Minimum wage increase misses the mark

APRIL 1, 2008

TORONTO – Dramatic increases to Ontario’s minimum wage are putting the squeeze on restaurant owners and missing the mark when it comes to alleviating poverty. 

Most minimum wage earners in the restaurant industry are secondary income earners.  Close to 80% of restaurant employees earning minimum wage are under the age of 25, and 78% are working part-time, according to Statistics Canada.   Nearly two-thirds (63%) are students.

“Those who want to use minimum wage as a tool to fight poverty are missing the mark, at a huge cost to small business owners in Ontario,” says Elaine Flis, Ontario Vice President for the Canadian Restaurant and Foodservices Association (CRFA).  “Numerous economic studies have concluded that targeted tax relief, credential recognition and job training programs are far more effective ways to reach those in need.”

A slowing economy, a drop in tourism and skyrocketing costs for essentials such as food, utilities and insurance have left restaurant owners with little room to absorb the recent 9.4% minimum wage hike, which will ratchet up all restaurant wages and cost the average restaurant operator an extra $11,400 a year.

Restaurant revenues in Ontario have been flat since 2000, with just 0.5% real growth in sales compared to 10% in the rest of Canada. The before-tax profit margin for the average Ontario restaurant is now the lowest in Canada at just 2.9% of sales -- or $21,600 a year.  

“Employers now face the unappetizing prospect of increasing menu prices – which is a tough sell to price-sensitive consumers – or cutting hours or jobs,” says Flis.

The vast majority of Ontario’s 34,700 restaurants, bars and caterers are locally owned and operated small businesses.  The restaurant and foodservice industry generates 4.0% of the Ontario economy.

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