Small business owners in Ontario, Canada’s most populous province, say they are raising prices to cover the increase in the minimum wage that they must pay to their employees.
The provincial Liberal government is raising the minimum wage to $14 an hour on January 1, 2018 and then to $15 an hour on January 1, 2019. That represents a total increase of 32% from the current rate of $11.60 an hour. Several small business owners featured in the Canadian media say they are covering this increase by raising the prices they charge for goods and services.
Andrew Violi, President of Mellow Walk Footwear, a Toronto-based manufacturer of shoes and boots, said the higher minimum wage will add about $250,000 in expenses in 2018, and that his company is planning to eliminate up to five of its 60 employees as a result. He added that additional expenses after the layoffs will be passed onto customers in the form of higher prices.
Large retailers such as grocery store chains Metro and Loblaws have also said that consumers can expect higher costs as a result of Ontario's minimum wage hikes. Ontario's move is being closely watched by Alberta and British Columbia, which are also poised to increase their minimum wages to $15 an hour in the coming years.
“We are on some new ground here,” Dan Kelly, Chief Executive Officer of the Canadian Federation of Independent Business, told The Globe and Mail newspaper. “We've seen minimum wage increases for years ... but not this rapid of an increase over a shorter period of time.”
For many businesses, raising prices could be risky. “You take a deep breath when you do it, not knowing if your consumer is going to stick with you,” said Mr. Kelly. “I think there will be a lot of businesses that will try first, but are going to find that will lead to a reduction in the demand for their products and services. That will take an even further toll on wages and hours.”
There is no right time for small businesses to raise prices, said Steve Pulver, a professor of entrepreneurial studies at York University. He recommends that businesses phase price increases in gradually and be transparent about why they're higher.
“If someone asks, you just say 'We've held our prices for this long, wages went up and we had to raise our prices,'” he said. “Do it as slowly as you can afford to.”