Canadian province just established $15/h as the new minimum wage

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To be effective in Ontario in 2019...but $14/h starting in January 2018 which is just around the corner.

Absolutely nuts. Current minimum wage is around $11.75 I believe, so this is a massive jump. I felt like minimum wage was already pretty high personally. I bet we'll see an even bigger swing towards automation. McDonalds already rolled out some self-serve kiosks but soon it will probably make sense to have the process fully automated less one or two managers to oversee everything.

To put it into perspective, I interned at a Big 4 accounting firm in downtown Toronto (high COL) and earned $20/h. Say what you will about the Big 4, but it's basically the BB of the accounting world and at least in Canada it is darn competitive to get in. The point I'm trying to make is that the reward between those who try and those who don't just got significantly smaller. Now obviously those who work in IB/MBB are still paid on another level, but for those who did well in highschool, went to college, and hustled to get $20-25 an hour starting out I think this stings a little, because you're basically being told that unskilled labor is worth almost as much as you. Not to mention the most likely impending loss of jobs and increases in prices that will affect the entire population.

I'm no economist but I feel like there's a line you have to draw somewhere instead of just boosting minimum wage up infinitely. Anyone agree/disagree?

Comments (35)

Best Response
May 30, 2017

Agree that large, sudden jumps like this probably doesn't make for the best economic policy, but minimum wage increases (especially in high COL areas) have been long overdue, at least in the U.S. The empirical data suggests that-contrary to what economic theory may tell us-increasing the minimum wage (at least on the margins) doesn't have a significant impact on employment. More likely, there's some threshold (in real terms) at which it will start to have negative effects on employment, but it's impossible to say where. Time will tell if it's below $15, I suppose.

Either way, however, I think the comparison between the wages of a minimum wage worker and an intern's wages is kind of silly. For one, as someone who worked low-wage jobs in high school and college and has also done my fair share of internships, I can say that the actual economic value that the low-wage worker is providing to their employer is almost certainly higher than an intern. Secondly, much of the compensation to an intern is indirect. You get paid not only in the wages you earn, but also the training you receive and the "potential" for wage growth in the future as a result.

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May 31, 2017

Those are some good points. However I didn't necessarily mean to compare intern wages to minimum wage, I agree that interns are often useless, but at the B4 your intern wage typically = full time pay, and after a couple of months those guys DO provide value (first year charge-out rates are around $240/hour with B4 audit) and typically the kids who were top of their class with accounting degrees take it upon themselves to learn and really contribute to the team.

I'm not disagreeing with you, but the point I was trying to make was somewhat similar to the point people make about college. Say you go to college and spend $50-60K over 4 years just to get out and make 40K a year VS if you finished highschool and immediately started working for 30-35K a year. It would take quite a few years to catch up if you took the college route. It seems like with high min. wage and no accompanying increase in pay for skilled labor, we may have more and more of these cases on our hands where people opt out of further developing skills, and perhaps that slows down the economic growth of the entire nation?

May 30, 2017

What are your thoughts on NYC bumping it to $15.00 for large employers (11 or more employees) by 12/31/18?
Link

Jun 3, 2017

Just my 2 cents, but economically, it makes sense. NYC's current minimum wage is $11.00/hr. Even assuming 40 hours per week, you're still clearing less than $2000 a month. Considering that you're locked into taking the increasingly expensive subway (at least $150 a month) and a definitely expensive bottom tier apartment in an awful neighborhood, all while buying food in NYC? That sounds very close to unsustainable. $15.00 will probably raise prices a little for the average New Yorker, but that'll be offset by the raise in SoL for the city's poorest.
The same wouldn't be true for other locations. I'm from the Midwest and $10.00 seems like it would be a reasonable minimum for most Americans, especially considering that the minimum wage is still primarily earned by younger people there.

May 30, 2017

This isn't as spectacular as it seems.

Given the weak CAD, it's roughly $11 USD / hour.
Consider that Hawaii's min wage is $10.10, and most McDonalds (in Hawaii) start at $12/hr.

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May 31, 2017

EVERYONE PANIC THE RED MENACE IS BACK

May 31, 2017

Big4 pay is sh*t , everyone knows that. Their (salary/effort to get) ratio makes it not worth to even try. Go to a bank.

You killed the Greece spread goes up, spread goes down, from Wall Street they all play like a freak, Goldman Sachs 'o beat.

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May 31, 2017

There are two points you are bringing in your discussion here:
1) Is the minimum wage increase too high?
2) Is the minimum wage to Big 4 salary too close?

For the first question, it is definitely true that a ~20-25% increase of minimum wage will impact the market for low skilled labor. Now proponent of minimum wage increases will say that it is long overdue. The reality is there is no true definition of what the minimum wage should be. Should it be relative to poverty levels? Should it be enough to rent 1 bdr apartment? Etc. Etc. Overall though relatively low inflation is a good thing. Minimum wage inflation has lagged the economy the past 40 years. Increase in minimum will put some inflation into the labor market.

The second question is actually interesting. I think you can look at it in two ways. One, the value of an intern or first year associate at a Big 4 is quite low. You are spending most of the time learning something that you hopefully will master in 3-4 years. It an investment price by the Big 4. On the hand, you can master and be very productive at a fast food place within 2-3 weeks. I think your "true" value for a Big 4 is generally at least 3 years out. That's the salary you should compare to McDonald's. The second part is overall (not necessarily this case) it shouldn't matter whether a job is more selective than another one. That's a market inefficiency. People are paid for the value of their productivity. If being productive at McDs is more valuable than being productive at Big 4, so be it.

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May 31, 2017
freroht:

There are two points you are bringing in your discussion here:
1) Is the minimum wage increase too high?
2) Is the minimum wage to Big 4 salary too close?

For the first question, it is definitely true that a ~20-25% increase of minimum wage will impact the market for low skilled labor. Now proponent of minimum wage increases will say that it is long overdue.** The reality is there is no true definition of what the minimum wage should be.** Should it be relative to poverty levels? Should it be enough to rent 1 bdr apartment? Etc. Etc. Overall though relatively low inflation is a good thing. Minimum wage inflation has lagged the economy the past 40 years. Increase in minimum will put some inflation into the labor market.

But there is a true definition of what minimum wage should be. The true minimum wage is zero.

May 31, 2017

I don't understand why everyone gets so up in arms about the increase in the minimum wage, be it in the US or Canada. We all get it, when you were a kid you got paid a hay-penny for a 25 hour shift in the corn field or on the auto-press, but i digress...

Look at it this way, if you had the option to roll up to McDonald's and the options were are two fresh-faced workers making $9/hr (aka the what you have now) taking orders/serving food, or a single more skilled worker in a more service/oversight type roll at $15/hr and two digital order menus that cost $1.50/hr/machine to maintain, you're going to pick the second option every time. So now you have one person earning a "living wage" (lets just assume that $15/hr is the magic number), as well as at least one person who is ancillary to the process making money on the upkeep of the machine.

Everyone acts like increasing the minimum wage means that we also keep the same amount of jobs, which just isn't possible. Now obviously this creates a general strain on the number of jobs that are available/currently exist, but in my (very possibly misguided opinion) all it does is chip away at the class of people who are working poor (which i can assure you is the worst type of cyclical/personally degrading poor there is). There will always be people without jobs, so why not actually pay the ones that are able to secure employment even if it is for something that is considered a menial task?

Obviously this question tends to get decisive along party lines and i am trying to avoid that, clearly my very simple example above doesn't account for the FT/PT worker discrepancy, as well as the cost of insurance/healthcare, and even other more nuanced stuff like would that actually drive the cost of goods/service up and the initial shock to the system that a sudden 25% increase in worker salaries would entail. But i think that's kind of the point, there isn't a correct answer to these types of questions, the answer that works for you (person working in finance), probably wont jive with another (the unemployed/current fast food worker).

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May 31, 2017

You should be upset at Big 4 for paying you slave wages instead of being pissed at MCD workers.....

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May 31, 2017

Lol who gives a shit about starting pay or pay as an intern. The idea of Big 4, and most skilled jobs that require a college degree, is the potential for salary growth. Some guy making $15/ hr flipping burgers at McDonald's could be making that same pay (with few increases) five years from now, additionally, he is not building any skills to be more valued outside of flipping burgers. Stop fucking whining, $20/ hr isn't bad for at all for an intern.

May 31, 2017

The rioting will start when the price of Maple Syrup increases!

May 31, 2017

All kidding aside lookup the maple syrup cartel in Canada, i think Bloomberg did a piece on it last winter, and yes it is exactly what it sounds like.

May 31, 2017

Guessing it's like the sugar cartel in South America? Control the prices and supply?

May 31, 2017

They should have limited the increase to the GTA or at least, the Golden Horseshoe. It's completely stupid that it's going to cover the entire province as the difference in COL are HUGE.

May 31, 2017

Well, this will continue to push Toronto's real estate prices higher.

May 31, 2017

You gotta be kidding me, you think minimum wage earners are what's driving the RE market in Toronto? That's ridiculous.

May 31, 2017

Lol if you think people making $15 an hour are going to impact a market where the average home price is nearly C$1M (including condos). The issue is more a concentration of wealth, foreign investment and still relatively favourable mortgage terms.

May 31, 2017

Just flipping around realtor.ca, there are plenty of 1 bedrooms in the DT area in the $400-450k context. If you move further out you can find stuff in the $350k context as well.

With an influx of people now making $15 per hr. / $30k a year salary, IMO it's going to increase baseline demand for housing and set a floor (or at least provide resistance) for downside movement in prices. If parents chip in for a down payment a $350k 25-yr. mortgage is serviceable by a young couple both making minimum wage (combined $60k salary).

And because of this new floor / resistance, I think the risk, or at least expectations for a "housing crash" that many people are waiting on is reduced, which could lead into more people being more open to entering the market and buying. There are tons of people sitting on dry powder just hoping for a crash where they can pick up properties on the cheap. Instead, I think some of these people would just buy now, if they think the odds of a housing crash happening is reduced.

From another angle, increased minimum wage is going to increase rent. As such, housing prices would also increase if cap rates were maintained.

Just my thoughts anyways. I'm curious on other's opinions.

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May 31, 2017

So the Canadians are making 7.50 USD/hour now?

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May 31, 2017

I hate to admit it but the attractiveness of living in Canada has declined over the past few years. The commodity bull cycle is long over, Toronto and Vancouver home prices are ridiculously high (even adjusted for FX), the CAD continues to weaken so international products and travel is much more expensive, taxes continue to increase, and the general economy apart from real estate / financial services is stagnant. The government can keep trying to prop up the economy and sentiment by keeping rates low, raising the minimum wage, promising "to create" jobs by increasing fiscal spending, but these measures if anything will continue to constrict long-term economic growth.

As a Canadian, I am proud of the inclusive society and stable government we have (one of the best countries to be born in), but as an ambitious young professional I'm having second thoughts on whether I want to stay here long term. A lot of my professional peers are making low FX adjusted, post-tax incomes with a large portion of $$ going to pay for the mortgage on the near ~C$1m semi-detached home in second tier suburbs like Brampton or Milton. Plus the winters are unbearable.

If the real estate market crashes (back to reasonable levels) and oil/metals come back I may reconsider.

"A real entrepreneur is someone who has no safety net underneath them." - Henry Kravis

May 31, 2017

Yes, but I don't know if you've seen the US lately.....

On top of that it remains to be seen how Brexit will impact the UK and in general terrorism in Europe seems to be escalating (American's may scoff at this but we have almost none in Canada). Those are the easier alternatives to Canada as most others are either quite a bit different culturally or require a language outside of English so there are more barriers to entry. I suppose Australia is an option with a similar economic focus to Canada but it's an island full of criminals with a significant concentration of the worlds animals that can kill you. Agreed on the winters though. Fack them.

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Jun 2, 2017

I too am in the same position. A question I ask myself is how can finance in Canada compare to that of New York Chicago SF even some commodity funds in Texas (mainly Chicago/ny tho). Imo there is no economic benefit/career upperhand (all else being equal) to being in Canada. What do you think?

May 31, 2017

I would agree with that. In a strictly economic sense, there's no real benefit to being in Canada over any of the cities you mentioned. Your career earnings will generally be higher in the US as the ceiling is higher but your COL will also be quite a bit higher in many of the cities you mentioned.

I think we offer a lot of other things but I wouldn't say financial benefit is number one on the list.

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May 31, 2017

There should be no minimum wage tbh

Jun 1, 2017

If you want to argue that we shouldn't raise the minimum wage too high or too fast because of the effect on employment. I would disagree with you, but you have a legitimate argument. This no minimum wage bs ignores the last 200 years of Western society and the horrid living conditions people lived in Victorian England or the Gilded Age.

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May 31, 2017

It's always easy to tell when an election is around the corner.

Classic Liberal writing cheques her ass can't cash.

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Jun 2, 2017

Another of Wynne's disastrous political ploys....

Jun 2, 2017
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Jun 3, 2017
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