The Canadian economy is proving it can absorb the shock of a wage increase
by Rachel Ranosa
Ontario is standing up to the sharp wage increase: the province posted an 18-year low jobless rate six months after the minimum wage hike.
Canada’s largest economy created 61,000 new jobs and registered an unemployment rate of 5.4%, down from 5.9% in June and the lowest since 2000, the Labour Force Survey from Statistics Canada showed. The country, on the other hand, added 54,000 net new jobs in July.
Payroll in Ontario also increased 0.8% last month. Paid employment in the province has been climbing fast since 2010, National Bank Financial reported.
“From a very big picture view, the Ontario job market is holding up relatively well given the shock of a plus 21% increase in minimum wages,” said Douglas Porter, chief economist at Bank of Montreal, in an article on The Globe and Mail.
Market observers believe the minimum wage hike comes at a time when the economy is capable of absorbing the shock.
“Demand for labour is so strong and labour market conditions are quite tight,” said Josh Nye, senior economist at Royal Bank of Canada. “Employers don’t have much of a choice.”
Critics of the 21% minimum wage hike, rolled out in January, forecast employers would downsize staff or reduce work hours. A robust labour market, however, suggests businesses are adjusting to increased wage costs.
“Employers seem reluctant to part with their now more expensive workers perhaps due to reported labour shortages, although the persistence of strong sales and profits could also explain the resilience of employment,” said Krishen Rangasamy, senior economist at National Bank Financial.
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