Minimum wage increases trickle upward

By Staff, with files from The Canadian Press | January 22, 2018 | Last updated on January 22, 2018
4 min read

There’s been plenty of good news about economic growth, both in Canada and globally. Observing that macro trend naturally results in micro musings. Specifically, when are we all getting a raise?

Certainly, some minimum-wage workers already have more money in their pockets—and that’s trickling up to higher earners in some cases.

Read: Canadian job market even better than it looks: CIBC

Stories from the trenches

Nick Cluley and his wife, who have always paid their Coffee Public employees more than minimum wage, have boosted everyone’s pay by $1.25 an hour since Jan. 1—not just those earning below $14, as a new Ontario law required.

They did that “to avoid tensions that might come from more experienced people, you know, being crunched right up against the same salary as someone that just started,” he said.

The new starting wage is $14.75, though the staff average is closer to $15.45, he said, adding they raised prices by about 10% on everything they serve in their Toronto and Port Hope, Ont., shops.

From small mom-and-pop shops to a discount retail giant, there are already examples of companies that have bumped the hourly pay for employees who were making close to the new $14 an hour minimum—suggesting Ontario’s recent minimum wage hike is affecting more than just the lowest paid workers.

There’s little question that a minimum wage hike in Ontario will have a “trickle up” effect to raise wages for other workers, said Bernard Wolf, a professor emeritus at York University’s Schulich School of Business in Toronto.

“The question is simply how much and how pervasive that is,” he said, adding it’s likely a considerable number of employers in Ontario—where the minimum wage rose to $14 on Jan. 1, 2018—will make such a move.

That ripple effect through the economy comes as employees who find minimum wage has now risen close to what they’re earning ask for raises to reflect their comparative skill level, Wolf said, or because their cost-of-living has increased as the price of goods goes up to offset the higher labour cost.

For employers already making the move, they benefit from positioning themselves as the good guy compared to other companies that raised the ire of consumers for clawing back employee benefits and other perks instead, he said.

Union Local 613 co-owner Ivan Gedz raised wages for all his kitchen staff to $16 in November, after realizing his Ottawa eatery could not only meet the new minimum in January, but surpass it.

The raises, which amount to between 50 cents and as much as $4 per hour depending on the employee, reflect Gedz’s belief in equality and because he realized the situation presented an opportunity to be an industry leader, he said. He raised prices on some items to offset the hit to his bottom line.

Small businesses aren’t the only ones setting a higher bar.

Walmart Canada, which employs more than 95,000 associates, increased its starting minimum wage on Dec. 23, 2017 just ahead of the Ontario-wide hike, said spokeswoman Anika Malik, adding all the company’s associates earn more than the provincial minimum wage.

“All pay bands also moved up accordingly to maintain appropriate relative compensation at all levels,” she said. The company isn’t cutting any roles, and employees will still be eligible for bonuses and performance increases, Malik said.

Meanwhile, one coffee chain has applied the pay increase to more than just their Ontario-based employees.

JJ Bean Coffee Roasters, which has more than a dozen locations across Toronto and Vancouver, first increased wages in Toronto on Dec. 17, 2017, and followed suit in Vancouver on Jan. 14, 2018, according to a letter from its senior leadership team.

Its national starting wage is now $14 an hour, and it increased wages for all employees making below $20 hourly. The company increased prices at its cafes by 1% to 3%.

“We believe people have intrinsic value and that everyone who takes part in the journey of coffee—from farmers to baristas—deserves to be fairly rewarded for their work,” the letter reads.

Wage pressures still mild

Despite these stories, wage and price pressures have yet to rear their heads in economic data.

In a weekly economics report, BMO chief economist Douglas Porter notes this lack of pressure even in the face of a tight job market. (A lack of wage and price pressures makes up part of his checklist to indicate that the economic cycle still has plenty of room to run.)

“No doubt, the industrialized world is fast running into real labour shortages, but this is assuredly not pushing up wages in a big way; instead, it’s prompting an even swifter shift to automation,” he says.

Read: Engage older workers to boost the economy: report

Further, employment rates in the U.S. and Europe can still drop further, so “there’s still room to grow,” he says.

Read: Eurozone unemployment fell to 8.7% in November

Workers might be waiting for higher wages, but at least the tight labour market isn’t making them wait for jobs—at least in some industries. Porter says that, on a recent panel, the COO of a large Canadian steelmaker revealed the company’s biggest challenge: finding workers.

Also read:

IMF hikes growth outlook for Canada, world

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Staff, with files from The Canadian Press

The Canadian Press is a national news agency headquartered in Toronto and founded in 1917.