Steven Mastoras says this is the last summer he'll be hiring seasonal employees.
The owner of Whistler's Grille &The McNeil Room in Toronto says the increase in the Ontario minimum wage announced last Tuesday has forced him to rethink how he staffs his restaurant and events business. He's also pondering how his business will adapt to sweeping changes to Ontario labour law, which will affect how shifts are scheduled, require additional vacation time and make it easier for some types of workers to unionize.
"Things are going to change in terms of scheduling, in terms of hiring practice, in terms of student hires," Mr. Mastoras says.
The 31.6-per-cent hike in the minimum wage, from $11.40 to $15 over the next 18 months, has caused anger and concern across large segments of the Ontario business community. But the restaurant industry, with its reliance on low-paid labour and its slim profit margins, could be hit particularly hard, Mr. Mastoras says.
In his business, which includes a restaurant and banquet hall, Mr. Mastoras employs between 30 and 40 people depending on the season, most of whom make minimum wage. By 2019, he estimates that costs related to labour, payroll taxes and employer contributions will increase by roughly $60,000. That includes an estimated increase of $1,500 to $2,000 that he'll have to pay for employment insurance, Canada Pension Plan, Workplace Safety and Insurance Board, and other wage-linked remittances.
"That wipes out pretty much any potential for profit in our operations," he says.
That's on top of steadily increasing costs from suppliers, utilities bills and taxes. "Ten years ago I think our hydro bill was in around $2,000 a month; it's now $5,500 a month. There are some dramatic increases in the cost of doing business that are beyond our control … Any suggestion that there's a lot of revenue out there is not accurate as it relates to small businesses," he adds.
Across Ontario, restaurateurs are already faced with small operating profits in an industry where labour makes up roughly of 30 per cent of all costs. According to Chris Elliott, an economist for the industry lobby group Restaurants Canada, Ontario restaurants earn an average pretax profit of only 3.4 per cent.
A 31.6-per-cent wage hike across the board – assuming people already paid above minimum wage will likely demand an increase as well – would increase costs for the average restaurant by $47,000, Mr. Elliott says.
That will likely trigger "a combination of layoffs or holding off on hiring staff, cutting back hours and menu price increases as well," he says.
Mr. Mastoras, who says his business is already below the average industry profit margin, is looking at changing up his hours of operation, trimming seasonal staff, and raising prices "in and around 20 per cent."
On the menu today, wings cost $16 at Whistler's Grille. They "could conceivably go up to 19 and a quarter," he says. "But who wants to pay $19 for a pound of wings?"
Given the competitiveness of restaurant pricing, Mr. Mastoras says cost cutting would more likely happen on the staffing side.
"I care about my employees. They have families, they have mortgages, they have rental costs, they have all sorts of expenses," he says. "But inevitably it's going to impact their hours of work."
He expects to have to shed as many as 10 staff, mostly young seasonal workers brought on for the summer, by 2019.
"I can't emphasize enough how much young people will be adversely affected by this change," Mr. Mastoras says, pointing out that the restaurant industry is the largest employer for first-time workers.
There's also the potential impact of new scheduling rules. Under the proposed legislation, if a shift is cancelled within 48 hours of its start, employees will be entitled to three hours of pay.
"If you call me and you have a last-minute wedding reception, or if it's you grandfather's 100th birthday on 48-hour notice, I need to be able to respond. We need to be flexible and nimble in the restaurant industry," says Mr. Mastoras.
On the other side of the employment debate are those who say the higher minimum wage is needed to boost the spending power of people at the bottom of the income scale.
"In the short term, restaurants will likely see a boost in their expenses," concedes Deena Ladd, co-ordinator with the Workers Action Centre, a non-profit that represents non-unionized workers. But this will be mitigated over the longer term, she says.
"Restaurants need consumers. They need people who are making reasonable wages. When people have more money in their pockets they're going to spend it in their communities."
Success in the restaurant business is also based on reputation, she points out. Well-paid employees, who have time to take sick days and aren't demoralized by shifting schedules are likely to provide better customer service.
"I think it's a knee-jerk reaction, doom and gloom reaction," says Ms. Ladd, adding that restaurateurs "have to understand the benefits to them and their businesses."