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Retail Council of Canada, Presentation to the Standing Committee on Finance and Economic Affairs

Thunder Bay ON,
Monday 10 July 2017

Mr. Karl Littler: Good morning. Thank you for the opportunity to present the retail industry’s views on Bill 148 and the proposed changes to Ontario’s minimum wage. Retail Council of Canada represents merchants of all sizes—small, mid- and large—including mass merchandise, grocery, pharmacy, fashion and specialized merchants in bricks-and-mortar stores and online. Our industry employs two million Canadians, being the largest private employment sector both nationally and in the province of Ontario. Unfortunately, if the minimum wage hikes are enacted on the stated timelines, those employment numbers, already pressured by automation and foreign online sales, are likely to diminish.
Let me be clear. Our primary issue with the minimum wage change is not the absolute level, whether that be $14 or $15 an hour. Our biggest concern is the extreme pace of change to those levels. Simply put, businesses need time to adjust to major changes to their cost structures. Make no mistake: A 32% increase in minimum wage is the greatest-ever single hike in our costs. Our other input costs are typically fixed or rising, including occupancy—like rent or ownership—municipal taxes, and utilities. Payroll tax costs like EI, CPP and the employer health tax will actually increase as a result of this measure, because they’re largely based on wages paid. We could, of course, take a look at what we can do about the costs of goods, but those are typically covered by supply contracts that extend well beyond the $14 hike in January and, in many cases, well past the $15 hike in 2019. Even supposing that we try to renegotiate the cost of goods, there is a limit to what we can expect from suppliers, given Ontario’s relatively small scale in the global supply chain. That leaves only two areas that could conceivably be adjusted: prices and labour costs. Aside from the impact of higher prices on those who will not benefit from the minimum wage changes, like seniors, the self-employed, those on social assistance and so on, there’s little room for price increases anyway.
In retail, our primary competitors may not be down the block. They’re increasingly likely to be over the border or overseas, shipping from warehouses in what are often lower-wage jurisdictions and with far fewer employees than work in Ontario stores and distribution centres. If we do hike prices, we will see an acceleration of consumers shifting purchases to foreign online vendors, with a corresponding impact on Ontario jobs and economic activity generally. That’s for the moment less true for grocers, but grocers also face a big impact from rising labour costs in their supply chains, being major purchasers of Ontario agri-foods and packaged foods whose producers will also be facing these minimum wage hikes. 1100 If other costs are fixed or rising, and if there’s a price ceiling due to foreign competition, the only remaining thing that can give way is employment, whether in the absolute number of jobs or in the hours available. And one has to bear in mind who will be affected by these reductions.
Retail is Canada’s biggest provider of first jobs for youth and students, last jobs for the semi-retired and opportunities for new Canadians who are establishing their language skills, credentials and Canadian experience. It is typically in these stages that employees earn at or just above the minimum wage level as they transition to greater responsibility and compensation or into other activities altogether, and it is these employees who will feel the effects of the minimum wage changes. It becomes a tale of two distinct classes of employees: those will be happy to see a bigger paycheque, and those who will most definitely not be happy to see the loss of jobs, opportunities or reductions in hours. Given adequate time to plan, these changes likely can be managed, but we simply don’t have the levers in place to be able to absorb a 32% increase in a mere 18 months. To do this properly, there should be a reasonable rampup to $14 and then $15. Yet Ontario is trying to pull this off far more quickly than in other jurisdictions.
In truth, if these end dates were inevitable, the government would have been far better to have started the process three years ago, even though that would have cost employers more, as it would have at least provided certainty and some time to plan and adjust. Instead, we have this eleventh-hour conversion from the government’s own CPI-linked process. To be clear, it is the pace of change that is the problem here, with expedient politics seemingly overriding good public policy. Thank you.