$15.00/hour: A rising tide lifts all boats

by Stefan Peters-Hnatiuk,

At the end of May, the Ontario Liberal government announced “sweeping” labour law reforms, inclining them to bask in the glory of their freshly appropriated “progressive values”, eliciting the ire and indignation of Conservatives, while causing New Democrats to utter a collective “well, duh!”

The Canadian Federation of Independent Business and the Ontario Chamber of Commerce were “shocked and appalled” at the suggestion that working people should be paid a living wage. Conservative leader Patrick Brown, somewhat more cautiously stated: “Everyone wants higher wages, but when a worker wakes up in the morning, they need a job.” Now, is Brown exuding obstinate blind faith in the debunked neoliberal nostrum that higher wages mean higher unemployment, or is he venting the natural instinct of a bourgeois to prey on the desperation of working people? In the end, the Conservative position seems quite clear: Capital is happy to provide jobs, but the question of whether “a worker” earns a living wage from that job; that’s a problem for “them.”
Well, if you’re a working person, “they” are “us.” And we want a living wage (which actually requires an amount closer to $20/hour).

As Ontario NDP leader Andrea Horwath stated in a recent radio interview, for labour-based New Democrats, the sort of labour law reforms proposed by the Wynne government aren’t just a populist Hail Mary tossed up at the 11th hour; they’re “in our DNA!”

The biggest talking point of the announced reform, of course, has been the increase in minimum wage, from $11.40 to $14 an hour in 2018, and to $15 in 2019. Right wing critics say this measure will spur inflation and drive up the cost of living, thus hurting the very people it is designed to help. However, the most significant expenditures by low income earners (i.e. shelter and transportation) are not labour-intensive, and are therefore not likely to be affected by an increase in minimum wage at all. So, any increase in the cost of living of low wage-earners is likely to be nominal, while clearly the purchasing power of wage-earners will increase considerably.

Another criticism is that a higher minimum wage will make it harder for small businesses to survive because of the added cost of labour for those businesses already operating on tight margins. This view is short-sighted because it focuses entirely on expenses and ignores opportunities for revenue generation. Take, for example, a neighbourhood bakery. The bakery owner needs a certain number of employees to staff the shop. Those employees represent a fixed-cost; regardless of how much sales revenue the bakery generates, the cost of paying employees remains the same. If you increase the minimum wage, the cost of operating the bakery increases. But the increase in minimum wage also means that workers across the board now have more money to spend at the bakery. Indeed, higher wages lead to increased demand. For an efficiently run business, higher demand should translate into a higher volume of sales, thus offsetting the increase in the fixed-cost of labour. In fact, the higher demand might even create an opportunity to expand the business, requiring additional staff, thus contributing to an increase in employment. For examples of colossal corporate expansion based almost entirely on catering to low-income earners, look no further than Tim Hortons and Dollarama.

Indeed, a higher minimum wage is actually more likely to bolster the economy and be particularly beneficial to small business because low-income earners – who spend rather than save their earnings – will have more money to spend on leisure and non-necessities, stimulating local economies in the process.
Certainly, not all businesses will be able to keep head above the tide of a $15/hour minimum wage. Some will drown. But to employ the “sink-or-swim” mantra so beloved by proponents of laissez-faire economics: if certain businesses are unable to adapt to the new market reality of a higher minimum wage, let them drown. Their fitter counterparts – those who can pay a decent wage to workers – will survive, and working people, not to mention society as a whole, will be the better for it.

Photo: A supermarket worker is giving a receipt to an elderly customer. Another senior citizen is on the line. Credit: CBC News. (Olivia Stefanovich/CBC)