Ontario will soon experience a rise in minimum wage from $11.60 to $14 per hour due to legislation introduced by Premier Kathleen Wynne. Hitting this record high on January 1st, it will rise up to $15 by 2019.
The rise in wages per hour at first seems quite beneficial to low income earners and their dependents. However, the rise may actually have negative effects on Canadians. A recent Yuen study found a rise in minimum wage was associated with a 4% higher probability of unemployment. One reason for this is that in order to comply with the extra money each hour per employee, companies might find it necessary to cut jobs. The rise also makes low-income workers more vulnerable by increasing a company’s incentive to replace human labour with machines.
Have you ever found yourself ordering off of a kiosk, rather than at the counter at a fast food restaurant? Maybe you were in a rush, or the line was too long. These touch-screen creations speed up the ordering process, increase accuracy, and allow customers to customize their order. However, in that moment, you have chosen to support automatable jobs—jobs in which employers have substituted machines for people.
Other studies have found that increasing minimum wage likewise increases the use of automobile labour over human labour. In other words, decreasing jobs for individuals in the minimum wage sector. In this way, workers from the minimum wage sector may actually be spurred by an increase that is meant for their benefit. Employers often find it easier to substitute their workers with machines, such as the kiosks used at McDonald’s.
The advancement of technology is not only saving businesses money, but also increasing accuracy. The installment of a Kiosk that includes web and mobile application, menu creation, as well as its advanced software costs around $12,000 per machine. By contrast, a year’s worth of full-time work at the current minimum wage of $11.60 per hour comes to approximately 22,620 per year, not including deductions. With the additional rise in minimum wage, businesses will be able to buy two kiosks at the price of one employees yearly salary.
As glamorous as the rise in minimum wage may appear, it’s adverse effect on the number minimum wage jobs available should perhaps have been taken into consideration.
