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EDITORIAL: They’re poor, Doug, not dumb (May 2018)

May 9th, 2018 · No Comments

“Folks are working their backs off for minimum wage,” said Progressive Conservative Party of Ontario (PC) leader Doug Ford recently, after announcing he would block a promised minimum wage hike in favour of a tax break. According to Ford, this would give a full-time worker earning $14 per hour about $800 more in net income every year.

Crunch the numbers, however, and you’ll discover that he’s really pitching a lose-lose proposition. Blocking the wage hike will leave the province without about $500 million in tax revenue, something Mr. Ford readily acknowledges. It will also leave minimum wage earners with far less in their pockets than if the plan to increase the rate to $15 per hour minimum were passed as promised next January.

A person who earns $14 an hour and works 40 hours a week has a gross income of $29,120. They’ll have $1,751 of deductions for CPP and EI, leaving $27,369 in pre-tax income. They’ll deduct the $10,354 tax exemption to arrive at taxable income of $17,015. Ford has said that he’ll wave the provincial tax, so they’ll only pay $2,552.25 in federal taxes. After deducting $2,552.25 from $27,369, a person earning $14 an hour will have net income of $24,816.75.

A person who earns $15 an hour and works 40 hours a week has a gross income of $31,200. They’ll have $1,888.49 of deductions for CPP and EI, leaving $29,311.51 in pre-tax income. They’ll deduct the $10,354 tax exemption to arrive at taxable income of $18,957.51. They’ll pay $957.36 in provincial and $2,843.63 in federal taxes. After deducting $957.36 and $2,843.63 from $29,311.51, a person earning $15 an hour will have net income of $25,510.52.

So a person earning $15 an hour, paying both federal and provincial income tax, still nets out ahead of the person earning $14 an hour paying only federal taxes by $693.77.

(We note that if a person is earning either $14 or $15 an hour, they are still living just above the poverty line, which the Canadian Centre for Policy Alternatives defines as annual net income of $20,811.)

We mused here recently that the provincial Liberals acted rashly when they increased the minimum wage from $11.60 to $14 effective Jan. 1, 2018. Though the goals of a liveable wage are laudable, we argued, they are not sustainable if it leads to an economic crisis for employers unable to absorb the increased expense.

But — judging from the many “for hire” signs along Bloor Street — the sky has not fallen as a result. Faced with exorbitant increases in rents and property taxes, a few bucks more to the staff is apparently a drop in the bucket, and has not visibly sunk the ship of any business within our catchment.

We are still cautious about Bill 148, The Fair Workplaces, Better Jobs Act, which passed in Nov. 2017. In addition to increasing the minimum wage to $14 an hour, and promising another increase to $15 hour next year, the bill contained many sweeping reforms that are hard to quantify. It’s hard to know how many workers will take advantage of more paid sick days and paid personal days, for example, and it’s not clear how measures designed to level the pay of full-time, part-time or temporary employees will manifest itself. We can find no analysis of the true cost of this.

What is clear is that the Ford team isn’t spending a lot of time developing a credible platform. Instead they’re focused on a bait and switch, denying an increase only to replace it with a tax break of lesser value. Perhaps they hope voters will think of the tax break as an additional benefit for workers in the lowest tax bracket. In fact, though, it’s a take-away, one that these people can’t afford.

 

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EDITORIAL: Thank you Mr. Asti (July 2017)

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Tags: Annex · Editorial