Small business owners in Oakville are looking at their operating costs and scratching their heads. How are they going to manage the 7.3 per cent minimum wage increase that comes into effect on June 1?
On Jan. 30, the Ontario government announced an increase in the hourly minimum wage from $10.25 to $11. The hike reflects the increase in the Consumer Price Index since 2010, the last time the minimum wage was raised.
The government also indicated future rate hikes will be tied to the CPI, giving business owners a chance to plan ahead.
The CPI is a measure of the cost of a fixed basket of goods, and is used to set wage rates so that consumers are able to maintain equal purchasing power as prices rise.
Two sides to every coin
When Premier Kathleen Wynne made the announcement, both sides of the debate groaned.
Small and medium-sized retailers were hoping for a gradual increase, while advocates for higher wages had been calling for a jump to $14 per hour.
The move to $11 will put Ontario at the top of the list in a tie with Nunavut.
Minimum Hourly Wage Rates Across Canada
(scroll over each bar to see the exact rate)
Business owners accept the rationale behind linking the hike to increases in the CPI, but they will have to revisit their spreadsheets and find ways to reduce other costs to accommodate the higher wages.
“Most businesses operate on a one-year planning cycle,” said John Sawyer, president of Oakville’s Chamber of Commerce. “It would have been better to have the increase phased in over a longer period.”
The five month lead time given to companies for this rate hike means business owners will have to make adjustments and find ways to stay within their annual budget.
“The consequences might mean some layoffs,” Sawyer said.
On the positive side, he said the planned introduction of annual increases being tied to the CPI takes the “politics” out of the decision-making process and should give businesses a better chance to forecast costs.
While the minimum wage looks like it will be more predictable, Sawyer says the uncertainty around a host of other costs is making it difficult for Oakville’s businesses to plan effectively. Rising expenses related to energy prices, pension schemes, transportation funding and development are worrisome for his organization’s members.
All of this is happening at a time when “the economy is still fragile,” Sawyer said.
Some retailers relieved
The Ontario Convenience Store Association welcomes the predictability that will come with the annual increases being tied to the CPI.
Dave Bryans, the OCSA’s CEO, had this to say about the minimum wage increase:
The minimum wage is only one component of the cost base and Bryans says small business owners are struggling much more with high electricity costs and credit card fees.
Oakville’s Business Improvement Areas (BIAs)
In Oakville, small businesses are not just places for people to shop; they are also part of the community. The Kerr Village Business Improvement Area is one of three BIAs in Oakville. Its nearly 300 members offer a wide variety of goods and services to local consumers.
The group’s new executive director, Doug Sams, said in an e-mail that the organization could not comment on the wage increase because the diversity of the BIA’s members means each business owner would have an independent opinion about the change.
In Oakville’s downtown core, the number of vacant shops is an indication that times are tough for local retailers.
The harsh winter has kept shoppers away and many of the Downtown Oakville BIA’s 400 members are already struggling with high operating costs.
Bill Rechter, owner of Just an Olde Fashioned Butchery located on Lakeshore Road in the heart of downtown Oakville, had this to say:
Rechter also said there is a risk of a ripple effect. Once the new minimum wage kicks in, employees who are being paid hourly rates just above the new limit will begin asking for a raise. “Someone getting $12 an hour could push for $12.50 or $12.75,” he said.
For stores that are unable to increase prices, owners will have to reduce employee hours, cut staff, find other ways of decreasing costs or simply shut down the operation.
As a stand-alone item the pay increase is not a big deal for most companies. But when it is combined with all the other increasing costs (rent, electricity, taxes) the wage hike is going to be difficult for some businesses, he says.
Downtown Oakville’s Businesses
View Downtown Oakville BIA Business Directory in a larger map
Text, photos, videos and wage infographic by: Andrew Scott Walker
Map: Downtown Oakville BIA