What you should know about the minimum wage hike
This January in Ontario, minimum wage has jumped up from $11.60 an hour to $14.00, which is a substantial increase in a short amount of time. While this wage increase is a nice boost to the income of minimum-wage earners, increasing a wage that much in that short a space of time will have consequences for everyone, not just the businesses and the minimum wage employees.
“Increasing a wage that much without the immediate cash flow will be a challenge for businesses. To compensate for these extra labour costs, they will likely reduce employee benefits to cut costs, raise the price of their goods and services for the entire public, lay employees off or a combination of all of these. In fact, there is data to suggest that there could be 50,000 jobs cut as a result of this wage hike and the next one to $15.00, coming in January 2019,” ,” says Jeff Schwartz, Executive Director, Consolidated Credit Counseling Services of Canada.
“Regardless if you’re a minimum wage employee in Ontario or not, these wage hikes impact everyone. It’s a good idea to take note of these changes to be proactive in reducing your financial vulnerability, should you experience job loss,” says Schwartz.
It’s time to retool the budget
One of the most likely scenarios for businesses in Ontario is to pass at least some of their new labour costs on to you, the consumer. That means many items are going to cost more right across the board. You may have already started to see these increased costs later last year as businesses prepared for their additional budgets.
It’s time to rethink your budget a little bit, anticipating that you may need to cut back in some areas or even remove things entirely from your budget in order to keep spending within your means.
Plan for the worst
The reality that there will be job losses as a result of this wage hike. Some businesses (especially small businesses) won’t be able to keep afloat with the extra costs. You may or may not be impacted by this, but you should take steps now to protect yourself financially.
Pay down as much debt as you can; stop unnecessary spending and put as much aside into savings as you can to cover costs in the event of a job loss.
For minimum wage earners
Just because you’ve received a big raise, don’t alter your lifestyle. Try to keep your budget at your lower wage. You’ll need extra cash to cover the increased costs of goods and services as a consumer, as well as possibly pay more out of pocket for your benefits if your employer is cutting back on those.
It may be a reality that your employer may have to cut your hours as well in the coming months so although you might be actually earning more, don’t automatically assume that you’ll have more money coming into your household.