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Ontario minimum wage increase would mean staff layoffs and cut hours

July 28 2017

Raising the minimum wage to $15 an hour in Ontario would force four in five restaurateurs in the province to lay off staff, according to new research.

Almost every respondent to Restaurants Canada’s survey said they would have to raise menu prices (98 per cent) or reduce labour hours (97 per cent) to offset the wage increase.

More than a quarter (26 per cent) of the 800 restaurateurs who took part in the research said it would be likely that they’d have to close one or more of their locations to absorb the wage hike.

Finally, close to three-quarters of the sample (74 per cent) said they would explore labour-saving technology, such as self-service touch screens.

Self-defeating

In short, Restaurants Canada believes that upping the minimum wage would hurt the very people it intends to help.

Currently, the minimum wage in Ontario is $11.40, and that would rise to $14 from January 1st 2018, and $15.00 12 months later.

If these increases take effect, it would mark a 32 per cent hike in 18 months, while 2018’s increase would represent a 22.8 per cent rise, which is 10 times the rate of inflation.

On a similar note, the minimum wage for liquor servers is set to rise from $9.90 to $10.10 in October, then $12.10 from 2018 and $13.05 from 2019, under government plans.

As it stands, Nunavut boasts the highest minimum wage ($13), with the lowest found in Saskatchewan ($10.72) and Newfoundland and Labrador ($10.75).

Profits down

James Rilett, Restaurants Canada's vice president for central Canada, said the survey’s findings were “not surprising, given the average pre-tax profit margin for a restaurant operator is just 3.4 per cent”.

He claimed that the “drastic” minimum wage hikes would reduce profitability by five to seven percentage points, something that would leave restaurateurs with no choice but to lay off staff, reduce employment or close their doors entirely.

“Many of our members just don't know how to cope with an increase of this magnitude,” he commented, before stating his intention to present the findings in more detail at a hearing in Hamilton.

Restaurants Canada's president and chief executive Shanna Munro insisted the group wasn’t against raising the minimum wage, but called on the government to carry out an economic study to justify the amount and speed of the increase.

"Too much, too fast is not a recipe for success,” she added.

Playing with youth jobs

Ontario is home to more than 37,000 restaurants, bars and other foodservice establishments, employing nearly 473,000 Ontarians, from Pickle Lake to Kingsville.

According to Statistics Canada and Restaurants Canada, the average restaurant owner in Ontario has 10 employees and annual revenues of $689,000.

These restaurants earn a pre-tax profit of 3.4 per cent - the lowest of any Canadian province - or $23,450 per year. A 31.6 per cent wage hike will cost $47,000 per year, therefore more than wiping out their profits and inevitably leading to hard cuts somewhere in the establishment’s operations.

Mr Rilett added: “The government says it wants to get kids out of their parents' basements, but the minimum wage increase will have the opposite effect.

“We're going to see more young people living in their parents' basements longer.”

Back in May, Mr Rilett accused the Wynne government of playing politics with youth jobs.

“Just three short years ago, the Premier committed to a balanced, predictable model to set minimum wage rates,” the Restaurants Canada Ontario vice president went on to say.

“Business took her at her word and supported the changes. Little did we know that she would turn around and make a backroom deal with union leaders.”

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