Dennis Bayazitov | Assistant News Editor
Featured image: A blessing for a broke student; a burden for a small business. | Courtesy of Pexels
The Wynne government’s decision to raise hourly minimum wage by nearly 40 per cent has proven to be either the most exciting—or most challenging—economic change for two groups of Ontarians.
For students living paycheck to paycheck, for instance, $14 an hour is music to their ears. For their employers, not as much.
For the past two weeks, Wynne’s political move has been perceived as somewhat of a double-edged sword. With Tim Horton’s now put on blast for perceived unfair treatment of their employees, and countless other small businesses having to lay off employees, it seems an adjustment to the hike has manifested differently among different industries.
So, then with a school as densely-populated, bearing so many business opportunities, and employing so many of said “broke” students as York, one might naturally wonder just how well they are handling the change.
“Those who get the increase are obviously going to get more purchasing power,” says Schulich Professor Emeritus of Economics and International Business Bernard Wolf.
“Whereas those people who end up not having jobs—who otherwise would have—are obviously going to be worse off.”
The most notable effect Wolf mentions is the to-be-expected decrease in jobs. While he figures the exact number is as good as anyone’s guess, he does point to one Bank of Canada study that estimates as many as 60,000 may be lost.
“That’s not positive,” says Sami Yehia, proprietor of what is perhaps York’s most iconic eatery, Falafel Hut—operating for over 25 years, since York Lanes’ inception.
Despite the possible threat to his business, however, Yehia admits he believes this is likely a positive change for the economy in the long run. “The real question is, ‘how many millions of extra dollars will this create?’” he says. “You have to balance this with people not having as much disposable income, but many food establishments and businesses will also use this as a legitimate excuse to raise their prices.”
That being said, Falafel Hut devotees can rest assured they have not done so… yet. “But we are in the process of doing so.”
Wolf says it ultimately depends on the buoyancy of Ontario’s economy—on “if the labour supply is tight, versus if it is not.” Of course, employment numbers are not the only consideration.
Wolf adds that the closer Ontario nears full employment, the more likely it is it will experience inflation. “If you have a lot of inflation, this increase tends to get diminished in terms of real purchasing power.”
Therefore, another major economic consideration is that of pricing.
Wolf believes the degree of price-raises will depend on the extent businesses think they can actually raise their prices—depending on a number of reasons, but primarily on how much competition there is in the industry, and how much resistance there is from the consumer.
“If a restaurant’s prices go up much too high, then people might not go to that restaurant,” he says. “Or, if not this one, then we’ll go to some other one.”
The Absinthe Pub & Coffee Shop (Ab) is the longest-operating business on campus and another York favourite. Student-run and first opened in the mid-1970s, The Ab is currently undergoing changes similar to what Wolf speaks of.
Sébastien Lalonde, President of the Winters College Council and current owner of the Ab, confirms this as such. “Although we have had to raise prices, our goal was to maintain our position as having the most affordable food, liquor, wine, and beer on campus,” he says. “Since all of our prices are tax-included, we have been able to sustain that position, regardless of the new minimum wage increase.”
Lalonde says with the minor increase in product prices, the Ab has been able to sustain its business, regardless of the minimum wage increase.
Furthermore, while likely not as prevalent a consideration for York, Wolf mentions there also exists the possibility of any businesses heavily dependent on minimum wage workers exploring other labour-intensive industries instead. “That doesn’t necessarily mean going to Nova Scotia—it could mean going to Vietnam, Mexico, or wherever.
“Obviously, you’re not going to move a Starbucks that services people in Toronto to Vietnam,” he says. “But there are manufacturers such that they could move, and probably would move anyways to accelerate it.”
In the case of the Starbucks in Central Square, however, employees of York’s most recent addition—conveniently unveiled January 4, across the hall from the Tim Horton’s—face unique challenges.
One fourth-year Social Work major and shift supervisor from the location, who requested anonymity, clarifies that particular Starbucks is not a corporate store. “It is a licensed location, owned by Aramark.
“But Starbucks is not the only franchise owned by them,” he explains. “Tim Horton’s and Starbucks are both owned by Aramark, so I don’t think they mind the competition at all. In fact, the whole cafeteria is also owned by Aramark.”
The Starbucks shift supervisor recalls last year when Starbucks went on strike, requesting a $15 per hour wage increase. Shift supervisors managed to win $13.80, as a compromise. Naturally, this put shift supervisors in a favourable position at the time, earning around two dollars more than minimum wage.
With the recent wage increase bumping up all employees’ minimum wage to $14, however, shift supervisors now question the fairness behind such a decision.
“It’s a little worse for shift supervisors,” he says. “Whereas before I was getting two dollars above minimum wage, now I’m getting just a bit more.”
Karen Cutler, vice president of Communications and Public Affairs with Aramark, says the company has always had a commitment to paying competitive wages to their associates “who deliver great experiences for our clients and customers every day.”
Their employees at York are represented by a union, whose wages are covered by a collective bargaining agreement (CBA).
“Currently, all employees are paid at or above the required minimum wage commensurate with their job title and tenure,” she adds. “The CBA includes a schedule for additional wage increases in March, and again in October of this year.”
Cutler confirms Aramark has not changed its approach to staffing, due to the change in legislation.
Nevertheless, the Central Square Starbucks shift supervisor shares a somewhat different experience.
“I’ve heard a lot of cutting back hours,” he says. “They have cut down here too. It’s harder now.
“The store closes at 12, but if you’re going to be closing up, you should really have three people to close. There are only two people that have been closing now, starting from around 10 to 12, and there are a lot of things to do. They’re very keen on saving costs and hours.”
Still, for such a large global corporation like Aramark, which turns an annual profit of $1.62 billion, it seems such raises in minimum wage are trivial at best. Wolf notes the minimum wage increase will affect various industries differently.
“Starbucks, Tim Horton’s, or McDonald’s are going to be affected differently than others,” he says. “I think smaller businesses will probably depend on minimum wage workers, and that could be in farming or the service industry.
“I think they’re the ones that are going to be squeezed the hardest.”
Currently employing a team of eight employees and operating Falafel Hut from 7 a.m. to 2 a.m., Yehia agrees with Wolf. “When you extrapolate that over a full semester, that’s hundreds of hours where this increase in minimum wage will definitely be felt.”
Yehia says the business is open for 16 to 18 hours a day, with two employees working simultaneously.
“For a small business, it adds up quickly because of the volumes we do. If we reduce employees’ hours significantly, it will definitely impact the way we serve our customers.”
Yehia’s biggest consideration as a result of the wage increase is future hires. The dilemma he faces going forward is whether it would be in the business’ best interest to hire and train students with no experience for $14 an hour, or instead hire somebody who has far greater experience and pay them a little bit more.
“This will definitely affect the overall pay structure of the business, because, take a person who’s been here for over two years who was making $16 an hour, and now someone new, who comes in and makes $14—that puts pressure on the business owner, where it doesn’t seem fair for that person there for two to three years to earn only marginally more than someone with not as much experience.”
Lalonde similarly shares the Ab’s hours have not changed, and their team has assured a minimum amount of staff to be available based on the flux of customers within the Pub.
“The only difference with our employees is that each staff person, night manager, and assistant manager have all received increased wages in relation to the new minimum wage increase.”
In fairness, Lalonde and Yehia both agree it is still too early to gauge the exact effects of the wage increase.
Lalonde says two weeks have not provided enough time to show a change in the way the York community has responded. “We have been having tremendous success lately, mostly due to the fact that the York University Colleges have been featuring the Pub in their frost week.”
“The real answers will come in six to 12 months, once this decision runs its full course,” Yehia says. “It’s too early to tell, but I’m all for all employees and people in general having more disposable income. In the long run, it should help the economy.”
Likewise, Wolf says he has no problem with the decision to increase minimum wage.
“Personally, I feel that people want to get a wage that keeps them out of poverty,” he says. “On the other hand, I think this has been too fast.
“Going from $11.60 to $14.00 does not allow businesses to adjust. It’s too abrupt. It’s too fast. That’s my problem with it.”
Dennis Pilon, associate professor and undergraduate program director with York’s Department of Politics, also agrees the decision likely was a positive one in the long run. “All credible economic studies of actual economic results—as opposed to abstract economic theory—flowing from minimum wage laws suggest they are a sound policy in terms of equalizing wealth, and putting more money in the hands of people who generally will spend it,” he says.
He further shares the political considerations behind the decision: “Politically, the Wynne Liberals will be fighting for electoral support in the next election from swing NDP voters, as well as regular Liberal voters, so this policy may help convince some NDP voters the provincial Liberals are genuinely progressive and a better option than a Conservative provincial government.”
Senior Communications Advisor Michael Speers with the Office of the Honorable Kevin Flynn, minister of Labour, meanwhile, says, in this uncertain time, the government has a responsibility to protect its youth, “which is why Bill 148—the Fair Workplaces, Better Jobs Act—was needed.”
“By raising minimum wage, the government is putting more money in the hands of many of our young people,” Speers continues. “By raising the floor, the government is supporting our youth, so they can thrive and contribute.”
Pilon continues to say the Progressive Conservatives may choose to focus on the minimum wage law as an example of poor economic decision making on the Liberals’ part.
“They may characterize it as an anti-small business, or even just anti-business, in a bid to gain swing voters from the Liberals,” he says. “Particularly those who are fiscally conservative, but socially liberal.”
Pilon reasons a lot will depend on whether those swing voters are convinced the minimum wage policies are a reckless or necessary correction on an economy that has been drifting toward significant inequality for some time.
The economic results of the past 30 years show how various government actions lead to such dramatic inequality, according to Pilon. Such actions may include: reduced taxes on the wealthy, tighter restrictions on union organizing, and signing various free trade agreements.
“Thus, a lot of the resistance to raising the minimum wage is not about how the economy works, but who it works for,” Pilon says. “Self-interested defenders of the wealthy decry it. But everyone else benefits from it.”
Wolf likewise mentions such a tendency is quite problematic.
“The Achilles’ Heel of the global economy, as far as I see at the moment, is the growing gap between the rich and the poor and this has led, in part, at least, to Trump and Brexit, the populist movement in Germany, Belgium, France, and Italy.”
He believes when people are no longer willing to tolerate huge differences in income for when things become so outrageous, the people rebel against the government, “and then the rebellion becomes contagious.”
The Schulich economics professor urges Ontario to take a look at its tax structure, and see that it is a reasonably fair structure that also does not dull incentives beyond what is reasonable.
As far as what this all means for York, however, if the Ab and Falafel Hut are any indication, even small businesses can stay afloat with the adjustment of prices.
Neither establishment has undergone any downsizing whatsoever.
There is also the question of whether or not shift hours will be reduced. Akin to raising prices, such an alternative offers a convenient way to reduce costs.
“Those working fewer hours may end up with actually considerably less—even though they’re going to earn more for the hours they work,” says Wolf.
So far, this seems to be the greatest implication of the wage rate for the minimum wage employees of York.
Conversely, “those people who have their jobs, who’ve gained this huge increase, can celebrate.”
