Northern Exposure

Canada’s Minimum Wage Controversy Makes Hot Water, Not Coffee

Two Canadian provinces are in the process of introducing massive increases in their respective minimum wages, and it’s creating lots of hot water for politicians and employers.

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The largest province, Ontario, increased its minimum wage by 21% effective January 1, going from $11.26 to $14.00. It will then go up to $15 one year later, for a total increase of 33%.

In western Canada, Alberta raised its minimum wage to $13.60 effective October 1, 2017. It will jump to $15 per hour on October 1, 2018, almost 50% higher than it was in 2015.

Most other provinces and territories’ minimum wages, meanwhile, range from $10.85 in Nova Scotia to $11.35 in B.C., with somewhat higher rates in the far northern territories.

Predictably, many businesses have responded by cutting other labor costs. Some have announced reductions of their head counts or employees’ hours; others have announced reductions of certain non-mandatory benefits.

The hot water got stirred this week when some franchisees operating Tim Hortons restaurants, the iconic Canadian fast food/coffee/donut chain, announced that they were pulling back on paid breaks and the employer’s portion of fringe benefit programs, which are not legally required. Ontario’s Premier, Kathleen Wynne, responded to what she interpreted as an attack on her labor program. She accused the franchise owners of “a pretty clear act of bullying” their own employees. With good political theatrics, she said of one Tim Hortons franchisees: “If Mr. Joyce wants to pick a fight, I urge him to pick it with me and not those working the pick-up window and service counter of his stores.”

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Unions have also seized the opportunity. There are reports of labor activists picketing Tim Hortons stores to urge a consumer boycott, while also pointing out that if the workers were unionized, their employer would not be able to reduce components of their compensation package.

The parent company of the Tim Hortons franchise chain, Restaurant Brands International Inc., has come out against what it said were the “reckless few” franchisees who announced labor cost reductions. It went on to say, “These recent actions by a few restaurant owners, and the unauthorized statements made to the media by a ‘rogue group’ claiming to speak on behalf of Tim Hortons, do not reflect the values of our brand, the views of our company …”.

The Great White North Franchisee Association, a group created last year to give voice to the concerns of some Tim Hortons franchisees, said in a statement that the franchisees are “hard-working small business owners who are striving to keep their business viable and keep all of their employees employed.” It complained about not being able to raise prices (at least not yet) to deal with the cost increases. And it estimated that Ontario’s new minimum standards, of which the wage is only one part, would mean an increase in employment costs of $6,968.26 per full-time employee for those working in Tim Hortons restaurants.

Regarding the broader business response to the increases, another lobby group, Restaurants Canada, said, “This was all foreshadowed and forecast to Premier Wynne and her government … We told her restauranteurs would need to cut shifts and reduce jobs.” Of course the restaurant sector is not the only sector affected.

Many reputable economists back up that claim. A January 2018 report issued by the federal government’s central Bank of Canada about the impact of minimum wage increases on the Canadian economy states, “… this shock reduces the demand for labour, leading to a decline in total hours worked of 0.3 per cent … [T]his would represent a loss of about 60,000 jobs by 2019.” The report goes on to note that the number could be as high as 136,000 jobs. It also states that total consumption in Canada will decline modestly, with a predicted 0.1 per cent drop in G.D.P.

Nonetheless, with an election likely in Ontario later in 2018, Premier Wynne and her party seem determined to forge ahead with the minimum wage increases, banking on them being politically popular.

What is being lost sight of to some extent, however, in the current controversy, is the fact that the Wynne government’s labor reforms involve many other changes that will add more labor costs and thus are likely to further reduce employment levels. These include:

  • Requiring that part-time, temporary, seasonal or casual employees generally be paid the same as full-time (with exceptions for merit, production or seniority-based pay systems);
  • Requiring that workers obtained from temporary agencies generally be paid the same as one’s own employees doing the same work;
  • Increasing vacation pay for those with 5 years of service, to 6% of annual wages; and
  • Requiring that all employers provide a minimum of 2 paid and 8 unpaid days of Personal Emergency Leave each year.

How about a coffee with that?

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