The economic impact of Ontario's minimum-wage hike on the province's lowest earners has received a great deal of attention, but the effect is felt more broadly by employers who face labour cost increases.
Ontario increased its minimum wage to $14 from $11.60 on Jan. 1 and plans another hike – to $15 an hour – next year. As predicted, some businesses responded immediately by reducing hiring, cutting employee work hours, reducing benefitsand charging higher prices. Further, Ontario experienced a decline of more than 59,000 part-time jobs in January, as highlighted by Statistics Canada. While it is too early to attribute this decline to any specific factor, the sharp wage hike is unlikely to have helped.
The hikes also likely spread beyond those earning a minimum wage; an increase in the minimum wage ripples through the wage distribution and potentially leads to higher incomes for other workers.
Many workers who earned close to the minimum wage prior to the increase likely also saw higher paycheques. Their remuneration needs to go beyond the new minimum wage to reflect their experience and ability. Otherwise, non-experienced minimum-wage employees and more experienced or higher-skilled workers receive the same pay, skewing incentives in the workplace.
Similarly, employers may raise all wages to maintain a relative hierarchy of wages according to employee skill levels. This broader wage adjustment...