Ontario's Financial Accountability Office is warning that the province's proposed minimum wage increase to $15 an hour could wind up resulting in an estimated net loss of 50,000 jobs.
In a report issued Tuesday, the watchdog said the losses would be concentrated among teens and young adults.
"The higher minimum wage will increase payroll costs for Ontario businesses, leading to some job losses for lower income workers," the FAO said. "At the same time, higher labour income and household spending will boost economic activity leading to some offsetting job gains."
The FAO also cautioned that the provincial job losses could be even larger than it is forecasting.
"Ontario's proposed minimum wage increase is both larger and more rapid than past experience, providing businesses with a greater incentive to reduce costs more aggressively," the FAO said.
The provincial government has proposed boosting the general minimum wage from the current rate of $11.40 per hour to $14 per hour on January 1, 2018 and $15 per hour the following year.
The FAO also said in its report that boosting the minimum wage is not an effective way to alleviate poverty, which is a strategy of the provincial government.
The agency estimates that only 27 per cent of the total gain in labour income from the higher minimum wage would be expected to benefit low-income families, with the remainder of the gain going to families who are already above the low-income threshold.
Ontario Labour Minister Kevin Flynn said the government can go ahead with the minimum wage hike because of the province's strong economy.
"We don't believe that anyone in Ontario who works full time should be struggling to pay their rent, put food on their tables or care for their families — especially when the provincial economy is doing so well," Flynn said in a statement.
Many groups representing small and large businesses have come out against the proposed wage increase.
Ryan Mallough, senior policy analyst at the Canadian Federation of Independent Business, said Tuesday the watchdog's report supports the need for the province to back away from the proposed hike and to hold consultations.
"We encourage the Ontario government to step back and take the time to find a solution that actually addresses the problem, without putting 50,000 Ontarians' jobs at risk, predominantly those of teens, young adults, and new immigrants," Mallough said in a statement.