By Suzanne Sears, Best Retail Careers International Inc.
Despite all the teeth gnashing about extra wage costs, there are some real positives to expect in 2018 when the Ontario raises the minimum wage to $14.00 per hour that are not just about the trickle down economics of more money in the hands of consumers to spend. Employers simply can’t fill these jobs right now at $11.40 per hour. Jobs that once “weren’t worth taking”, from the employee point of view, now will be.
(Suzanne Sears)
From a recruiter’s’ point of view, the absolute hardest roles to fill are the very lowest paid jobs.
Check any corporate sites or job posting boards and you will find thousands of vacancies. In Toronto, there are over 500 fresh new public postings this month for what are essentially minimum, or close to minimum wage positions…on one job board alone! Walk into any big box store or franchise outlet and you will surely see ‘Apply Now’ signs.
The battle to fill these positions is on-going. Not only are these jobs hard to fill, but they are next to impossible to keep the turnover at less than 20%. Many retailers report up to 80% annual turnover.
When you factor in training costs for a new entry level hire (about $5,500.00 average) plus recruiting costs, these roles are vastly more expensive to fill than even slightly more senior roles.
So what is going on here?
A full-time minimum wage position delivers $1,690.00 a month in net income. If we focus on the Toronto market, where a 1 bedroom condo is now $2,000.00 per month (July 2017), you can clearly see the problem. Rent is up 11%. Wages have not kept pace.
Take this problem one step further. Who exactly fills these roles?
“In 2013, 39.8% of minimum wage workers were between the ages of 15 and 19; in 1997, it was 36%. 50.2% of workers in this age group were paid minimum wage in 2013, an increase from 31.5% in 1997. Statistics Canada notes that “youth, women and persons with a low level of education were the groups most likely to be paid at minimum wage.”
It’s easy to see that it’s our women, youth and least educated that are falling behind drastically in our economy. It is now to the point where they cannot even afford to take these jobs. They can’t afford to live where the jobs are. They cannot afford the transportation to even get to work. A bus pass in Toronto is about $150.00 a month (that’s if you stay only in one zone). Let’s not even try to factor in the costs of child care. That’s just a non-starter when it comes to “minimum” wage roles.
Far from pushing these people out of the job market by reducing the numbers of jobs available to offset the wage increases, these people aren’t in the job market anyway! They are working. They are working in the underground cash economy because it’s simply not possible to accept a tax paying position.
Benefits of a $14.00 an hour job begin with an income of $2,863.00 per month. That’s nearly a living wage even in Toronto and suddenly it’s worth taking a retail job for many more people.
Vacancies and turnover are the most costly, yet controllable expense for retailers.
Without quoting the actual M.I.T. study right now that analyzed it, a vacancy costs a retailer about 4x the base monthly salary of the person who should be in the role: costs to recruit, costs to hire, costs to train, costs in lost sales while the role is vacant, costs in lost productivity to the existing staff shouldering the excess workload.
What retailers will experience very quickly once the base level wages rise is simple….their vacancies will shrink. Related costs will go down. Sales will go up.
The benefits to society are obvious. The benefits to retailers are even greater.
For more information on Suzanne Sears and Best Retail Careers International Inc. please visit www.brcareers.com.
To connect with Suzanne directly:
Phone: +1 (289) 795-6150
Email: best-retail-jobs@live.ca
*Partner Content. To work with Retail Insider, contact Craig Patterson at: craig@retail-insider.com.
How is it fair to tenured staff at these retailers that started at a considerably less hourly wage and have had to work 2-5 years to get up to where the new hires will now start at? If an employee started with a retailer within the last 5 years there’s a good chance they could have started at $10-$13 per hour. They have had to work hard for their merit increases. In some cases, employees who are currently at $14-$15 per hour, could have put in at least 5 years with their company to get to that rate. Then someone new comes along and starts at $14 per hour. In my opinion this will still cause a lot of turnover for the retailers. Loyal, knowledgeable employees will start to look for work elsewhere. Creating a moral that is not a positive one. Unless their management team sees their worth and compensates them accordingly.
This kind of wage imbalance occurs often, incl. in companies where new wage scales are adopted. You can complain, but are the existing employees ACTUALLY hurt? If anything, there will be upward pressure on all wages. Anyway, where are these disgruntled, tenured employees going to go?
You’re talking about Toronto, always Toronto. What do you do with rural town, that don’t have the same issue, this increase in minimum wage will close small business. And what do you do with town on Quebec boarder? We will have to increase our prices to be able to pay these salary, but Quebec won’t so we loose all our competitiveness! No it’s not good for retailers!!
"Benefits of a $14.00 an hour job begin with an income of $2,863.00 per month. " Where do you get this number from? Assuming 50 weeks work a year at 40 hours a week times $14.00/hr = total yearly income of $28,000. Divide $28,000 by 12 months in a year = $2,333.33 per month.
"What retailers will experience very quickly once the base level wages rise is simple….their vacancies will shrink. Related costs will go down. Sales will go up."
Why is it obvious that sales will go up? Is this assuming that the prices of retailers goods/services will automatically increase because of the minimum wage increase and that the quantity of goods and/or services sold will stay the same. Why? What economic theory or empirical evidence is there to support this conclusion?
It is obvious that (all else being equal) raising the nominal wage (and presumably the real wage) for any job will increase the demand for that job and thus decrease vacancies…however to assume that this minimum wage increase will actually result in a ‘real’ wage increase as opposed to a purely ‘nominal’ wage increase is unwarranted. Any school of reputable economic theory strongly argues that this minimum wage increase will (in the medium to longer term) only be a nominal wage increase. Unless total production per capita increases there cannot be a real wage increase. All that will happen is that all prices will adjust higher to true market prices.
The government as much as it may wish it could cannot raise total production by government fiat. Indeed in the late 2000’s the very same Liberal Government of Ontario raised the minimum wage over a number of years utilizing the same arguments that it will provide a living wage, be a boost for the economy, etc. If the reasons were true then, why would it need to be raised again now? This wage increase is purely for political purposes. On the bright side even this blatant political decision will not save Wynne and the Liberals.