People who understand money, and how it works, look at almost every situation in life differently, than those with less understanding.  I am going to use an example.  This one is very public right now

Ontario Premier Kathleen Wynne raising the minimum wage in Ontario to $15.00 an hour.  I am sure that the Primier’s heart is in the right place.  She would like to help the poor. (Not buy our votes with our own money. Opps, was that political??) So, let’s up the minimum wage to $15.00 an hour.  The answer is that simple. (I wonder why nobody else thought of it??)

Now let us look at what this really means.  The Ontario minimum wage today is generally $11.40/ hour.  So, we think that the boost will only affect people who make that amount.  But what about the people making between $11.50 and 14.99 an hour.  They will all have to make more money.  This increase affects way more people than it first appears.

This is wonderful for the government.  We will have a whole bunch of people with extra money to save and invest. (What they hope you don’t do.) In reality, this will shift many of these people into a higher tax bracket, so the government will increase the Income Tax collected.  Most of the people will SPEND the money, so the government will collect more Sales Tax money.  Because of this increase, all those affected will be grateful and vote liberal in the next election.  (Darn. There goes that political thing again, sorry.) This is a big win for the government and all the people they are helping.

Now let us look at the reality side.  The common wisdom is that everybody buys on PRICE.  (In reality price is usually number 3 or 4) Therefore it is in every business’ best interest to have the lowest price.  In simple terms Price is made up of, the Cost of doing business plus Profit.  By the way, EVERY BUSINESS IS IN BUSINESS FOR THE PROFIT.  Otherwise why bother?  Wages are a Cost of doing business.  If wages go up 31%, businesses have two choices.  Take the increase out of the Profit or raise the price of the product.  If companies try to keep their profit, then the selling price of their product has to go up to cover the cost. If the price of everything goes up 31% did the wage increase help??  Not only that, all the people who did not benefit from the wage increase will have to pay more for all the products.  So in effect they all took a pay cut.

Ok, so take that 31% increase out of the profit and make less.  Reality Check:  Is taking the money out of PROFIT actually doable??

According to a new study released Tuesday, the average profit margin of all non-financial corporations rose to 8.2 per cent of sales in the fourth quarter of 2014.  Taken from HuffPost  05/31/2015 05:59

If you had to reduce your 8.2% profit by a 31% increase in costs; you go from being a business to a Charity.

Will this affect companies like GM or Magna?  To a small degree.  (Most of their employees make over the $15/hr.) But what about Grocery stores, Restaurants, and Department stores?  For example, at my local Walmart, they have reduced the number of express check outs by 50%.  They did this to install a half dozen self-serve check outs.  I wonder why?  (At $15.00/hour are Cashiers too expensive??)

1 to 4 employees: Micro-enterprise

5 to 100: Small business

101 to 499: Medium-sized business

500-plus: Large business

(Source: Industry Canada) From CBC News article published Oct 25 2011.

How many small businesses are there in Canada?

The total number of registered employer businesses in Canada (businesses with at least one employee on payroll) as of December 2010, the most recent figure available: 1,138,761.

1,116,423 of those were small businesses, comprising 98 per cent of all employer businesses in Canada.

(Source: Industry Canada calculations using data from Statistics Canada) From CBC News article published Oct 25 2011.

I am sure that the cross country percentages are representative of the situation here in Ontario.  That means that 98% of the employer businesses in Ontario are going to be the hardest hit. It could mean many of them are at risk of going broke or at least giving up.

Last week, Restaurants Canada released a survey of its members that found 95 per cent of restaurateurs believe the wage hike will hurt them. The poll found 98 per cent will raise menu prices; 97 per cent will reduce labour hours; 81 per cent will lay off staff; 74 per cent will embrace more automation, and 26 per cent would close one or more locations.   (By 

Now I am sure that not all of them will go broke, or just give up.  But if even 25% of them do? What happens to all the people who had a job at $11.40/ hour, and now have no job?  Is it fair to all the people who don’t get this increase but have to pay more for most things?  Is this really a workable solution??

I blame Business, Government, and Labour, for this US versus Them attitude.  It is time for a new way of thinking.  We all need each other.  Business needs government to establish a good set of business conditions in the world economy.  Business needs Labour because not everything can be done by machines, and machines don’t buy products.  Labour needs business, because somebody has to put up the capital to build factories and businesses, which supply jobs.  (When was the last time you saw a union open a business to employ it’s members??)  And governments need Business and Labour so they have someone to tax.  The government gets its money from Taxes, (Income and Sales) Duties and fees.  It does not produce a product for sale.

Maybe a little more financial knowledge and realism is what the whole system needs.  Maybe raising the minimum wage to $12.00 and actually putting realistic Financial education into our school systems so that everyone has a better understanding of the inter relationship of government, business, people, and money would be a better solution.  Teaching proper money management and how money is used would help people manage the money they have.  Might work, BUT the results of this will not show up in time for the next election.  (Sorry, I got political again.)

Could we all benefit from more DIY Wealth Education??  You be the judge?