Three Other Impacts of a Minimum Wage Hike

The Week Ahead

October 16, 2017

We’re not going to add to the now growing literature on whether there will be significant job losses arising from Ontario’s upcoming minimum wage hike. Studies from other jurisdictions are inconclusive, some show no net job losses, and their results might not be scalable linearly to this larger move.

But there is some other less trodden ground in terms of what to expect when minimum wages jump from $11.40 as of September, to $14/hour in January, and $15 come 2019. First, given that the central bank wants to see inflation heat up, how much of that will come from the price responses to higher wages? Sectors like grocery stores, which don’t compete with imports and face inelastic demand (you’ve gotta eat something), would be expected to pass on much or all of the higher costs, after perhaps making some marginal adjustments in their labour use. Restaurants and personal services are even more labour intensive, and would see some inflation impacts as well.

Read More…