Increase in minimum wages have many effects on the economy. Where it increases the standard of living of workers, decreases poverty, and diminishes inequality, it equally increases the rate of unemployment, increases poverty level, and destructs businesses. This is because an increase in the minimum wage forces business to elevate the prices of their goods and services to be able to pay workers with higher wages. An increase in minimum wages might result in reduced number of staff, since business owners are going to have to pay workers much more that they used to. Business owners hope to keep their production costs low, and are likely to disapprove an increase in the minimum wage. With higher paychecks, workers will have an increase in their buying power, which in the end benefits businesses and the economy as it contributes to the nation’s output. This will result in a multiplier effect of their expenditures on Ontario’s economy, which leads local businesses to develop and create more employment opportunities in Ontario.
Therefore this will have a beneficial impact on Ontario’s economy and it’s employment rate. GDP, which is the total value of everything produced by all the people and companies in the country, will increase since there would be more transactions in the economy, and there would be an economic growth, which is the increase in the inflation-adjusted market value of the goods and services produced by an economy over time. It is conventionally measured as the percent rate of increase in real gross domestic product, or real GDP.However, there are a few negative effects of a higher minimum wage.
Small businesses employ minimum wage workers and tend to make small profit. Higher minimum wages will force these businesses to hire less workers since their cost to operate will increase and the businesses may not be able to maximize the production of their goods and services. Along with that, business owners may be forced to lay off employees to pay for the increased cost of operations, due to a higher minimum wage. Higher minimum wages may lead businesses to shut down due to small profits.
This can negatively affect small businesses and the employment rate. Another possible negative effect of having higher minimum wages is that businesses might decide to replace their workers with automation, since robots will work for a longer period of time, for a cheaper price and much more efficient and faster than a regular worker. There are several businesses where machines are competition for humans.
The fast food industry is adopting new technology in their business with the idea of self-serving kiosks. Therefore, if higher minimum wage convinces businesses to replace human workers with automation, it may negatively affect the people that were targeted to benefit from the increase in the minimum wage. Fast food restaurants such as Wendy’s, McDonald’s and retail stores such as Walmart have already started introducing self-service kiosks in their stores. With the help of automation, businesses can then hire fewer workers, which will cause an increase in unemployment. However on the positive side, automation is opening up many job opportunities. Overall, the increase in minimum wages from $11.35 to $14 per hour will definitely improve the lives of low-income earners in Ontario.
With higher minimum wages they are able to afford an improved standard of living and greater purchasing power which will in the end have a positive impact on Ontario’s economy and the employment rate. Also, when the minimum wage is combined with the working income tax benefit (WITB), a tax credit for low-income workers that is later refunded, it will allow them to experience a higher standard of living. However there are negative effects of having a higher minimum wage, for example businesses would be suffering, there would be a reduction jobs, and in some cases workers would be replaced by robots.