.60 an hour (Ontario's current minimum wage) is no doubt nearly impossible. Losing your minimum wage job and having to rely on Employment Insurance, which pays out 55 per cent of your regular earnings, will make matters worse for many thousands of families who lose employment because of Kathleen Wynne's poorly thought out policy and lack of follow through.

The province let down small business owners in low-margin sectors who were holding out hope that the Liberals meant what they said when the premier began promising months ago to do something to help small businesses withstand the impending wage shock.

MJ_Prototype via Getty Images

The government's plan amounts to expensive but meaningless drops in the bucket that make good headlines but don't come close to addressing the issue at hand.

Their three-pronged "plan" consists of:

1) Cutting small business taxes by one per cent (savings of $1,000 for every $100,000 of business profit);

2) Providing grants of $1,000 when an employer creates a new job for a 15- to 29-year-old; and

3) Providing an additional $1,000 if that 15- to 29-year-old maintains the job for six months.

Labour is just about every business' largest expense. Generally, minimum-wage employment is most prevalent in sectors with the lowest profit margins, giving employers less room to manoeuvre without making serious changes to their businesses to adjust to their new cost structure.

Small businesses will need to adapt to survive the coming minimum wage hike. In May 2017 when the increase was announced, I suggested four steps employers could take to survive the minimum wage increase.

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The biggest criticism I heard on social media and in the comments related to small businesses' ability to afford to adapt to survive, not an unwillingness to do so.

It was my view then, and remains my view now, that those small businesses that rely on minimum-wage workers as part of their business model will need to adapt by:

  • Maximizing employee productivity to get more value out of more expensive employees;
  • Reviewing (and adjusting) their financial plan and model to fit their new cost structure;
  • Growing their sales to increase volume of work and employee utilization; and
  • Adjusting pricing of products and services, if that's all there is left to do.

Absent of the resources to take an honest look at employee processes and productivity, many businesses won't be able to make educated decisions about how to maximize their workforce and will instead look at how best to cut the number of hours they staff, something that hurts the business, workers and customers.

Every business should always be focused on growth, but a stunning number of small businesses invest either nothing or not enough in marketing on a regular basis. Having no control over your revenue growth is a dangerous game, but is more likely to become mission impossible for many when economic conditions change this abruptly.

Others will try raising prices in place of increasing volume and will find their better-resourced competitors eating their lunch anyways, even with improved margins.

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Some might just throw up their hands and close. After the federal Liberals' quixotic demonization of small business owners, I suspect more will choose this option than would have if Bill Morneau had instead focused on the tax avoiding one percenters the Liberal Party seems to have no shortage of in their ranks.

Others will try and fail, and these are the ones the Ontario Liberals should be concerned about, but have ignored to date.

If the Liberals were serious about helping small businesses remain viable, they would have targeted supports to allow impacted small businesses to make meaningful investments in changes that would improve their odds of survival. Doing that would strengthen the economy, protect employment and help our communities as whole.

If the Liberals were serious about Ontario reaping the benefits of a more livable wage, they wouldn't be dropping $500 million on window-dressing tax cuts and rebates, and would instead be mitigating the problem they're creating for low-wage workers and small businesses.

They didn't — because the truth is they don't care about the fate of minimum-wage workers or small business owners. The only jobs the Ontario Liberal Party seems to care about are their own. This is just another policy death throe from a government trying to cling to life by making big moves without any concern for consequences.

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