The lessons for Ukraine from Ontario’s 21% increase in minimum wage.

Effective Jan 1, #Ontario increased the province’s minimum wage by 21% to improve the livelihood of workers. The hourly rate increased from $11.60 to $14 – the highest in Canada. This one change is already having a significant ripple effect, with further consequences still unknown.

This is a well-intentioned measure with a laudable goal. However, as a result of the rapid wage hike, many employers have responded with a series of compensation changes, including implementing hiring freezes, eliminating paid breaks, cutting hours, and shifting benefits costs. Some economists predict an increase in the cost of goods to offset reduced profit to business, the closure of some small & medium businesses, job losses, and slowed job creation in the province. Others applaud the measure as a means of lifting Ontarians out of poverty.

It’s too soon to tell what the overall outcome will be, but what is certain is that there are immediate detrimental effects arising from this experiment of such a rapid wage hike. Spreading the increase over 5 years would likely make adjustments easier and less painful for all. I think Ontario’s experiment with a whopping 21% wage increase should be considered by all involved in Ukraine reforms.

This is one change in a stable democracy affecting only a portion of the population, and it has a serious ripple effect – both positive and negative. Some small businesses will close. Others will see a serious slow-down in growth. Some employees will see a larger pay cheque but a reduction in hours & benefits, undoing the benefit of the wage hike. And the province may see a slow-down or even negative trend in economic growth.

Inexplicably, many such measures are expected to occur rapidly and seamlessly in Ukraine without any pushback from interested parties, never mind ordinary Ukrainians who are impacted – both positively and negatively – by the many changes. This is on top of foundational changes. For reasons I chalk up to naivety, ignorance, or self-interest (like justifying one’s own existence as a cog in a wheel, prestige or money), many involved in reform in Ukraine appear to ignore that even well-intentioned measures can have far-reaching negative ripple effects. These ripple effects can be hugely destabilizing when resulting from just one measure, never mind many foundational changes in rapid succession. Well-intentioned changes can actually have an undermining & destabilizing effect. Time is needed to experience & sort these things out.

The takeaway of Ontario’s wage increase for Ukraine: Don’t undermine positive changes by pushing too far, too hard, and too quickly.