Minimum wage increase’s ‘timing is pretty tough’ for some small businesses
Those earning minimum wage in Ontario are now earning an extra 50 cents per hour as of Oct. 1.
The bump, which was announced earlier this year, puts the new wage at $15.50. It follows an increase back in January, when the rate went up by 65 cents to $15.
While it is great news for earners, some businesses say it could spell trouble.
According to the Canadian Federation of Independent Business (CFIB), 60 per cent of small businesses in Ontario are still not hitting their usual revenue levels.
“On the bright side, it’s something that we knew was coming. This is sort of the index to inflation. It was announced back in April and comes into effect today,” said Ryan Mallough, the CFIB’s vice-president of legislative affairs in Ontario.
“On the down side, the timing is pretty tough. The recovery coming out of the pandemic has very much stalled.”
Mallough said small businesses are still having a hard time, with additional unforeseen hardships such as supply chain issues thanks to lockdowns in China, the Russian invasion of Ukraine, plus the labour shortage.
“One of the challenges that small businesses are facing is labour and this is going to put even more upward pressure on wages and on finding employees to work in small businesses,” Mallough said.
Although, there are some experts who argue the most recent wage increase could help the labour shortage.
Professor of Economics and Finance at the University of Guelph, Miana Plesca, argues this may especially be the case with younger demographics who she said make up most of the minimum wage earners.
Plesca added the wage increase will not help with the rising cost of living.
“If you think in terms of real wages and the purchasing power of these wages, and what we mean by 'real wages' is we divide by inflation in some sense and increasing inflation really cuts, the real wage,” Plesca said.
Plesca said businesses that can’t afford the wage increase will likely pass the cost onto the consumer, if they can.
However, other businesses whose prices are set or regulated by the government will have no choice but to pay with what money they have.
“If you can't increase prices in response to this, it's going to be a bit harder,” Plesca explained.