This week’s guest commentary comes from Nathan Stevens of the Christian Farmers Federation of Ontario
The Province of Ontario has launched consultations on whether to increase the minimum wage and what level to consider increasing it to in the future. This is a very complex issue, with wide implications for the people of Ontario, the vibrancy of the economy and our ability to produce goods competitively for ourselves and for the world. For agriculture, there are serious concerns about the best way to proceed on this issue.
There are areas of the economy that are relatively unaffected by a minimum wage increase from a competitive perspective. The cost to employ a cashier at one big box store or another is basically the same, and so where you place the minimum wage has little or no impact from a competitiveness standpoint. Two local service providers, such as a lawn maintenance company, are not impacted from a competitiveness standpoint as each is required to pay their employees the same base rate. The increase in wages will either have to absorbed by the company or passed along to the consumer or, in a worst case scenario, the consumer will have to decide if they can afford the service or not at the new rate.
However, there are areas of the economy that are very sensitive. Agriculture is such an industry. Although agriculture is exempt to the minimum wage rules, the fact of the matter is that the industry has to compete with other job opportunities to attract workers. The fruit and vegetable industries are particularly sensitive because labour often accounts for more than fifty percent of their costs. Because a great deal of production is export oriented, or used to supply an Ontario processor who exports, increasing labour costs impacts their ability to compete with other jurisdictions offering the same range of products. An increase in labour costs is a major challenge.
There are also questions around how much an increase in the minimum wage really helps to alleviate poverty? Certainly, an increase will help initially, but as the new labour costs work their way through the economy, the cost of goods will be driven upward. Furthermore, employers may not be able to afford higher rates and will be forced to reduce the number of employees they have, and will either ask more of their remaining employees, or invest in productivity improvements to replace low-wage workers. The net affect may be one step forward and one step back.
The provincial government consultation panel is wrestling with this issue. This incredibly complex issue is one that impacts the entire economy, including agriculture. I want to encourage anyone that cares about this issue to weigh in on it. How Ontario approaches the minimum wage issue will have an impact on everyone.