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New job numbers in, still no credible evidence against minimum wage raise

October 5, 2018

3-minute read

During an announcement last week, Labour Minister Laurie Scott confirmed plans to freeze the minimum wage at $14. This measure would prevent more than 1 million Ontarians from getting the legislated $1/hour raise next January.

The minister provided two pieces of “evidence” as justification.

First, she said business owners have told her they find it hard to adjust to the raise; some of them apparently told her they are even working longer days to make up for employee hours that have been cut back.

While the impact on hard-working owners of mom-and-pop shops must be considered, it is important to note that only 21% of minimum wage workers are employed in businesses with less than 20 employees; 49% work for firms with 500 employees or more. I would also suggest that there are more robust methods for assessing policy impact.

But it is the second justification I want to focus on.

Minister Scott suggested the drop in 80,000 jobs that was recorded in August was an effect of the minimum wage increase.

The minimum wage increased in January. Scott's party assumed office in June and proceeded to break campaign promises, cancel contracts with international companies and pick legal fights with other levels of government. Could August's job numbers perhaps be related to the uncertainty a change in government has created? Could it possibly related to the potential for auto tariffs to be applied at the U.S. border by the Trump administration? We don’t know.

Today, Statistics Canada released the following statement regarding the August job loss:

The level of part-time employment observed in September 2018 is consistent with typical seasonal patterns. On a seasonally unadjusted basis, declines in part-time employment usually observed in July occurred this year in August...Further analysis will be undertaken to identify the labour market conditions contributing to these trends.

In other words, Statistics Canada experts are not completely sure of what happened to part-time employment in August. They will do due diligence before providing a definitive answer.

In the meantime, the judicious approach for assessing the impact of the recent minimum wage increase – one that doesn’t rely on anecdotal evidence or one month worth of data – is to look at year-over-year labour market indicators for Ontario and compare them with the average for the rest of the country. To increase our level of certainty, we can look at two sources that use different methodologies.

Table 1 and Table 2 present overall employment figures and employment growth rates in minimum wage–heavy industries. The conclusion is clear: Ontario’s labour market is doing well, and in some areas it is doing better than the Canadian average.

Table 1: Labour Force Survey (LFS), year-over-year, September 2017 – September 2018 figures

  Canada Ontario
Employment growth +1.2% +1.2%
Unemployment rate +0.3% +0.2%
Employment in wholesale and retail trade -2.0% - 1.3%
Employment in food and accommodation   +2.2% +2.6%
Employment in business, building and other support services +2.6% +3.1%
Table 2: Survey of Employment, Payrolls and Hours (SEPH), December 2017 – July 2018 figures
  Canada Ontario
Employment in all industries +1.2% +1.4%
Employment in retail +0.4% +1.2%
Employment in accommodation and food services +0.7% +0.7%
Employment in administrative and support, waste management and remediation services +1% +1.1%
SEPH data are released with a longer delay than LFS data; most recent data from July.

If raw economic data is not your cup of tea, analyses by Scotiabank (February 2018) and National Bank of Canada (August 2018) have concluded that the $14 minimum wage has not had the nefarious impacts business lobbies had predicted.

Due diligence is a core value in government policy-making , but it seems utterly absent in recent statements and decisions of the Ford government, like its line-by-line review of the books.

Coherence is also clearly missing. A government elected on a promise to defend the “little guy” is now planning to roll back improvements in wages and working conditions for low-wage workers. One can’t help but to wonder who exactly are these little guys.

Ricardo Tranjan is a senior researcher with the CCPA-Ontario.

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