Proposed wage rise justified?

The debate on the proposed increase in the minimum wage in Ontario has been raging since Premier Kathleen Wynne announced that province would be raising minimum wage to $15 per hour by 2019, up from the present $11.40 per hour.

One set of critics are asserting that the increase in the wage to $ 15 an hour will lead to reduction in job for young and low-skilled workers as they believe that the increase is too much and is being carried out in a very short span of time. These critics are looking at mainly adverse effects on employment. Other sections of critics have been citing that any kind of potential decrease in job growth will be offset by gains in income.  Both the sides are trying to sound as if the policy of increase in wage is erroneous that may affect the workers and the businesses alike.  A report by the Financial Accountability Office of Ontario, an independent adviser to the government, has estimated that the proposed minimum wage hike could lead about 50,000 lost jobs across Ontario and teens and young adults are likely to be the most affected ones.

However, that may just be the view of an economist, and the view of those having a strong strategic management may be different. Could there be some substantial advantages to the economy? That aspect is not being addressed by either.  Any business that has to pay more to the workers is looking at increase in labor costs. There would be an effort to bring down the total labor cost and one of the means would be to cut down the number of workers. The other option to increase the price may not be feasible as it may an offset due to the competition. Hence for some of the critics the option of cutting jobs appears to be the option.  A study carried out by the Canadian Centre of Policy Alternatives in 2014 tried to establish a relationship between minimum wages and employment in all the provinces and over a good period from 1983 and 2012 and the study revealed no empirical co-relation between the two.

Though the business would have to pay more for the same work, it should be looked as an attempt to reduce poverty, increase the purchasing power and above all better the standard of living in the region.  With election in Ontario due in June 2018, Conservative leader Patrick Brown too appears to have understood the need and even while opposing the same has advocated in a way to say that the province should lengthen the transition period to ensure small business owners and farmers have more time to adapt. No wonder a political compulsion for the Premier who made the announcement looking at the next elections, has found an admirer in opposition leader though he only wants to sound economically right. His all out opposition to the wage hike may not go well with the voters.

Those opposing the move need to know, that increase in the wages would bring more purchasing power in the society and could help the business grow with increase in sales and can help the economy to grow. The increase in wages ultimately is going to come back into the system that would prompt them to buy more, shift from rental accommodation to own houses and even drive instead of taking a ride in the bus. This wage increase will have a positive impact in the long run for the economy of Ontario.

Premier Kathleen Wynne has had these issues in mind when she made the announcement, however the timing of the announcement has solid political reasons too. The announcement could have come anytime during the last three years, however giving  respite to the potential voters is her prime concern specially when her party is facing a tough time ahead with opposition parties gearing up to take on  the Liberal party both in the House, and at the polls.