Bank of Canada: Minimum wage increase could result in loss of 60k jobs by 2019
This month, Ontario’s minimum wage saw two of its three promised hikes under the Kathleen Wynne Liberal government.
On October 1, minimum wage went up to $11.60 per hour, a 20 cent raise from the previous $11.40, marking the fourth consecutive year for an increase. And on January 1, the province hiked that up to $14 per hour, before it plans on bringing it up to $15 in 2019.
But since the initial announcement of the wage increases, there have been warnings of job losses in relation to the quick hikes.
And now, the Bank of Canada has released its own analysis of the job losses.
In a report titled The Impacts of Minimum Wage Increases on the Canadian Economy, the Bank of Canada states that the increases in minimum wage can lead to higher real wages, which push up firms’ marginal costs. This in turn will result in weaker labour demands, leading to reduced employment and lower hours worked.
Although the net impact on labour income is positive, the Bank of Canada predicts 60,000 jobs will be lost by 2019.
Bank of Canada
The number is close to what has previously been predicted by economists.
In September, the Financial Accountability Office of Ontario (FAO) said that the Ontario government’s proposed minimum wage hike to $15 an hour by 2019 would result in a loss off about 50,000 jobs. The FAO released a report assessing the impact of the wage increase in the province, and warned that higher payroll costs may result in layoffs for businesses.
Soon after, another report outlined that the proposed minimum wage hikes could cost the province between 80,000 to 90,000 jobs by 2020.
According to an economic assessment report by TD Bank, raising the minimum wage to $15 can generate benefits to the province, but the speed in which its being implemented will likely have a negative impact on employment.
The changes on the consumer end will be noted in higher product costs.
“Since a higher minimum wage raises production costs for firms, it is likely that part of the
increase will be passed on to consumers,” states the Bank of Canada. “The extent of this pass-through, however, depends on firms’ ability to substitute away from the higher-cost labour inputs and preserve their margins, as well as the competitive landscape they face.”
But changes have already been taking place in the city. And in order for businesses to keep up with wages, Ontarians should expect more price changes leading up to the next hike in 2019.
Just grabbing coffee today WHEN…! Bank of Canada says Minimum Wage ⬆️ will push inflation up by 0.1% in 2018. Here’s a little example. pic.twitter.com/G1E0dV4ZUg
— Frances Donald (@francesdonald) January 2, 2018
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