How is Ontario’s minimum wage hike impacting small business?
When it was announced last year, businesses warned they would be forced to cut jobs, reduce benefits and offer their employees fewer hours. Now that the 21% increase has arrived, Ontario is starting to see the impact.
Coffee shop giant Tim Hortons made headlines when employees at an Ontario location owned by the children of the chain’s founders reported that they are losing paid breaks, paid benefits and other incentives as a result of the wage hike. News outlets have called out the hypocrisy of the move as Tim Hortons is a business that relies on coffee breaks.
But if institutions such as Tim Hortons are worried about the hike, how are small businesses fairing the change?
In response to the new laws, the Canadian Federation of Independent Business (CFIB) is conducting research over an 18-month period to report on the new minimum wage’s effect on small business. According to CFIB’s initial findings, 54% of businesses surveyed have reduced or eliminated plans to hire new workers and 51% have raised their prices to help offset the financial impact of the new laws.
That said, the same survey found only 20% of respondents are looking towards automation to replace workers and only 18% are planning to reduce employee benefits. Additionally, 60% of businesses reported they will not reduce overall staffing hours and 61% of respondents said they began to proactively raise their employee’s wages to ease the financial transition.
Small business owners consider other employees
While several businesses struggle to determine how they will meet the new minimum wage requirements, others are looking at how they can equally support employees who already earn more than $14 per hour. Owners of Howe Family Farms reported to The Globe and Mail that they are planning to give workers making above minimum wage a similar 20% increase in 2018 and are looking to offset costs by raising prices.
Living wage is good for business
Other small business owners believe a living wage is good for business. One such business is Toronto’s Walk My Dog.
For Walk My Dog owner Gilleen Witkowski, paying staff a living wage is non-negotiable. In an interview with The Toronto Star, Witkowski believes the benefits outweigh the costs.
“The loyalty I’ve seen from my staff is incredible,” shared Witkowski. “It’s doing the right thing, but there are tangible benefits and that is my low turnover.”
Other business owners report seeing better quality work from their employees when they are paid a living wage. In their experience, they are saving time and money by not having to fix the mistakes of unengaged and underpaid staff.
Alternative ways to adjust
Cutting hours or laying off staff aren’t the only ways small business owners are working to make the new wages financially viable.
In an interview with CBC, Bryan Burke, co-owner of Toronto’s Chula Mexican eatery, has found ways to improve efficiency in the kitchen to reduce overall costs. This includes reducing the number of people required to make a certain cocktail, or cutting the prep time required for dishes from three hours to two without reducing quality.
In the same CBC story, Tracy Molyneaux, manager of Coffee Public Toronto, increased her prices to accommodate the jump in employee costs. Though customers have taken note, Molyneaux shares that once they understand that the increase is because of the higher wage, her customers are comfortable paying a little bit more.
Though the new minimum wage will have a significant impact on businesses of all sizes, it’s clear that many are already in the process of adapting their business models to make it through this period of transition. Furthermore, Ontario is not the only province increasing the minimum wage this year. For instance, Alberta is planning to hike their minimum wage to $15 by October.
Only time will tell how the minimum wage hike will affect businesses and employment in the province. In the meantime, entrepreneurs across Canada should pay close attention to how Ontario’s small business owners handle the change and use their experience to inform their own practices.