Let me start by saying that the Chamber of Commerce is fiercely non-partisan. We will openly like, or dislike any Government policy, no matter what party is in power. Policy, not Politics, is our mantra. In addition, we are very well represented, municipally, provincially and federally by our elected officials, including two cabinet ministers.
Having established that, and given that this is an opinion piece; It feels like there is a disconnect between the business community and Government. It feels like there isn’t enough understanding of what it actually takes to start a business and have it be successful.
To be fair, I believe I understand the thinking. On the proposed Federal Corporate Tax changes, the Federal Liberal Party was clear in its intentions during the election that brought them to power – to go after tax cheats. Fair enough, some have taken unfair advantage of the existing regulations. However the proposed reforms go so far, and so deep as to gather the majority of incorporated business owners under the tax cheat umbrella. To say that the typical small business owner has been deeply offended by this is an understatement. It appears that the Government has been listening and has finally started to soften its approach, though it remains to be seen what the end result will be. A more careful, evidence-based approach would have been better.
Similarly, with the Provincial Governments Bill 148, I understand the Governments desire to raise all boats on the tide of a $15 minimum wage. The Government appears committed to implementing the most dramatic increase in minimum wage in Ontario’s history! Their response to the universal “too much, too fast” response from business has been to promise mitigation measures.
They are promising to mitigate a crisis that they’ve created! There is growing evidence that the timeline is indeed too much too fast. The Keep Ontario Working Coalitions peer reviewed CANCEA Report, the Financial Accountability Office of Ontario Report, and the TD Economics Report, all warn of unintended consequences, some of them rather alarming. (These reports are all on our website.) The “tide” is starting to swamp local businesses with many of them already implementing their own mitigation strategies, including fewer hours, fewer jobs, and cancelled expansions. A more careful, evidence-based approach would have been better, tax measures and a basic income guarantee should be considered, and a five year implementation strategy is still an option that I hope the Government will take.
This is small business week.
I wonder how many people truly understand what it takes to create a job… Simply having an employee in the building costs roughly 50% more than that employee’s salary. There is the cost of the building, the utilities to run it, the multiple taxes, the cost of regulation compliance (let alone the fees for the privilege of complying), and this doesn’t even scratch the surface. Most small businesses operate on a profit margin of 10% or less. This means that for every dollar that goes into the cash register it costs the owner 90 cents. That left over dime is typically sunk back into the business for expansion, new equipment, building improvements, new employees, etc. When Government legislates a cost increase, when hydro rates go through the roof, when wages get a legislated increase, it leaves a business owner with very few options, and only 10 cents to solve the problem.
Suffice it to say that, unless you’ve sat in the chair of a small business owner and faced the responsibility of mounting expenses, you shouldn’t judge, and if you are an elected official, you should make decisions based purely on evidence. policy, not politics.
A double whammy or a one-two punch - that’s what businesses are facing in Ontario with two significant public policy changes at play provincially and federally. It’s a challenging time to be in business in Ontario with the potential impact and ripple effect of these changes creating a lot of uncertainty.
Provincially, Bill 148 the Fair Workplaces, Better Jobs Act is forcing businesses to look at their business model and make tough decisions such as fewer hours, fewer jobs and consideration of automation. “Too much; too soon” has been the mantra from the business community throughout the summer, since the announcement of proposed sweeping labour and employee relations changes.
But this response is not in a vacuum. There are three recent studies that are now part of the conversation and they present the same concerns as business owners.
The latest updated report from the Ontario Chamber of Commerce and CANCEA shows that extending the time frame of the minimum wage increase over five years will result in 75% fewer jobs at risk. The CANCEA study also finds that Ontario’s 400,000 small businesses (those with less than 100 employees) are exposed to 46% of the increased costs associated with the Act. While the economic analysis indicates the province will see an economic boost of $11 billion in wage stimulus in the next two years, there will remain a $12 billion cost for business to absorb.
A recent report from TD Economics says “the relatively rapid speed of the implementation and its timing within the economic cycle are two factors that will likely accentuate the negative hit to Ontario employment.” It goes on to say that they are expecting “a net reduction in jobs of around 80-90,000 positions by the end of the decade” and that “these estimated impacts could be mitigated by extending the implementation timeline.”
The Financial Accountability Office has also weighed in on the impacts of Bill 148, raising some new points in the discussion:
Add to the commentary the multitude of remarks from businesses themselves and there is an overwhelming message of concern. From its own members, the Peterborough Chamber of Commerce gathered up 15 pages worth of comments and sent them to the Standing Committee on Finance and Economic Affairs. This document shows a consistent message from all sectors of the business community as to the impacts of the speed of implementation of Bill 148.
“Small businesses are telling us the tools they have to work with are limited, and include fewer hours, fewer jobs, delayed expansions, and closing for the winter months,” says Stuart Harrison, President & CEO, Peterborough Chamber of Commerce. “Some have even speculated they’ll be forced out of business entirely…”
Offsets for businesses, to help with the transition this legislation will require, are expected to be announced in the coming weeks. The hope is that these offsets, which our counterparts at the Ontario Chamber of Commerce have been speaking to government about, are offered using tools such as the tax system to make it easy for business to access and complete. Offsets in the form of grants will only add to the regulatory burden facing small businesses in our community.
Add to this provincial legislation new proposed corporate tax changes at the federal level. These proposed
tax changes present serious concerns for incorporated businesses in how passive income is dealt with, along with the ability to pass a business on to the next generation and income sprinkling.
Both levels of government are creating a negative message about business. Considering the feedback from the business community, this is a dangerous gamble. With over 400,000 small businesses in Ontario alone this group is truly the backbone of our provincial and federal economy, creating jobs and investing in the social fabric of our communities. Understanding their needs and ability to adjust to regulatory burden, market pressures locally, provincially, nationally and internationally is key to finding a balance that works for everyone.
To learn more: Peterborough Chamber Advocacy Page on Bill 148