Ontario premier Doug Ford announces an increase to the minimum wage to $15 an hour in Milton, Ont., on Nov. 2, 2021.Nathan Denette/The Canadian Press
You can’t survive long in politics without learning how to make a U-turn every once in a while. Or, depending on the circumstances, more than once in a while.
Ontario Premier Doug Ford’s Progressive Conservative government has lately been giving itself a lot of practice performing the manoeuvre, and on Tuesday it did it again – unexpectedly reversing course on its decision of three years ago to block an increase in the minimum wage promised by the previous Liberal government.
In the run-up to the 2018 election, the province’s Liberal administration suddenly raised the minimum wage by more than 20 per cent, to $14. It was scheduled to rise again at the start of 2019, to $15. But after its election victory, the Ford government kiboshed that. Instead, it froze the rate at $14 for nearly two years, and then brought in a meagre 25-cent increase in October of 2020, and an ever slimmer 10-cent boost last month.
But as of Jan. 1, the minimum wage for most jobs in Ontario will rise to $15. Having suppressed the increase to far below the rate of inflation for three years, in the name of supporting business, the Ford government is now upping it by more than 5 per cent in just three months, in the name of helping workers.
This U-turn is the right move, and most Canadian provinces can likely stand for their minimum wages to go higher. The work of Canadian Nobel prize winning economist David Card, and two decades of continuing research from many others, suggests that higher minimum wages can be an economic positive. So long as they are not pushed too high or too fast, minimum wages can raise the incomes of the lowest-wage workers and even boost those a bit higher up the ladder, without lowering employment.
But the process by which Ontario got here? It’s broken. It’s been broken for years.
The Ford government’s out-of-the-blue decision to pump up the minimum wage before next spring’s election, four years after the Liberals abruptly jacked it up (as part of their own bid for re-election), and three years after the PCs’ victory unwound the Liberal campaign promises, is a reminder that this hyper-politicized process is not the way to set minimum wages.
For example, as part of the Ford government’s Tuesday surprise, it announced that the minimum wage for tip-earning servers will rise to the common level of $15 – an instant jump of nearly 20 per cent. The server minimum wage is currently $12.55.
Is that too much, too quickly, for the restaurant industry? Is it the right move? Some evidence of looking before leaping would be nice, but like earlier moves on this file by both PCs and Liberals, these decisions have been made with politics front and centre, not evidence.
A better way to handle things? Several provinces have mechanisms automatically increasing the minimum wage each year, at the pace of inflation. That’s not a bad idea – and it’s what Ontario says will happen after 2022 – but it has two defects.
If per capita economic growth is higher than inflation (and in the long run, it should be), then average wages should increase slightly faster than inflation. The difference in a given year may be small or non-existent, but over time, it will add up. Pegging minimum wage growth to inflation risks a minimum wage that, as the years go by, will fall ever further behind the living wage.
And even with a mechanism for automatically raising minimum wages in future, you still have to decide on a starting point. What should be the minimum wage, today?
Quebec may have an answer. Its minimum wage benchmark is the average wage. Quebec aims for a minimum wage equal to 50 per cent of the provincial average wage; as the average rises, so does the minimum. The minimum wage increased 3.1 per cent last spring to $13.50, and in light of what’s currently going on in the job market, it’s likely to rise even more next spring.
Quebec may have chosen too low a percentage – 60 per cent or higher might be better. But using the average wage as a benchmark offers a principled way of setting the minimum wage, and deciding how much it can increase annually. The better the labour market and the economy are doing, the more workers at the bottom will get a raise, automatically.
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