, by

How does higher minimum wage impact your business?

(Photo credit: kasinv/iStock.com)

Ontario is about to become the second highest minimum wage payer in the country when the rate jumps by 20 per cent to $14 an hour come Jan. 1, 2018, and then again by another six per cent a year later when it bumps to $15 an hour.

If you’re a worried small businesses owner, you are not alone in that fret. Small businesses make up 97 per cent of all businesses across the country. There are 1.4 million small businesses in Canada, with Ontario being home to 36 per cent of them.

Patti Taggart, the owner of Tag Along Toys in Ottawa is afraid of the ripple effect this is going to have on her business.

She’s in an industry with small profit margins that has faced a lot of competition from big box stores in her area. The superior customer service that her trained, mature staff provide is what she feels gives her an edge. As a way to attract the quality workers she needs, she pays more than minimum wage. When minimum wage goes up, she questions if she will be able to do that anymore.

What will you pay your employees?

“Can I afford to pay $17, $18 an hour? If I pay my staff $15, what do I pay my manager?” she asks.

These are the same questions the Canadian Federation of Independent Business (CFIB) is hearing from its members as well. “We have many small businesses owners that pay well above minimum wage and there are a lot of people saying those people won’t be impacted,” explains Ryan Mallough, policy analyst with the CFIB. “People are failing to recognize that when we see an increase in minimum wage a lot of business owners feel obliged to increase their other employees’ wages accordingly.”

Will there be cutbacks?

Since profit goes down as expenses go up, business owners will be forced to make some difficult decisions about current staff, hiring, raising prices and taking home less. “Let’s not forget that the business owner is the last person that gets paid, and they get paid with whatever is left over,” Mallough says. 

For Nandini Sarkar, owner of TastersHUB Inc., this is already her reality. She’s launched her food businesses in January 2017 and has yet to pay herself, although she makes sure all three of her staff get paid.

The Wynne government insists that now is the time to increase wages to the province’s lowest-paid workers, with Minister of Labour Kevin Flynn stating there is no clear evidence to support that minimum wage increases are bad for businesses.

Economists and other number crunchers that look at long-term trends say businesses that are on solid footing will be able to sustain the increase. Historical data out of the U.S that spans the last 71 years finds that minimum wage increases have mainly boosted the economy.

While retail and hospitality industries are typically hit the hardest due to having a high number of workers who hover around the minimum wage rate, policy analyst Yannet Lathrop has said these industries tend to show employment gains after a minimum wage hike around the 12-month mark.

Nonetheless, small businesses owners aren’t convinced.

“You can’t control the people that walk through the door but you can control your payroll and staffing,” says Taggart. “There will be a decrease in people hours and people may lose jobs.”

Like many Ontario businesses, Sarkar was blindsided by the promise of higher wages. She agrees that the current minimum wage is too low but doesn’t think the current plan on the table is the solution.

The way forward

“No one should suffer,” says Sarkar. “As someone who is struggling to employ three members of the community so that they can each go home and provide for a wife and child, who’s making sure that my paycheque at the end of the month is not zero? Because it is.”

Taggart agrees, “There needs to be something in place for small businesses.”

As small businesses still reel from last week’s blow and try to figure out the long-term impact, Mallough said the CFIB isn’t ready to close the book on the issue.

“Our motto is ‘never give up and never go away,’ and we’ve heard the done-deal thing before. We heard it with the Ontario Retirement Pension Plan (ORPP). It was a campaign promise, legislation was passed, they were setting up offices and we did manage to defeat that,” he says. “I understand while people feel like it’s a done deal but there is still a long way to go for this legislation to get royal assent.”

How will you adjust to the cost pressures?

Minimum wage isn’t the only increase employers are going to see over the next few years. Employment insurance premiums go up in 2018 as well.

“It feels like a punch in the stomach,” says Taggart. “I feel knocked out.”

What impact will this have on your small business?