Minimum Wage Increase, Again!

Image: McDonald's Canada

Minimum Wage Increase, Again!
By Dwayne Reno

It’s been two years since the last wage increase pushed Ontario’s minimum wage to $11.40. Well, Ontario’s Premier Kathleen Wynne announced that the minimum wage will increase two more times to $14 in 2018 and $15 in 2019. OK, I’ll let you catch your breath… now that you have recovered there’s more, she also mentioned new reforms to the rules that govern Ontario workplaces as well. These reforms will accompany the new wage increases as part of the Fair Workplaces, Better Jobs Act. Ok, let’s get right into it.

Everything Is Going Up Except The Cost Of Fast Food
The current wage increases are part of a larger set of reforms issued by the Ontario government. These reforms are part of the Fair Workplaces, Better Jobs Act, and was put together to give the 1.5 million workers in Ontario making less than $15 an hour a livable wage. "People who are working at the minimum wage spend that money. That money goes back onto the economy and that's a good thing for business," said Premier Wynne.

So is the premier’s decision politically driven or is she showing others that Ontario's economy is back on both feet? Well, considering that unemployment did not go sky high the last time around, I’m sure Premier Wynne is betting on the same reaction from the public.

Also, as the cost of living in Ontario continues to increase so will the working minimum wage since the minimum wage and inflation go hand and hand.

Furthermore, a study done by Purdue University in 2015 stated that a $15 minimum wage increase would raise the cost of fast food by 4.3 per cent.

The study also looked at employee turnover rates in the foodservice industry. "Turnover has been one of the more troublesome problems to manage in the foodservice industry,” said Richard Ghiselli, professor and head of the School of Hospitality and Tourism Management. “In 2013, franchised establishments experienced a turnover rate of 93 percent," he said. "People often hypothesize that if you raise pay and offer benefits, turnover will go down. I don't think we answered the question of whether that reduces turnover, but the study showed that if you raise pay and offer health insurance, prices will go up." Richard also added.

Charging your customers more is never a good first option for foodservice operators as consumers nowadays can be fickle. For example fast food operators have been slowing gaining on their fast-causal competitors because of how affordable their menu items are. We can safely say that fast food operators will not be keen on increasing their prices as it may push more of their customers toward healthier fast-casual options. So this upcoming wage increase will only help to speed up the push toward fast food automation happening in Canada and the U.S.

What Other Reforms Can Be Expected
The wage increase is just one of a few new reforms to rules governing workplaces in Ontario. The new reforms will include: 

• Increasing minimum annual paid vacation to three weeks once a worker has spent five years with an employer.
• Prohibiting the practice of paying part-time staff a lower wage than full-timers doing the same job in the same workplace.
• Making it easier for workers in retail and fast food chains to form unions.  

What Does This Mean For Foodservice Operators?
At this stage it's too early to say what is going to happen, will the increase in minimum wage encourage more spending or will it lead to higher unemployment? Tough to say right now, however what we do know is that the large chain operators are better prepared to sustain these reforms and wage increases.

Also many fast food chains have already started to automate their franchises and will continue to do so as I have stated before, HERE. This is a clear sign that fast food operators are choosing innovation to help them remain competitive during the tough times ahead.

Solutions
The majority of independent foodservice operators across Ontario will have a tough time compared to their franchised brothers. It has become unusually common for independents to be the hardest hit during government policy changes. Here are a few ideas to get your independent foodservice business better prepared for what’s ahead:

1. Increase Your Marketing Volumes - One of the two ways to weather the labour cost increase is to increase your marketing volumes. Your costs are going up so must your marketing volumes. Also, Increasing your marketing volumes will let potential customers know you exist and will help them differentiate you from all of your competitors. Furthermore, increasing your marketing volumes doesn’t have to be expensive, HERE.
2. Innovate To Stay Ahead - “Tough times never last but tough people do”. The second and most difficult of the two solutions is to be innovative. Innovation will play a huge role in the days ahead. The Fast food chains such as McDonald’s and Wendy's are choosing automation to help them solve the problem of higher labour costs. Also keep in mind that the foodservice industry by nature is a competitive marketplace. The innovators are always going to finish on top and in better shape than those who choose to remain the same.

Until next time your customers want to know why they should spend money at your restaurant, bar or cafe. So give them the goods!