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Neil Kudrinko, owner of independent grocer Kudrinko’s in Westport, Ont., says he will see his labour costs rise by $48,000 because of the minimum-wage hike.

Andrew Ryan/The Globe and Mail

Ontario's minimum wage is set to keep rising by at least the rate of inflation even after it hits $15 an hour in 2019.

Labour Minister Kevin Flynn said on Friday the government intends to bring back indexing to "keep up with inflation" – the latest announcement by Premier Kathleen Wynne's Liberal government on an issue that has become intensely political, sparking a wave of backlash from the small-business community.

In 2014, the government decided to peg increases in the minimum wage to inflation. But that changed in 2017 when it chose to ditch the policy and instead raise the minimum wage by nearly 30 per cent in less than two years.

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Speaking with reporters at a coffee shop in downtown Toronto, Mr. Flynn acknowledged that the move to rapidly increase Ontario's minimum wage to $15 was a "political decision."

"The problem with the minimum wage was that the baseline was too low. We were doing it the right way, but we started from too low a place," he said of the previous policy. "So what we don't want to do is we don't want to politicize this issue again," he said. When asked if the issue had been politicized by Ms. Wynne's government, the Labour Minister responded, "Yes, there is some politics in this."

The comments come after months of mounting anger in the business community about the minimum-wage hikes and politicians' critiques of business owners dealing with the fallout – most notably Premier Kathleen Wynn accusing Tim Hortons franchise owners of bullying employees. Many business owners say the steep hikes to minimum wage – a 31.5-per-cent rise over two years – are an unfair burden to businesses.

"There's disbelief that the Premier would be so self-centred in terms of her election timing that she would disregard the impact this will have on business," says Neil Kudrinko, owner of independent grocer Kudrinko's in Westport, Ont., about 120 kilometres southwest of Ottawa.

Mr. Kudrinko says he supports higher minimum wages, and many of his employees make more than the lowest rate, but sees the rapid increase as "irresponsible" and forces business owners to make cuts to staff, benefits and services and raise prices that, in turn, hurt employees, consumers and the business community as a whole.

"I want to see people making a good living, but we just can't ignore the economics of trying to implement that," says Mr. Kudrinko, who is a former Liberal and ran unsuccessfully for the Green Party of Ontario in a 2010 provincial by-election.

At Mr. Kudrinko's grocery business, his labour costs will rise by $48,000 from about $700,000 this year; in 2019 he expects it to rise again by an additional $24,000 as the minimum wage goes up to $15. To help recover some of those costs, Kudrinko's will start charging customers 5 cents per plastic bag, which is expected to save about $10,000 a year. The business has also stopped printing and mailing paper flyers to save an additional $20,000.

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Unfortunately, that decision will mean a loss of about $10,000 in business to the local print shop, which the family-run grocer has been a customer of for almost 30 years. "It gave me no pleasure to go in there and tell them I was scaling back printed flyers, but what do you do?" Mr. Kudrinko says. "At the end of the day, there's no magic money tree."

Mr. Kudrinko is also expecting costs from suppliers and producers to increase, as a result of the minimum-wage increase on their operations. As a result, and combined with the higher wage bill he faces, Mr. Kudrinko will have to raise prices on some of his products. If he passed on all of the additional labour costs to consumers, his prices would go up nearly 11 per cent, which he says he can't do.

Alex Zilberberg, co-owner and president of the Bagel Stop, has long believed the increase to minimum wage increase has been politically motivated. "It has everything to do with the 2018 election. I think it's a way to buy votes," he says. "It's certainly not helping our industry."

To cover the higher costs, he plans to raise prices by about 5 per cent in March at his two locations in Toronto, which together employ about 10 people.

"It's the only thing we can do … There really are no other alternatives," Mr. Zilberberg says. He says the stores can't operate with any fewer staff and can't reduce hours since they're located in malls with set operating hours. Prices may need to rise again when the minimum wage increases again next year. Mr. Zilberberg's concern is that customers will see the price increase and decide to buy less or visit less often, even though many of his competitors are also raising prices.

"We will get through it," he says. "We aren't just going to fold up and go home. We will assess the situation as it comes."

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For Dan Rishworth, the owner of Toronto-based sporting goods retailer Enduro Sport, the main issue is finding the money to compensate more experienced employees already making above minimum wage.

"I am now forced to pay out increases in salary to staff that I'm not looking to retain, who are entry level coming into the door with no experience," says Mr. Rishworth, who employs seven full-time staff and up to 20 in the busier summer months. "That will make it more difficult to retain staff through paying better wages at higher, above-minimum-wage levels."

He expects his labour costs to increase by about $20,000 to $30,000 this year, depending on how much of an increase he will need to give more experienced staff already making above minimum wage.

"This becomes an emotional issue where people feel like the hard work they've put in to get these permanent positions, who are career-oriented in retail, aren't earning a lot more than students who are taking a summer job before going back to university and who will have a career in another field once they graduate," he says.

For many business owners, the increase in labour costs comes at time when they are feeling stung by other government moves, such as other provincial labour rule changes, and the controversial changes to federal small business taxation. Many are also facing fierce competition from retail giants such as Amazon.

For Mr. Rishworth, this means he's unlikely to bring in significant price increases. Reducing employee hours isn't an option either, given that it's a consumer-facing business. "We definitely need to figure out how we can mitigate the costs as much as possible … It's a reality and we'll deal with it, but it's just one more headwind."

Brenda Bouw is a freelance writer.

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