Ontario’s low unemployment rate continues debate on minimum wage hike

Published On August 15, 2018 | By ajeffrey | Business, News

Ontario’s minimum wage debate has continued this year as Ontario’s unemployment has dropped to its lowest point in 18 years. (Flickr/Fibonacciblue)

Andrew Jeffery

Ontario’s unemployment rate hit its best mark in 18 years last month, according to a Statistics Canada labour force survey released last week. This historic mark comes seven months after the province raised its minimum wage to $14 at the beginning of this year. The effects of the minimum wage hike haven’t posed any problems so far to Ontario’s economy despite much public concern.

The survey reported Ontario’s unemployment rate dropped 0.5 percentage points to 5.4 per cent, the lowest mark in the province since July 2000, and it is below the Canadian national rate of 5.8 per cent.

“I’m unsurprised,” said Sheila Block, senior economist at the Canadian Centre for Policy Alternatives. “The economic evidence, the academic literature, the experience in other provinces and in jurisdictions in the U.S., is that an increase in the minimum wage doesn’t have the negative employment effects that some people fear.”

Block is cautious about drawing too many conclusions from a month-to-month report, like the labour force survey. But the survey reflects a full percentage point drop this month from the 6.4 per cent unemployment rate Ontario experienced in January 2017.

But Ryan Mallough, a senior policy analyst at the Canadian Federation of Independent Business (CFIB), is still skeptical about how the minimum wage hike will affect Ontario. He said while the province’s unemployment rate is doing well, it’s too early to tell if the minimum wage hike will be good or bad for the province.

“The economy is doing well. Would it be doing better without the minimum wage? If the economy turns, does the minimum wage have any contribution in the fallout from that?” Mallough asked.

“With only six months of data, we just can’t say for certain either way,” he said.

Many factors impact the unemployment rate and the state of Ontario’s economy. Mallough said the growth in public sector jobs could be affected by the provincial government hiring freeze, and the private sector could be impacted by NAFTA negotiations and potential tariffs on automobiles that could hurt the province’s manufacturing industry.

The previous Liberal government planned the hike to $14 in 2018, followed by a further increase to $15 per hour on Jan. 1, 2019. But Premier Doug Ford promised to hold the minimum wage at $14.

Block is hopeful the positive evidence supporting a rise in minimum wage will help change Ford’s mind.

“That legislative increase (to $15) would be more effective than a tax cut at actually increasing the incomes of low-income workers,” Block said. “It won’t have the negative impact on the government’s coffers that the proposal that Premier Ford made during the election campaign would.

“So it will be better for the bottom line of workers and it will be better for the bottom line of the province as well,” she said.

But as a representative of the CFIB, Mallough believes business owners were concerned about the sudden jump in minimum wage to $14 and the planned increase to $15.

“What they’re looking for in a minimum wage is something that’s stable, predictable and apolitical,” Mallough said. “The big concern, in addition to the jump itself, was that it seemed to come out of nowhere, it seemed to be arbitrary.”

Block pointed to other economic factors in Ontario to better understand whether the province is benefiting from the minimum wage hike.

“Are we seeing increases in the incomes of low-income workers? Are we seeing a decrease in inequality? Are we collectively as a society saying that we don’t think that people who are working full-time full year should be at or below the poverty level?” Block asked.

“If no other jurisdiction in the world had done this before and if we didn’t have a whole bunch of economic literature and research from the academic community, then I would say it’s early days,” she said. “But what this is showing us is that it’s consistent with the experience in other jurisdictions.”

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