The NDP just loves to spend other people's money
Reality check: Ontario's minimum wage

When I knocked on doors in 2003, campaigning for election, Ontario's minimum wage was $6.85 per hour. It had not had a single increase during the eight long, hard, Harris-Eves years. My party's platform said that, if elected, our government would increase Ontario's minimum wage. It would increase in stages to $8.00 per hour by the time of the 2007 election.

Three years and five months later, right on schedule, that promise was kept. Ontario's minimum wage stands at $8.00 per hour. It went up in stages, just as promised, each year from 2004, when the legislation changing the minimum wage in Ontario passed.

The staged approach enabled employers to phase in the changes they needed to absorb the mandatory wage increase. It worked. The principal beneficiaries are the working poor, new Canadians, students and young people in the early stages of their careers.

And now the NDP wants to wage war on new Canadians, throw the working poor onto the street, drive costs in small business up, and make it more difficult for employers to hire young people and students. Shame!

A private member's bill by an NDP back-bencher from Toronto proposes raising Ontario's minimum wage in one stroke to $10 per hour.

• Where in Canada does any province pay $10 per hour? Nowhere.
• Where in the surrounding U.S. states does a jurisdiction mandate a minimum wage of $10 per hour? Nowhere.
• What is the justification for this proposal? None. "But I wanna have it," is the essence of what the NDP says to anyone gullible enough to listen to them;
• The NDP also suck and blow at the same time: asserting that few people actually make the minimum wage and that it would really thus have little business impact; but on the other hand that so many people can't live on a minimum wage job, and therefore they gotta have more. Give us all a break!

Probably because the idea is so far-fetched, no business group, or employers' association has even tried to weigh in with a reality check on this off-the-wall proposal. I tried phoning around recently to see what the employers, whose money the NDP proposes to spend with such reckless abandon, felt about the idea. Not a single one as of mid-April had given it a serious thought.

So I will.

Reality check: it's a job-killer

Okay, let's think about this proposal just a little bit. The NDP says that raising the minimum wage to ten dollars per hour wouldn't have any significant impact.

• The NDP has never had any use for small business anyway. What do they care if they mandate the spending of private sector money, or force small business owners to throw in the towel and go back to working for somebody else?
• If legislation proposes the raising of the minimum wage to $10 from $8 per hour, then one component of a business' costs (low-wage salaries) has, overnight, gone up 25 percent. If your business depends on some low-wage tasks, consider an analogy: what if gas prices went overnight from about $1.00 cents per litre, which is what they are as this is revised in mid-April, to about $1.25 per litre and stayed there? If your business means driving, delivering goods, or burning fuel to any significant degree, your costs are up to stay. Can you pass along the price increase to your customers? If not, you're out of business, or out of Ontario. At the very least, you are probably cutting back hours or laying off staff if you have a bottom line to keep, probably a bank loan to service, and almost certainly a high rent to pay every month;
• The actual price of the person-hour is only part of the equation. Worker benefits are usually about a quarter of wage costs. The benefits cost of a business' minimum wage workers just went up by another 25 percent as well, if the minimum wage is raised as the NDP says it should be;
• What about the staff currently making between $8 per hour and $10 per hour. Oops! The NDP forgot about that. Well, no they didn't; they just don't want to talk about it. Those people will all need a raise too. Oh yes, and don't forget the increase in their benefits costs as well. As one Meadowvale restaurant owner put it to me, his bi-weekly costs would increase by more than $2,500 at a stroke if this bad proposal is enacted. Said he at that time, "I'd be looking for a buyer the next day. I just couldn't absorb that extra cost." Point taken;
• The domino effect won't stop there. You can be very sure that salaried or hourly-paid staff making between $10 and about $16 per hour will all say, "Me too" in a resounding chorus. And don't forget about their benefits costs also;
• If a business contracts out their payroll, they usually pay based on a percentage of the payroll. That cost component will go up too, depending on the weighting of worker wages at or below my estimate of $16 per hour. Similar expenses linked to the wage levels of workers will go up and stay up too;
• All of the above assumes that not a single manager in a business will get so much as a cent of an increase as a result of everyone else getting a double-digit raise.

Without really getting much useful input from any of Ontario's business groups, that is a first-order estimate of the extra costs of raising the minimum wage in Ontario. It's a lot more than two bucks per hour for a small percentage of workers. A $10 minimum wage is not the small deal that the NDP deliberately misstates it is.

Layoffs, fewer hours and job losses

Let's assume your family owns a franchise operation. Your ability to put up your prices to recover a sudden jump in wage costs may be limited by your agreement with the franchisor, who will probably take (or need) weeks or months to adjust their price structure, which may be national or regional and may span provincial boundaries. In the meantime, in order to stay within the wage component of your business model, your choices are pretty stark: keep a few people at the new $10 minimum wage structure, perhaps lay off some others, and cut back hours on other staff: both those at minimum wage and others paid higher. In the meantime, who is working all those extra hours to keep the place open and stay within budget, and not getting paid for them? Well you are, and so likely is your spouse and your kids. Ironically, you are all probably taking in less than the old $8 minimum wage on all those extra hours.

In manufacturing, the jobs Ontario is really struggling to keep are those between $8 and $15 per hour. Now all those jobs – and a $10 minimum wage, as outlined above, really does mean all of those jobs – have just got at least 25 percent more expensive. Where the price of a commodity: low-wage labour in this case, goes up, its use will go down. But then again, the NDP didn't learn much about economics before their five accidental years in government in between 1990 and 1995, and they haven't taken a collective course in economics since. Earth to NDP! A 25 percent hike in the price of low-wage labour means job losses and factory closings. But most of them won't be unionized NDP voters anyway, so what does the NDP care? Workers in Asia think a $10 minimum wage in Ontario is just fine. Only California has more manufacturing employees than Ontario in all of North America. Workers and employers in Ontario matter too. And the NDP wants to price them all out of the market.

In the social services sector, workers are paid pursuant to grants from governments, and funders like Trillium Foundation and the United Way. At a stroke, a $10 minimum wage means that agreements  negotiated and signed in good faith by both parties just don't work any more. In social services, it is a people-intensive business. You either discontinue the service, or lay people off because the budget just doesn't have the flexibility to absorb a sudden and permanent 25 percent rise in the salaries and benefits portion of staff or contract workers under about $16 per hour. Similarly, the funder's budget is made either by a public sector allocation for a full fiscal year, or through fund-raising. Just spending more money isn't an option. There isn't any more money.

Read this blog again from time to time

I'll send these thoughts out to people and ask for their reactions. If you've read this far, you can always click here, and provide me some of your opinions. I will likely revise this article in the coming weeks, or expand its scope as people and business groups send me their thoughts, their stories and their facts and figures.

Ontario's 2007-08 budget has proposed three annual, 75-cent-per-hour increases to the Ontario minimum wage. That will take it to $10.50 per hour by the year 2010. Gradual increases like that give business owners like franchisees a chance to build it into their business plans. An irresponsible move to immediately hike the minimum wage would throw an estimated 90,000 Ontarians, most of them students and young workers, oujt of a job, or reduce their hours.