Saturday, March 28, 2009

Ontario questions minimum-wage increase

Here's a bit of good news. Yesterday, Ontario premier Dalton McGuinty told Ottawa business leaders that he's considering axing an increase in the minimum wage scheduled for 2010.

The minimum wage will rise as scheduled this Tuesday, by 75 cents to $9.50 an hour. The 2010 increase would raise the minimum wage another 75 cents, to $10 an hour.

The Toronto Star reports today in a front-page story that McGuinty explained his dilemma by saying, "Like all prudent business managers we have to take into account ... what's happening to the economy as a whole."

I agrees. Governments must be especially frugal about using their power to legislate contracts between private, independent parties.

When the economy is going well, yes, let’s share some with the young people and the recent immigrants, who are the most common beneficiaries of minimum-wage legislation. But when the economy is tanking and bankruptcy rates rising, why would any sane government load any more burdens on the small businesses and marginal retailers who are the most common employers of minimum-wage workers?

Look at the history. Minimum wage rose by 75 cents to $8.75 just a year ago. That’s a 9.4% increase. I wish someone would legislate me a 9.4% raise.

The three annual increases announced a year ago amount to a 35% increase in two years – a ridiculous burden for employers in good times, and economic suicide in times like these.

Kudos to the government for reconsidering. There is nothing wrong with admitting a mistake.

I am particularly disappointed with the response of Progressive Conservative MPP Tim Hudak, who used this welcome acknowledgment of uncertainty to score cheap political points. Hudak, considered the front-runner in the current PC leadership campaign, called McGuinty's statements "a broken promise," according to the Star. "Page 38 of the Ontario budget papers talks about the minimum wage increase, and now, less than a day later, they're backing away."

If Hudak wants to head a common sense, pro-business party, why not welcome the review? If he needs to be negative, Hudak could have pointed out the insanity of a 35% increase in two years. But to make it so hard for a government ever to admit it might be wrong is a mistake, a disservice to voters and taxpayers.

I will leave it to the neo-cons to explain why every increase in the minimum wage is a blow against the poor. I will only point out that if grown adults with marketable skills are still working for minimum wage, there is something seriously wrong. And we should not be redistributing funds from hard-pressed, innovative entrepreneurs to encourage those underachievers.


Anonymous said...

I think the point of Hudak's comments are to keep the spotlight on Dalton McGuinty's broken promises. The story is about Dalton, not Hudak. Here is the point:

If there is something in the 2009 Budget (like the minimum wage increase) that is now "under review" as McGuinty says - what else is the 2009 Budget is under review? Perhaps the budget's proposed business tax cuts, personal income tax cuts, maybe the Sales Tax Harmonization rebate cheques....who knows what is now on the table to "be reviewed". That's the point - you can't trust Dalton McGuinty.

Brad said...

I love your blog, but paragraphs 6 and 7 generalize this issue to a degree that I don't think is appropriate.
Percentages don't do this justice. Someone would have to work full time at minimum wage to have a $1500 a year increase in gross earnings. I don't know how many folks in ON are working full time for minimum wage but given the current climate, I would expect that number to have declined recently.
We would all like a 9 and a half percent raise, but can we agree that 9% for someone making $65K is a whole different world (in terms of real $ in pocket) than someone working part time hours for min. wage.
What would be great to see from any politico's that make a decision like this (and I do agree this is probably the prudent move to make) is a statistic that says, "...look, the cost of living in 2009 is going down. Things cost less and as such, legislating an increase in wages does not make sense. We'll put this back on the table when inflation and the cost of living are back on the rise."
Thanks Rick, and keep up the great work.

Peter Wright said...

Good comments, here is another angle. Many people working for minimum wage are legal migrant workers in the agricultural sector who repatriate their earnings to their country of residence.

As far as I am aware, Canada's migrant worker scheme is well administered and benefits local farmers who cannot get Canadians to do the work and the migrant workers, who frequently earn more in 6 months than they can is several years in their own countries.

Farmers are being subjected to increasing pressure to keep food costs down despite huge increases in input costs, especially fertiliser.

Postponing the minimum wage increase will have a positive effect for farmers without a reduction in migrant workers earnings.(And may even preserve some of their jobs).At the same time as keeping more money in Canada to be used for local spending.

Rick said...

Thanks for your comments. Yesterday Mr. McGuinty backed down and apologized for even considering rolling back the promised increase.

Anonymous said...

Well, at least we'll still be able to enjoy the harmonized tax.

Anonymous said...

Another example of how percentages can be deceptive: the 20%+ expansion represented in this year's "sunshine list". (Thank heavens for the public sector -- we'll always have those jobs. At least as long as taxpayers keep footing the bill.)

Marc said...

There are adults with families with marketable skills still earning minimum wage. People earning more than minimum wage should be quiet. High minimum wage laws is the difference between why ontario is one of the best place in the world to work and raise a family as opposed to third world nations like Mexico. The rich make too much and should be punished by the power of the masses.