More Money, More Problems
While the new minimum wage’s effect on the economy remains to be seen, the lacklustre response of some Tim Hortons franchisees is a model for how not to respond.
As of January 1, 2018, the minimum wage in Ontario has gone up to $14/hr, significantly more than the previous rate of $11.60/hr. The increase is one step toward enabling minimum-wage workers to improve their quality of life.
However, early reaction to this raise has been negative. Several franchisees of Tim Hortons responded by eliminating their employees’ paid breaks, cutting health benefits, and getting rid of periodic perks such as free coffee and uniforms. Public backlash to this move has been swift and strong.
While these actions are not illegal per se, they show a spiteful side to a Canadian franchise that has long been viewed as a symbol of wholesome Canadian values. Tim Hortons has effectively developed its brand into an icon of Canadian culture, a champion for children and a place where folks meet to share good food. But what of those values now that some of its franchisees have proven so ungenerous to the employees who help to secure the brand?
In fact, the very first franchise location to issue these changes is owned by children of the Tim Hortons co-founders: wife and husband, Jeri Horton-Joyce and Ron Joyce Jr. The heirs to the multibillion-dollar company claim they are unable to afford the new wage increase without making cuts. City Life reached out for a response, but Tim Hortons corporate refused to comment at this time.
Chris Buckley, the Ontario Federation of Labour (OFL) president, finds it “offensive” that employers are being “vindictive and disrespectful to workers because they had to give them a raise” — a raise that is now law in the province of Ontario.
As reported by the Toronto Star on January 12, these rogue franchisees insist that Tim Hortons’ parent company, Restaurant Brands International (RBI), needs to raise the price of items or cut costs in order to eliminate the cutbacks that the franchisees have made (since then, Tim Hortons Inc. has raised the price of its breakfast items by 10 to 20 cents, which they claim is not connected to the increase). Buckley calls the franchisees’ claims a “cop-out,” as the majority of franchises have not disadvantaged their employees due to this raise. He explains “What I find offensive is the government announced on May 30th their plans to increase the minimum wage across the province. Since May 30th, these franchises have had an opportunity to try to work out their business plan…. They chose not to.”
This is not a point to be overlooked. The wage increase was not sprung upon businesses at short notice. The complaining franchisees had several months’ time to raise concerns and come up with ways to offset the changes in wage, but instead, they decided to take it out on their employees. Since other businesses and, in particular, other Tim Hortons locations have not made similar cuts to employee benefits, what excuse do these outlier franchisees have?
RBI has come out against these actions, saying, “It saddens all of us to see [the brand] jeopardized by the recent news stories and comments on social media caused by the actions of a reckless few.” But these words are little more than a PR move unless something changes for the employees in question.
Kaylie Tiessen, economist and policy analyst at Unifor, says, of the effect of these cuts: “This will likely have a negative effect on worker engagement in their job, worker well-being, and could actually have the opposite effect of what they intended. Perhaps then the wage bill is technically lowered, but if folks aren’t as engaged in their work, unable to take breaks and reinvigorate themselves for the next part of their shift [that will have a negative impact.] Those are clearly considerations that weren’t taken into account.”
Whereas these cuts are a detriment to employee morale and productivity, the mandated wage increase has many benefits associated with it. “We see less turnover, higher engagement of the workers who are employed in that environment, and then productivity goes up. You can perhaps serve even more people than you were before,” Tiessen says.
While the raise necessitates an increase in cost, that cost is absorbed in many ways. Sheila Block, senior economist and long-time research associate and participant for the Canadian Centre for Policy Alternatives (CCPA), says, “Part of that cost is going to be increased productivity from workers, so that does not have an increase in cost. Part of that is going to be a decrease in profit as we shift income from profit to labour. Part of that is going to be passed through to consumers at slightly higher prices.”
Block gives the example of over a century ago, when the labour workforce shifted to no longer include children. “That shifted the cost structure for employers. Those changes had to be absorbed and accommodated, but the sun continued to rise and set. We now have a similar situation where people who work full time, full year, should not be living in poverty. That is going to require adjustments on the part of employers. The dynamism of the business sector means they are going to figure it out, and some of them will do it in a way that has the potential to harm their relationship with their customers and their reputation, in the way Tim Hortons is, and others will find more efficient ways to accommodate it.”
The OFL and Buckley encourage the franchisees who have found more efficient ways to offset costs to publicly state their opposition to the actions of the rogue franchisees, even take the issue to RBI themselves, as the OFL plans to do, and fight for the workers’ rights.
“It’s important for people to remember that, for over a decade now, Ontario has lost an excess of 500,000 good-paying, permanent jobs. They have left this province and they are not coming back. When you look at the employment landscape across Ontario, we are predominantly made up of a service sector and retail economy. And if that’s the type of economy and that’s the type of jobs that we have in the province, then those workers deserve to have an increase in pay and to have stronger rights in regards to employment standards and labour law,” Buckley says.
“It’s not the solution for everything, but it will make concrete progress toward reducing income inequality in the province” — Sheila Block
In the ongoing conversation about the increased minimum wage, part of the popular narrative is that jobs will be cut and prices will go up, so the raise will be no more than a face-value maneuver that moves the goalposts farther away. But research says otherwise.
Speaking on more than 20 years’ economic research, Block says, “Increasing the minimum wage does not have a negative impact on employment. But what it does do is decrease income inequality. By raising the labour market income of people who are at the bottom of the wage spectrum, what it does is raises up the bottom, which is good for income inequality.”
Tiessen adds, “This is going to put more money in the pockets of people who are working and currently working low-wage jobs. The vast majority of economic literature on the subject of jobs finds that there is very little or no statistically significant effect on the level or number of jobs when the minimum wage is increased.”
A recent report released by the Bank of Canada has been “widely misinterpreted by the media,” says Block. “What it said was, there would be a 0.1 per cent increase in consumer prices; that was a national figure as a result of the increase in minimum wages. So we’re in a very low-inflation environment. A little bit of an increase in prices is something that absolutely can be absorbed.”
Tiessen concurs. “Certainly,” she says, “the studies that are out there right now that have been floating around in Ontario are overblown and actually talking about something that is not a loss of jobs, but a slower growth of jobs. That in the media has been reported incorrectly as well.”
Buckley calls these tactics and misreporting fearmongering. He gives a recent example where a similar raise happened in Alberta with no massive negative ramifications. “People need to understand: the sky is not about to fall. This is about helping workers. This is about helping workers have a decent living and have rights in the workplace. We all should want that for every worker in this province.”
Certainly, the crux of this issue should not be how the wage increase will affect profit margins, but how it will benefit people overall, and whether it will take us closer to creating the Ontario that we want to live in. The increase is a step toward giving full-time workers a chance at a living wage (which varies between cities, but in Toronto is $18.52/hr minimum). While the raise to $14 and the scheduled raise to $15 next year are great first moves, there is still much ground to make up.
As Block says, “It’s not the solution for everything, but it will make concrete progress toward reducing income inequality in the province.”