Ontario has decided to increase its minimum wage to $15 an hour by 2019. It will become the second province after Alberta to move towards a minimum wage of $15 an hour. The implementation of a higher minimum wage is expected to affect workers and businesses differently.
The demand for higher minimum wage has gained increasing momentum. Cities like Seattle and San Francisco have implemented $15 minimum wage for some workers. In Alberta, the $15 minimum wage will be implemented in October 2018, while New York and California will implement it in 2021 and 2022 respectively.
The new minimum wage will offer the same pay to part-time, temporary, casual or seasonal workers as full-time employees. Also, all employees will be entitled to a minimum of two days emergency leave per year, and employees working for a company for five years or more will receive three weeks of vacation.
Self-order counter at an A&W restaurant. A patron can self order and pay and then just go to the pick up counter to grab the food. (Photo: Richard Lautens/Toronto Star via Getty Images)
According to the Changing Workplaces, approximately one-third of Ontario's 6.6 million workers are vulnerable to new technology, a shrinking manufacturing sector and fewer union jobs, over other factors. This indicates that workers are in a tight spot and a higher minimum wage will significantly benefit them.
A $15-an-hour minimum wage will provide minimum wage workers a decent living and improve their quality of life. Currently, 1.5 million workers in Ontario make less than $15 an hour. This means that the implementation of a higher minimum wage will benefit many workers and their dependents in Ontario. A substantial portion of the population in Ontario will benefit from the implementation of a $15-per-hour minimum wage and enjoy higher standard of living. They will be able to pay rent and afford groceries, and live comfortably relative to their current situation.
Also, higher pay will allow these workers to spend more which will be beneficial for Ontario's economy. There will be a multiplier effect of their expenditure on Ontario's economy which will lead to local businesses growing and creating more employment in Ontario. Therefore, the higher minimum wage will not only help workers working at minimum wage but also their dependents, and have a beneficial impact on Ontario's economy and employment.
However, there are some possible adverse effects of a higher minimum wage. There are small businesses that employ minimum wage workers and make low profit margins. A higher minimum wage may force these businesses to hire fewer workers as their cost of operations will increase and the businesses may not be able to expand their operations. Also, they may be forced to lay off workers to compensate for the increased cost of operations entailing from a higher minimum wage. Again, the higher minimum wage may make some small businesses unprofitable and they may be forced to shut down their operations. All these possible effects may adversely affect small businesses and the employment situation of minimum wage workers.
Small businesses are crucial to Ontario's economy and as employment generators; therefore, due emphasis has to be put on the possible effects of a higher minimum wage on their operations and employment generation. However, large businesses that hire workers at minimum wage or close to minimum wage may not have their businesses adversely affected due to a higher minimum wage.
Another possible adverse effect of a higher minimum wage is that businesses may replace their workers with automation. Higher minimum wage increases the cost of labour which may make hiring workers less financially lucrative relative to automation. There are businesses where machines are serious contenders for human workers, especially with declining prices for computers. The fast food industry is vulnerable to automation with the introduction of self-serving kiosks.
It could also be true for some clerical and administrative positions. Therefore, if a higher minimum wage prompts businesses to replace human workers with automation, it may adversely affect the very group that is being targeted to benefit from the introduction of a higher minimum wage. Wendy's and McDonald's are introducing self-service kiosks in their outlets. With the introduction of automation, businesses may hire fewer workers so that the unemployment rate among minimum wage workers may actually increase. This will be very harmful for their plight and this possibility needs to be considered in analyzing the possible effects of the introduction of a $15-per-hour minimum wage.
However, sometimes the introduction of automation has led to more orders and an increased number of hours for employees to serve these increased volume of orders. Also, historically, automation has created new jobs. There are arguments that the current wave of automation may not necessarily create jobs.
Overall, the $15 per hour minimum wage will improve the lives of low-income earners in Ontario and their dependents. They can afford to have an improved standard of living and higher purchasing power that will have a positive impact on Ontario's economy and employment. Also, recent research has shown that higher minimum wage leads to job creation. Also, when the higher minimum wage is combined with working income tax benefit (WITB), which is a refundable tax credit for eligible working low-income individuals, it will allow low-income earners to experience an improved quality of life. However, the possible adverse effects of a higher minimum wage like small businesses suffering, reduction or less creation of minimum wage jobs, and workers being replaced by machines have to be considered as well.
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