Canadians shocked when minimum wage hike negatively impacts workers

The Fight for 15 crowd is having more success in the Great White North than they’ve seen across much of the United States lately, with Ontario being the latest province to massively increase their minimum wage. What could possibly go wrong?

As we’ve already seen repeatedly on our side of the border, quite a bit, actually. And as soon as the new mandatory minimum went into effect on January 1st, big employers of largely unskilled, lower wage workers responded in the only way available to them. They began cutting costs, starting with perks and benefits, but also reducing hours and even laying off workers. This left many “living wage” advocates in Canada shocked and dismayed. (MSN)

Employees at nearly a dozen Tim Hortons outlets across Ontario tell CBC News they are facing the loss of paid breaks, benefits, and perks by franchise owners citing Ontario’s minimum wage increase.

The cuts go beyond the iconic coffee chain, with minimum wage workers at other businesses being told they’re also going to take a hit as a result of the hike.

Sources tell CBC News Tims franchise owners are taking similar action in Leamington and Port Hope and at multiple locations in the Cobourg area.

One family that owns six franchises in Durham Region, east of Toronto, is cutting paid breaks at its locations because of what it calls a “massive” increase in labour costs. Ontario’s minimum wage rose to $14 an hour from $11.60 on Jan. 1, and it will go to $15 next year.

So the minimum wage was previously $11.60, which was already fairly generous when you consider that’s currently about $9.40 per hour in American dollars. (Plus the fact that everyone gets free healthcare under their socialized medicine scheme.) But it went up by $2.40 per hour overnight and will go up another buck next January. Places like Tim Hortons, along with other fast food outlets, restaurants and coffee shops, were taking a massive hit to their bottom line. And in such a competitive market space, they couldn’t just jack up all their prices by 20% and expect to keep their customer base.

One employer sent out a memo to their workers explaining it in simple terms. “Unfortunately when wages rise at such a fast pace we cannot raise our prices at the same rate to offset the costs and something has to give.”

The “something” in question was paid break time and other little bonuses they offered to attract workers. Other companies are figuring out how to do more with less, laying off workers or shifting some full-time employees to part-time status. In other words, if you’re lucky enough to still have a full-time job, you’ll be bringing home more money (albeit with fewer perks at work), which is great for you. But a lot of your minimum wage colleagues, rather than being lifted up by this change in the law are now finding themselves making even less or being out of a job entirely.

There’s one other area which won’t come as good news to minimum wage workers, and it’s once again something we’re already dealing with in the United States. Canadian employers knew these wage hikes were coming and many have been moving at lightning speed towards automation wherever possible. One report from October found that companies in Canada were on track to eliminate as many as 40% of minimum wage, low-skill jobs with robots over the coming two years. (Global News, Canada)

A new report suggests the speed of technological advances has become so rapid that it’s outpacing the rate at which large Canadian businesses and government institutions can adapt, with the number of jobs threatened by automation ranging from 35 to 42 per cent.

The co-authored report, by Deloitte and the Human Resources Professionals Association, calls upon policy-makers and business leaders to prepare Canadian workers for the disruption that artificial intelligence, machine learning and other technologies are having on the economy.

This is just the free market in action. As long as human labor remains significantly cheaper than automated alternatives, many companies will be loathe to make the significant investments required to automate. But as soon as labor costs exceed a certain breaking point it simply makes more sense to replace workers with machines and internet applications which work 24/7 at a fixed cost without ever getting sick, needing a vacation or demanding benefits.

But hey… you got your minimum wage hike. And at least some people will be able to enjoy it. Well done, I suppose.