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Minimum wage hike comes at a steep cost. 'We cannot afford to hire them and survive': CFIB

The fallout will hit young people looking for their first job, and employers, who will have to work longer, lower-pay hours


By Aaron Aerts

Published in the Financial Post May 14, 2018

Our first jobs leave a life-long mark. They help shape us, as workers and as people. My first job was in the summer of 2005, when I worked as a busboy on the popular Sparks Street strip in Ottawa. It was a transformative experience.

While I was wet behind the ears and needed lots of guidance, the job helped me get my first glance of life outside school – the real world. It also resulted in long-lasting friendships, a new-found understanding and appreciation for the workplace and the expectations that come with it, not to mention some money I was able to save up while living at home.

It was hard work, even frustrating at times, but I look back to that summer with great nostalgia.

Unfortunately, it’s starting to feel like the times they are a-changin’.

Recently, a student union leader was quoted as saying in relation to the wage hike: “We’re less able to hire than we were last summer, but that’s an acceptable trade-off.”

But is it?

New survey results from the Canadian Federation of Independent Business show that many young people in Ontario will have a harder time landing that first job: the huge spike in the minimum wage has made it a lot more challenging for small businesses to create jobs for inexperienced workers. Those who are fortunate enough to find a job could end up working fewer hours and less likely to get the workplace training that is a crucial start to moving up the job ladder.

Ontario forced up the minimum wage from $11.60 to $14 an hour on Jan. 1, 2018 (a 21 per cent hike in only three months). An additional increase to $15 is scheduled for Jan. 1, 2019. To understand the implications of this economic experiment, CFIB has been doing what the Ontario government refused to do: study the economic consequences. Almost 1,000 Ontario small business owners have shared detailed feedback with us on the challenges they’ve faced as a direct result of the minimum wage hike.

The results are stark. With such large increases to their labour costs, small business owners have had to make some tough choices. Many who have taken considerable steps over the years to hire youth and provide them with on-the-job training – often for the first time – have been forced to rethink or reverse those efforts.

Among some of the difficult decisions Ontario business owners have already made, 59 per cent say they reduced or eliminated plans to hire young workers, 46 per cent cut employee hours, and 22 per cent automated jobs.

Have you already made any of the following changes to prepare for Ontario’s increase in the minimum wage to $15 per hour? (select as many as apply)

Almost half of the businesses surveyed have fewer employees under 25 years of age today than they did last year as a result of the minimum wage hike.

As business owners end up working longer hours themselves to cover the production loss, the study also finds they are being forced to cut back on training – on average, new hires are losing nearly an hour of training per week compared to last year. This training time is critical for someone not only learning the ropes of a new job, but also taking their first steps into working life.

Small business owners want to hire young people and give them their first job opportunity and set them up for a successful career. Sadly, this is becoming unfeasible due to rapidly escalating wage costs. Here’s what some small business owners said about it:

“We have had this family business for 50 plus years and I don’t see a good future. Seasonal workers will be cut and student labour will not be hired this year as we cannot afford to hire them and survive.”

“I cannot take time to train anymore; better to pay more and get trained people. Sadly, no more summer students.”

“We absolutely will not hire a student to train — who will make more money than us (the owners), who take all the risk.”

Obviously, this is not good news for the next generation of workers.

While it might be a benefit for those who do manage to get hired, it also creates more competition for fewer positions. This means there will be more students who miss out on their first steps into the workplace and enter the labour market after graduation with no work experience.

Aaron Aerts is an economist at the Canadian Federation of Independent Business.

This story was originally published in the Financial Post

May 14, 2018

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