Raise in minimum wage another burden on business during the pandemic

  • Business   Friday, February 11, 2022   Lisa Chester-Hanna

The rate for minimum wage in Ontario was raised to $15 per hour effective Jan. 1, 2022; a welcome move for many employees, but during a pandemic where business is already struggling, it is a burden.

Eddie Matthews, general manager of the Chamber of Commerce in Stratford said that the raise is a double-edged sword. The Chamber is in favour of reasonable compensation and wage increases and realize that workers have been impacted by the pandemic and the higher cost of living.

“Businesses are still dealing with the ongoing impacts of the pandemic, including the increased cost of doing business, and lack of customers.  The way the proposed changes were implemented only gave employers a few months to plan for the changes,” he said. 

The minimum wage announcement by Premier Doug Ford was only last November.

“It’s a bit reckless to bring in major new labour reforms without addressing the possible consequences and economic hardships, such as job losses, rising consumer costs and even service cuts. Many restaurants are having a difficult time surviving so this is very difficult and the customer will ultimately be paying higher prices,” said Matthews.

Restaurants in particular are hard hit with an increase from $12.55 to $15 per hour, a jump of almost 20%. Anthony Jordaan is the owner of Keystone Hospitality Group which represents The Alley, Brch & Wyn, Ken’s French Fries, Ken’s Bru Garden and Braai House, as well as the Little Green Grocer. The raise in minimum wage has a great impact on Keystone Hospitality Group, employing approximately 45 people in the winter, double that in the summer.

“For our restaurants, the impact is substantial. I know everyone thinks it is marginal, but it is not. For both our restaurants combined it’s roughly $750 per week more in payroll costs that’s based on seven to eight servers per week working five shifts per week. That’s in the slower season, in the summer our serving staff more than doubles. So for us it’s an increase of roughly $35,000 to $40,000 per year on already tight margins, not factoring in COVID debt. This cost ultimately has to be carried forth to the customer, we have no choice,” said Jordaan.

“I think it is badly timed, for sure, considering the lockdowns and how much revenue we have lost as restaurants. Also, at 50% capacity constraints, how can we be expected to increase wages as well as pay off any sort of government COVID relief funding that has to be repaid?” asked Jordaan.

Why the hospitality industry was targeted for such a high increase is a mystery. Jordaan agrees that minimum wage on its own is not enough to live off without a supplemental income, but for servers, there are tips that supplement roughly 60% to 70% of their annual income.

“Don’t get me wrong, if anyone thought serving was an easy job, I challenge you to working a Friday night with a full section of twenty to thirty to appease, it’s not easy,” he said.

Bree Schaeffer was a server who fell victim to COVID; she had to leave the restaurant industry due to restrictions making it an unreliable way to earn an income, but would return in a heartbeat with or without the raise if the right opportunity arose. 

“I think the raise can be a good thing but I can also see it being a bad thing. I think society has become so used to tipping that people choose to go into serving based on the idea that they can make a lot of money. It’s no secret servers make good money, but they also have bad days, weeks, and months too. There are a lot of factors that go into restaurants and serving that not a lot of people know. Not a lot of people realize that servers oftentimes tip out to the hosts, bartenders and also kitchen staff. When restaurant goers don’t tip, that tip out money then must come directly from the servers own pocket,” explained Schaeffer. 

When it comes to dining out, she thinks that it is important to remember that people go out to restaurants for the experience and the service, which directly reflects in the idea of tipping. 

“I also think that it’s important to remember that some individuals who go out might only be able to afford the meal. Does that mean they should not get good service? Absolutely not! That’s where I see the minimum wage increase being a great thing for everyone around! It gives an opportunity for everyone to go out and enjoy a meal without the pressure of spending beyond their means to ensure that they leave a good tip,” said Schaeffer.

Jane, (not her real name) works as a bartender and also is apprehensive about the raise in minimum wage and the impact it will have on tips. She thinks the increase will have a negative impact on servers and bartenders because the raise does not come close to what they normally make with supplemental tips.

“One of my main concerns with the increase in the server/bartender wage is how the public will respond about tipping or not. Under the previous system some people already would not tip and had very high expectations and the increase in the hourly wage may further encourage people not to tip. I suspect, many customers attitudes will now come with even more entitlement and higher expectations for servers/bartenders to go above and beyond for them. As someone who works in the industry, I find that extremely frustrating as I bet these customers won’t even tip even though they have these higher expectations. People not tipping already impacts servers/bartenders and will now even more so,” she said. 

As a bartender, prior to January 1 when the raise was implemented, Jane’s tip out was 3% of her food sales. With the raise it is now 5%. The additional $2.45 in wage does not cover the tip out deduction from the bill when a table doesn’t tip, leaving Jane to lose money.

Even for those businesses that paid above minimum wage, the raise has effectively decreased the premium rate benefit to the employee. Such is the case for Spiritleaf Cannabis in Stratford. Allen Tripp, owner of Spiritleaf said, “We already pay more than minimum wage plus offer a benefits package, so we don’t have plans to change anything with the increase. However, I would consider raising our wages proportionately depending on what industry averages are looking like, and if it’s fiscally responsible to do so.”

He agrees that businesses should have been given more notice on timing, particularly considering the pandemic situation.

“I’m a believer in the unhampered market (insofar as we can call it that) since interventionist policy, no matter how well meaning, will have consequences that we need to deal with,” said Tripp.