The Ontario government’s new low-income tax credit will result in less money for workers than the cancelled $15 minimum wage, and will add $1.9-billion to the deficit, according to a new report from the province’s fiscal watchdog.
In a report released Tuesday, Financial Accountability Officer Peter Weltman found that Ontario’s new Low-Income Individuals and Families Tax Credit (LIFT) provides less money to fewer people than a planned $1-increase to the province’s minimum wage would have. On average, the report says, minimum-wage workers will receive about $400 less per year under the new plan, which was announced in last fall’s fiscal update.
“Ultimately what we found was, under an increased minimum-wage situation, more people would get a higher benefit versus the LIFT credit,” Mr. Weltman said.
“The LIFT credit, however, is more focused or more specifically targeted to those low-income individuals.”
The report also found that, due to lost provincial tax revenue from cancelling the minimum-wage increase combined with the cost of the LIFT credit, the province’s pocketbook will worsen by $1.9-billion over the next five years.
However, the report noted that the LIFT credit does not impose direct costs on businesses, which could have impacted employment, as well as increased prices.
Finance Minister Vic Fedeli said his government “would never apologize” for bringing tax relief to low-income families, while the NDP and Liberal leaders called on the government to increase the minimum wage to at least $15 an hour.
Mr. Fedeli pointed to a previous FAO report from September, 2017, when the Liberals were in government, which stated that Ontario’s proposed minimum-wage increase would result in a loss of approximately 50,000 jobs, primarily among teens and young adults. He also said Ontario has added 132,000 since forming government last June.
“Our strategy has been working correctly,” Mr. Fedeli told reporters. “There’s no sense having a higher minimum wage if you don’t have a job.”
NDP Leader Andrea Horwath called it “shameful” that the government cancelled the planned wage increase. She said the previous Liberal government should have raised the minimum wage during its 15 years in office, instead of six months before last June’s election.
“People deserve to earn a wage that allows them to raise a family and build a decent life in our province,” she said, without elaborating on what she thought the minimum wage should be.
Interim Liberal leader John Fraser said about a third of people living on minimum wage are seniors, and most are women. “They would have done better,” he said. “[Mr. Fedeli] can cherry-pick, and the evidence is not there. We’ve had the lowest unemployment rate we’ve had in decades.”
The Progressive Conservative government announced last fall that it was halting the planned increase to the minimum wage that was scheduled to kick in this year, following up on a promise made during the spring election campaign.
Ontario’s minimum wage remains at $14 an hour rather than rising to $15 as planned by the previous Liberal government.
The FAO report said of the 2.9 million people making less than $38,500 a year, some one million would benefit from the LIFT credit. On average, they will receive $409 this year. Only 19,000 people will receive the maximum $850.
Under the proposed minimum-wage increase, 1.3 million people would have benefited, and received a net after-tax benefit of $810, the report said.
The LIFT credit also increases the proportion of those making less than $30,000 a year who do not pay provincial income tax from 78 to 90 per cent.
Premier Doug Ford had pledged during last year’s election campaign to ensure that minimum-wage workers pay no provincial income tax. But advocates say those taxes were not high to begin with.
Deena Ladd, executive director of the Workers’ Action Centre in Toronto, said it’s “appalling” the government’s policies are not helping minimum-wage workers earn more money.
“What’s really awful about this is 1.3 million workers … would have actually seen a real difference in their take-home pay if the minimum wage had gone to $15. And those are the workers who need it the most,” she said.
Article by Laura Stone for the Globe and Mail