A Curious Thing Happened When Ontario Hiked Minimum Wages By Over 20%

Minimum wage hikes, and the inevitable job losses that result from them, are a consistent topic of conversation for us...here are just a couple of recent examples:

Of course, no amount of empirical evidence (or common sense for that matter) will ever be sufficient to convince left-leaning politicians that basic economic concepts governing the relationship between supply and demand also apply to the market for labor.  No, in the mind of politicians, every business ever created is an evil corporation owned exclusively by "millionaire, billionaire, private jet owners" who earn infinite profits and will casually accept whatever minimum wage hikes or tax increases are thrown at them...

That said, here in the real world, competition prevents corporations from earning excess profits (at least for an extended period of time anyway) and businesses respond to higher labor costs through capital investments designed to reduce labor (think ordering kiosks at McDonald's) and/or other cost cutting initiatives.

In fact, for the latest example of the unintended consequences of higher minimum wages, one has to look no further than a pair of Tim Horton's franchises in Ontario, Canada.  Faced with a 21% hike in minimum wages starting January 1st, with hourly rates going to $14 from $11.60, owners of the two restaurants said they had no choice but to cut employee benefits and eliminate paid breaks to offset their higher costs.  Per the Financial Post:

Employees at the Tim Hortons locations owned by the children of the co-founders of the franchise say they have reduced employee benefits and cut back paid breaks to help offset Ontario’s $2.40 jump in hourly minimum wage.

Jeri Horton-Joyce and Ron Joyce Jr. wrote a letter to employees at their two Tim Hortons restaurants in Cobourg, Ont., that those who want to continue receiving dental and health benefits will have to pay a portion of the plan’s costs themselves. Those working at the restaurant for more than five years will have to pay half, while those working from more than six months to five years will pay 75 per cent.

Employee breaks will also no longer be compensated, the letter dated December 2017 read. For example, those working nine-hour shifts will be paid for eight hours and 20 minutes, while those on three-hour blocks will be paid for two hours and 45 minutes.

“We apologize for these changes,” the letter, widely circulated on social media, read. “Once the costs of the future are better known we may bring back some or all of the benefits we have had to remove.”

Tim Horton

The alternative would be for the franchises to simply raise prices to offset their higher cost structure, which they did not, demonstrating how little confidence in pricing power businesses have despite the constant media cheerleading about the "coordinated global recovery."

Discussions about economic stability aside, such efforts only seem to further undermine the relative profitability of small businesses versus larger national chains and drive lower volumes as fewer people can afford to eat out.

The minimum wage hike and other new franchisee costs, like vacation pay, have put Tim Hortons franchisees in “a difficult situation,” said a statement from the GWNFA’s board of directors.

The GWNFA, whose membership hit half of all Canadian Tim Hortons franchisees last October, said its goal is to mitigate job losses.

But without help from their parent company in lowering food costs, raising prices and reducing couponing, the association said franchisees have been forced to take steps to protect their business.

“While other competitors have received concessions from their franchisors, unfortunately our chain has not,” the GWNFA said. “Many of our store owners are left no alternative but to implement cost-saving measures in order to survive.”

Conclusion: Keep up the good "Fight for $15", Bernie; it seems to be working really well.

Comments

researchfix Jan 8, 2018 5:37 PM Permalink

This is an interesting view of that business. But thinking forward, don´t we need people to buy things? Will the robots in industry buy? Where are the consumers?

Xena fobe Bobzilla. Do n… Jan 8, 2018 8:25 PM Permalink

Delivery people are now mainly temp, on call.  The hourly wage when they work is around $17.00.  You will never be picked up permament unless you have a relative there.  They send newbys to the hood.  Supervisors are psychopaths.

It is not an easy job at all.  Only those in top physical shape can cut it.  No time for breaks or lunch.  You carry a GPS and they monitor your speed.  You do not return to the office until your route is completed.  Which may be late at night.  The $75,000 is for full time at the top of the scale and includes pension and benefits.  

I knew someone who tried it.  Most people quit because the income is not steady.  

 

In reply to by Bobzilla. Do n…

HardAssets old naughty Jan 9, 2018 7:39 AM Permalink

The .000001% use the political system to their advantage, by buying off the politicians, bureaucrats, & judges. So billion & trillion dollar give aways are framed as necessary by those ‘too big to fail’. Minimum wage laws are misguided, but they involve pocket change when compared to the former. Fact is, real wages have remained stagnant for decades. 

In reply to by old naughty

HopefulCynical Troll Magnet Jan 9, 2018 10:56 AM Permalink

MinWage is all about unions. Union contract pay scales are almost always indexed to MinWage. A MinWage hike is an automatic across-the-board pay hike for unions. Then they use forcibly-collected dues to fund the Democrats who agitate for ever-higher MinWage rates. The fact that it fucks over small businesses is just icing on the cake.

It's the goddamn Marxists, scamming for shekels. Always.

In reply to by Troll Magnet

Dirtnapper Shpedly Jan 8, 2018 11:08 PM Permalink

It's the same person (letters and parcels) with few exceptions (express can be delivered by any postal employee and the RCA/PTFs might be on a special run to help out routes that have too many parcels to deliver in a reasonable time period during Christmas).   Full time career carriers don't have it too bad since they have the same route every day.  It's the subs (city and rural) that have miserable jobs that get thrown route to route every day yet expect to perform the same as the full timer delivery schedule. Rural Carrier Associates (rural carrier subs) have it the worst, they are only promised 8 hours @ week yet are on call the rest of the week and have zero benefits. City subs (Part Time Flex) are promised 20 hours (on call the rest of the week) with benefits.

If you want to know why the postal employees are miserable, it's a miserable job that will break you, your spirit, and your body.  I say this as a former Rural Carrier - Part Time Flex (rare as hen's teeth title).

$75K is with benefits included, take a look at what your state pays it's teachers when benefits are included for not teaching your kids anything.

In reply to by Shpedly

mc225 Xena fobe Jan 8, 2018 11:32 PM Permalink

usps carrier used to be a good job... 50 years ago... year by year, the employees of usps get the squeeze put on... kind of like how nordstrom employees used to have good jobs, then newer employees got more of a '2nd tier' or '3rd tier' package of pay/benefits compared to the older hands...

 

for awhile there, usa was more or less a 'really easy' place to live... now it's just a memory...

In reply to by Xena fobe

Harry Lightning Bobzilla. Do n… Jan 8, 2018 8:52 PM Permalink

Oh please, don't cut the pay of the Postal workers ! Its worrisome enough to trust they will get peoples' bill payments to the correct addresses. If you cut back on salaries, I can just imagine who will get employed. 

The postal workers aren't being paid $75,000, that's their pension if they've worked for a lifetime at the Postal Service. The average salary of postal workers is probably a lot less. Make it lower and you will not attract the kind of people who you can trust to get you mail delivered to where it needs to go by the time it needs to get there.

In reply to by Bobzilla. Do n…

Yogizuna Shpedly Jan 9, 2018 2:15 AM Permalink

And the job can and will make you sick and or injured. Out there in any kind of weather, delivering heavy packages, etc, trying to beat the clock. The days of just delivering letters are long gone. One woman I know managed to hang in there for 34 years, and she earned every cent! Now her knee is shot, and her feet also. And the pain in her right hand will never go away.

In reply to by Shpedly

DontMessWithGumby Yogizuna Jan 9, 2018 6:32 AM Permalink

Not to mention the clerks processing the mail through automation. They are guinea pigs. The automation was not designed with humans in mind (none of it). Hence the back injuries, carpal tunnel, knees, etc. Shame of it all, once the lousiest workers go into management (it's a pattern), they become total tyrants to the people they used to "get over" on. Been there, it sucked.

In reply to by Yogizuna

Justin Case 847328_3527 Jan 8, 2018 10:10 PM Permalink

U.S. Postal Service (USPS) Job Listings

United States Postal Worker   $16.75    
Postal Service Mail Carrier     $16.99    
Mail Handler                        $15.14    
Mail Processing Clerk        $16.00    
City Carrier Assistant       $16.18    
Postal Service Clerk        $16.11    
Custodian                     $14.28

 

https://www.payscale.com/research/US/Employer=U.S._Postal_Service_(USPS)/Hourly_Rate

In reply to by 847328_3527

Dirtnapper ar8 Jan 8, 2018 11:37 PM Permalink

Post Office is screwed from the beginning.  It's a quasi-private company that has mostly Federal Government Employees (and some casual) with 5 unions each with their own contracts while following government regulations.  I worked there for close to 3 years, I was amazed that the mail actually got delivered in spite how badly things were screwed up.

In reply to by ar8

Gerrilea ar8 Jan 9, 2018 8:47 AM Permalink

It never did until the Republican Congress tried to bankrupt it in 2006.  It was for over 200+ yrs self-sustaining.

The pre-funding of pensions, prefunding future healthcare costs, 75 years out.  Congress INTENTIONALLY bankrupted the USPS.  Why? Because they wanted to destroy the union and privatize our entire government TO MAKE A PROFIT.

You can't go into a Post Office today and make copies anymore.  The "private, for profit" machines Congress put in there don't work and don't get serviced.

Congress' micromanaging IS what has forced them to make "deals" with UPS, Amazon and FedEx...AT A LOSS!

The only reason those private companies are making so much is because they are being given public subsidies.

In reply to by ar8

Eyes Opened forexskin Jan 9, 2018 4:10 AM Permalink

And is that what u would want for yourself or your children today ?? Working yourself into the dirt ?? 

We were told that the invention of the computer & other technology would result in such efficiences that we'd all be working less... guess where the gains went... not into employees hands, thats for sure....

In reply to by forexskin

HopefulCynical JimmyJones Jan 9, 2018 1:36 PM Permalink

I am constantly amazed at the number of people who have no concept of how life was even a century ago. Yes, the fucking (((banksters))) have plundered us badly, but folks - humanity has never had it so good as we do now. For thousands of years, 99.99% of the population had no leisure time at all. Get up, struggle to generate enough food to survive and feed your family, repair your dwelling as best you could, go to sleep. Rinse, repeat.

The real path to Utopia, as best as we will have it in this world, is to eradicate Marxism from the Earth. That's it. Hard work is part of being human. Such is life.

In reply to by JimmyJones