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Take The Politics Out of Managing the Economy Please!

Posted on June 26 by

The Government of Ontario is proposing radical changes that will affect business and employees across the province. With little warning, negligible consultation, and economic impact research, the government is setting the province in a new direction. Here is a quick summary of five key changes:

  1. Hiking the minimum wage to $14 by January 2018 and $15 by January 2019
  2. Making all businesses offer up to 10 days of personal emergency leave, of which a minimum of two are paid
  3. Extending minimum vacation entitlement from 2 weeks to 3 weeks for 5 year seniority with the same company
  4. Making it easier for unions to organize in the private sector workplace by removing the secret ballot vote and establishing card-based certification
  5. Significantly increasing fines for businesses and hiring 175 new employment standards officers to police the workplace.


While business and economic history have clearly demonstrated that free market supply and demand equilibrium is the best for a healthy economy, there will always be arguments for both sides. On one side some argue that increasing the minimum wage will be the best thing to happen to workers and to businesses and the opposing view that raising the minimum wage artificially will result in economic misfortune.

Whether you belong to one view or the other is debatable, but the introduction of all five new changes lead to believe that the government objective is to influence votes prior to a general election within a year. Giving everybody a raise, an extra vacation and making unions happy may indeed get some votes but ultimately the economic health of our province and country does not depend on votes but on good governance and management of our economy.

The vast majority of small and medium size business owners I am in contact with want to pay their employees better than the industry average; most want to provide benefits that reduce turn-over and all want to keep prices under control to survive in a more competitive market place. It is always how you do it that make you successful. Henri Ford famous quote is a good reminder: "It is not the employer who pays the wages. Employers only handle the money. It is the customer who pays the wages."

The proposed increase of the minimum wage is a gigantic 32% in less than eighteen month. The combination of the new changes will result in businesses reducing their working hours, increasing prices, tightening their hiring practices and seeking more aggressively technology to replace workers. Unions have been steadily losing membership and influence for very well known reasons. Ultimately, they need to re-invent their relationship with business and seek a win-win relationship rather than a continued confrontation and adversarial relationship. Finally, a province that does not promote business will not receive investments which are the life blood for a growing economy. Ontario manufacturing base has been declining for some time and a weak Canadian dollar has been slowing the decline but the new direction of the Ontario government will not help.

The track record of the province for the last few years with reference to deficits and pilling up of debt has been poor by any measure; we are seeing now a further acceleration in the wrong direction. Standard & Poor downgraded Ontario credit rating in 2015 and Fitch had done the same in 2014. Every downgrade means a higher cost for borrowing. We need to reverse course and seek to be good stewards of public finances. This is the best way to win votes. Please take the politics out of managing the province economy.

Hugh Latif is a management consultant and author of Maverick Leadership.

 

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