Ontario Enters Uncharted Waters with a $15 Minimum Wage

Premier Wynne’s government in Ontario has announced a plan to increase the province’s minimum wage to $15 per hour by 2019. This would represent a 32 percent increase in less than 18 months.
Such a rapid increase in the minimum wage could have harmful unintended consequences. Specifically, it will reduce employment opportunities for young and less skilled workers. Defenders of the policy often cite evidence from the United States suggesting that the adverse effects on employment will be negligible.
The impact of a minimum wage increase on employment in a given jurisdiction depends on a many variables, one of the most important of which is the existing prevailing wage levels in the economy.
Research shows that as the minimum wage climbs closer to the market-determined median and mean wage levels in an economy, the likelihood of substantial, economically harmful effects on employment opportunities for young people increases.
This bulletin examines how the new minimum wage in the province will compare to the prevailing median and mean wage levels. It shows that once the minimum wage increase has been implemented, the ratio of Ontario’s minimum-to-median wage will be out of touch with Canadian, North American, and international norms. Ontario will have, by far, the highest minimum-to-median wage ratio in Canada and will be much higher than nearby competing US states.
The move to a much higher minimum-to-median wage ratio heightens the probabilities of substantial adverse employment effects. This is especially true in economically weaker regions of the province where prevailing market wage levels are much lower than they are in Toronto. Specifically, in many regions of Ontario the mean wage is now more than 15 percent lower than in Toronto. The likelihood of severe effects on employment in these regions from a dramatic increase to the minimum wage is especially high.