SOURCE: Canadian Centre for Economic Analysis

Canadian Centre for Economic Analysis

October 03, 2017 13:09 ET

CANCEA Report: An evidenced-based dialogue on Bill 148 and minimum-wages in Ontario

TORONTO, ON--(Marketwired - October 03, 2017) - The scheduled minimum wage increases over the next 15 months represents one of Ontario's largest socio-economic experiments. As an independent analytics group that is outspoken on the dangerous culture of decision-based evidence-making that is prevalent in Canada, we were pleased that the Keep Ontario Working Group had chosen us to conduct such important work. We faithfully report what we see.

Our risk assessment approach is unique, as the report review by Dr. Morley Gunderson reads "One of the potentially important contributions is the application of Agent Based Modelling to the evaluation of labour market programs. On the plus side, this can be a potentially important tool for assessing risk and rewards associated with proposed legislative changes like the ones under Bill 148. On the negative side, it is not "user friendly" and can be extremely difficult to follow for persons more used to more conventional evaluation tools and especially ex poste evaluations of causal impacts."

Today, Professor Jim Stanford sent us a letter that was coincidental with his opinion piece in the Globe and Mail. We were pleased with his genuine concern for "how your research (and other recent studies) has been portrayed in media coverage and other commentary". On that point we agree.

Our work is an exercise in risk assessment. This had involved an analysis of all the conceivable business and household behaviours that Bill 148 could induce given it creates a $23-billion cost challenge over two years. As we report, the incremental job outcomes for just minimum wage increases ranges in the extreme from 85,000 jobs potentially created through to 255,000 jobs at risk (page 107). It then becomes a question of who will be successful in avoiding the costs (businesses, consumers, employees or some combination thereof).

We reviewed the literature for sampling methods, techniques and context. As directed by the lower bounds of Ontario academic literature, for a 10% increase in minimum wage, we chose scenarios that were consistent with the different business, consumer and employee consequence combinations. Within these combinations there is 102,000 jobs at risk (minimum wage increase only); all of Bill 148 yields 185,000 jobs at risk with Ontario households potentially paying upward of $1,300 per year extra.

Our preliminary results were released on August 14, 2017. In the spirit of risk management, a rational debate should have ensued around Bill 148, but it didn't. A test posed in our report (page 109) demonstrates that the debates around minimum wage increases in Ontario appear to be irrational, with our results being persistently misrepresented by the ideological left. Despite an invitation to have a personal tour of all assumptions, methods and results on August 15, 2017, such commentators declined and have yet to provide their own economic analysis, peer reviewed or otherwise, that includes all groups affected including employees, employers and business owners, consumers, and all levels of government.

Risk assessment and management is dependent upon a culture of open, evidence-based communication. It is essential if sustainable policy solutions are to be developed and implemented. The results of our analysis performed determines that there is a significant amount of economic risk associated with Bill 148 and a rational debate should occur. While 89% of minimum wage increases will go to households without any children under the age of 18 years, small businesses in Ontario with become under extreme pressure, becoming precarious themselves. They employ 57% of all private Ontario employees, of which small businesses make up 71%, yet they will have difficulty managing given their inability to risk manage through location, cost and customer diversification. Large businesses may "wait them out" in anticipation of greater future market share.

Professor Stanford has extended an invitation to discuss our approach which we welcome. As to the deliberately framed wager, the impact of Bill 148 is not an issue that we want to appear to be light hearted about. There are better and less risky ways to ensure Ontarians have the living wages they need. This should be debated as a process of risk management, a process that separates modern times from the past.

CANCEA's fair and objective analysis of Bill 148 can be found at: Potential Economic Impacts of the Fair Workplaces, Better Jobs Act (Bill 148)

ABOUT CANCEA

CANCEA is a state-of-the-art interdisciplinary research and technology organization that is dedicated to objective, independent and evidence based analysis. They have a long history of providing holistic and collaborative understanding of the short and long term risks and returns to our sustainability and prosperity. The study was conducted using CANCEA's modern agent-based modelling and linked-path data approach to economic analysis.

Contact Information

  • To arrange an interview or for more information, please contact:

    Paul Smetanin
    President
    paul.smetanin@cancea.ca
    Phone: 416.782.7475 ext. 401