Increasing the Minimum Wage in Ontario: A Flawed Anti-Poverty Policy

Main Conclusions

• As part of its Poverty Reduction Strategy, former Premier Kathleen Wynne’s government was planning to raise the minimum wage from $11.60 in 2017 to $15 per hour by 2019. But, raising the minimum wage is not an effective way to alleviate poverty, primarily because the policy fails to provide help targeted to families living in poverty.
• In 2015, the latest year of available data, 90.8% of workers earning minimum wage in Ontario did not live in low income families. Though counterintuitive, it makes sense once we explore their age and family situation. In fact, most of those earning minimum wage are not the primary or sole income-earner in their family.
• In 2017, the year before Ontario was to increase the minimum wage, 59.2% of all minimum wage earners were under the age of 25 and the vast majority of them (86.3%) lived with a parent or other relative.
• Moreover, 17.8% of all minimum wage earners had an employed spouse. Of these, 95.7% had spouses that were either self-employed or earning more than the minimum wage. Just 2.1% of Ontario minimum wage earners were single parents with young children.
• In addition to ineffectively targeting the working poor, raising the minimum wage also produces several unintended economic consequences to the detriment of young and inexperienced workers. These include fewer job opportunities, decreases in hours available for work, reductions in non-wage benefits, more automation, and higher consumer prices, which disproportionately hurt the working poor.
• A work-based subsidy is a more effective policy since it better targets the benefits to those in need without these negative economic consequences.