Minimum wage and income tax

Jeff Green | Sep 27, 2017

Like many very small business owners I was wary when I read about increases opf the minimum wage to $14 in January and $15 a year later. It is a big jump from where it is now, big enough that it will affect the entire labour market over the next year or two. It will impact the entire wage structure for a lot of us, and is something I have talked about to other business owners about a fair bit in quiet conversations over the summer.

When $15 an hour becomes the minimum wage, what do you pay the employee who you are already paying $15 an hour. The quick rise of the minimum wage, from $11.40 on December 31, 2017, to $15 on January 1, 2019 will put pressure on any business that pays their employees under $20 an hour. Wages, like all outlays, are a factor that businesses need to weigh against the income they generate. A gradual change can sometimes be swallowed or go unnoticed, but a jump needs to be dealt with immediately. There will be a lot of scrambling among small businesses in this region as the result of the new minimum wage.
I do get the idea, however. The Province of Ontario is saying, the minimum wage is too low because those earning it are not able to pay for food, shelter, and transportation in the current economy.

If $15 is the minimum living wage, businesses need to find a way to survive in that environment, either by living with an increases payroll, doing more themselves instead of paying employees to do some tasks, cutting back on unprofitable enterprises, raising prices, or a combination of all these things.
One thing does bother me about the wage hike, as a business owner; income tax rates.

If the provincial government is saying that people need to earn $30,000 a year for 40 hours in order to pay for a decent life in Ontario, why is it that people making that much can be taxed as much as $3,600 per year (15% federal and 5% provincial tax on all earnings over $11,800)
The province is not changing the tax rate or deduction scheme for low income earners when they bring in the new minimum wage, nor are they asking the federal government to make a similar change.

When the government tells me, a small business owner, you have to pay more for labour, I say OK, maybe that’s only fair. But I will be paying more payroll tax as the result of that increase in wages, and my employees will pay more income tax. If we are all trying to be fair here, give me a break on payroll taxes to go along with the minimum wage increase, and raise the basic personal amount in the tax structure so the employee can keep the extra money.

I can accept that the minimum wage increase will cost businesses money, but why should it result in a boon for the federal and provincial government at the same time?
Why do I have the feeling that along with pressure from the wage increase we are seeing a hidden tax increase on small business.