B.C. eyes turn to Ontario's job numbers after 20% increase in minimum wage

Job losses in Ontario attributed to people leaving the labour force

Yesterday, the B.C. government revealed its plan to increase the minimum wage to $15.20 an hour by 2021. As if to tempt fate, the announcement came less than a day before January job numbers were released – data that could provide insight into the effects of Ontario’s recent 20% increase in minimum wage, which was effective the beginning of this year.

The headline in Ontario is a net loss of 51,000 part-time jobs, though this seems to be a result of people leaving the labour force rather than job loss from the increased minimum wage.

“Some will look for evidence that a huge minimum wage hike in Ontario was the driver of the poor labour survey. The fact that Ontario shed more than 50,000 jobs, all of which were part-time and young, fits that story,” said Avery Shenfeld, chief economist at CIBC. “But leaning against that theory, Ontario’s unemployment rate fell by 0.1% to 5.5% in January from 5.6% in December. The job decline was also entirely part-time work, which fell by 59,300 jobs. The province experienced full time job gains of 8,500.

With a net loss of 51,000 jobs, you would expect an unemployment rate to increase by 0.67%. However, since people left the labour force in large numbers, the unemployment rate remained relatively unchanged. The amount of people working or looking for work fell by 0.3% in January, which accounted for the large declines in part-time employment.

The fall in the amount of people participating in the labour force is strange, said Shenfield, in that with increased wages you would expect more people to enter the workforce, not less.

National wage growth increased to 3.3% nationally in January, up from 2.8% from December. While the wage growth increase was relatively balanced across provinces, RBC senior economist Nathan Janzen said it was probably related to the hike in the minimum wage in Ontario. While wage growth increased, it was not to the extent economists were expecting.

“Wage growth heated up this month, but did not accelerate to the pace expected given the minimum wage legislation being implemented in Ontario,” said James Marple, TD senior economist. “Still, more gains may be on the way in the months ahead, with the metric likely to be closely watched going forward.”

It’s important to not look too deeply into a single month’s worth of labour data describing the vagaries of labour market statistics as creating noise. According to Shenfeld, at least six months of Ontario job data will be needed to make a conclusion on the effects of the 20% minimum wage increase on the labour market.

British Columbia is following with a four year timeline to reach a $15 an hour minimum wage, double the time taken in Ontario. British Columbian eyes will continue to turn to Ontario to see how its minimum raise increase, somewhat unique in Canadian history because of its size and speed of implementation, will affect its labour markets.

Dan Baxter, director of policy for the B.C. Chamber of Commerce, told Business in Vancouver’s radio show that he would like the uncertainty taken out of minimum wage policy by having it chained to inflation.

“Hopefully once we hit that $15 minimum wage we really want to get out of the politics of minimum wage and really get it tied to some sort of predictable formula whether its consumer price index (CPI) or some variation of CPI,” he said.