Q & A: Straight Answers to Hard Asked Questions
Question from Resident of East End Toronto Condominium, Name Withheld
“Our condo board has come to our community with another maintenance fee increase citing that the Ontario government has raised the minimum wage stating this October. The board didn’t explain it in a way that I could fully understand. Most of us believe in paying our workers well as they do a good job but why is it that owners always must foot the bill for such increases and when will it all end?”
Answer
Condominium service providers are always challenged to provide superior service while helping boards remain fiscally prudent. Part of that equation is a commitment to pay employees more and with great benefits so that companies can attract and retain great talent. The goal for most companies is to pay employees more than the minimum wage while remaining market competitive. It is a very difficult balancing act to keep both clients and employees happy.
On October 1, 2023, there was another Ontario government-imposed wage increase. This time it was a 6.8% increase improving minimum wages from $15.50 to $16.55 per hour. This minimum wage increase is larger than most in recent history, second on only to that imposed on January 1, 2018. Many are unaware that the effective rate of this increase is much higher because all such wage increases include impacts to wage fringe (WSIB, EI, CPP, EHT, etc.). The net effect of this wage increase is over 8%.
The intention of government imposed minimum wage increases is to provide lower income earners with a living wage. In 2022, there were over six million workers in Ontario, 942,400 of those earning minimum wage. The Ontario minimum wage is forth highest in Canada despite Ontario having by far the highest percentage population at 38.45%.
A living wage is the hourly amount a worker needs to make to be able to function, stay healthy, and participate in the community. This includes things like food, housing, clothing, and transportation, and varies between $15 and $33 depending on the community throughout the country.
There is a lot of ongoing online debate on minimum wages, good, bad, ugly, pro, and con. Most condominium boards are sympathetic to employees, even demanding higher wages in contracts. Boards want to help employees and attract great talent, but not at the expense of their corporation.
Let’s take our minds back to 2018 when the minimum wage in Ontario was increased from $11.60 per hour to $14.00 per hour. Business and condominium owners were shocked by the whopping 20.69% increase because it was communicated with very short notice and ill-timed during a provincial election.
This angered many in Ontario, but minimum wage earners benefitted by improved lifestyles. Condominiums boards struggled to explain double-digit maintenance fee increases that hit the pocketbook of owners hard. The government has continued with smaller minimum wages increases and also, wage fringe increases each year since that time.
Fast forward, in 2023 Ontario’s average living wage is now estimated at $19.72 per hour. The Greater Toronto Region has the highest living wage set currently at $23.15 per hour and the lowest is reported in London-Elgin-Oxford at $18.05 per hour.
Boards often ask, “Why is it that condominium owners always have to foot the bill for such increases and when will it end?”
This latest increase by the government, like all others, is designed as a flow-through with cost increases that are directed to end users and is based on the Consumer Price Index (CPI). This is similar to such increases and taxes that stem as far back to the implementation of the Harmonized Sales Tax (HST) in July of 2010. The HST impacted all end users heavily at that time. Like tax hikes, government imposed minimum wage increases do not just affect condominiums owners, but everyone directly and indirectly.
Take for example, restaurants that are recovering from the COVID 19 Pandemic. Traditionally, restaurant owners pay their staff minimum wage allowing their workers to keep all tips. Tips represent a very large portion of their weekly take home pay. The restaurant owner must raise menu prices to offset such minimum wage increases along with food price inflation. This scenario can be translated to other businesses in Ontario.
Some of the minor annual increases have been absorbed by building services providers since January 2018 but quickly forgotten when the next increase is on the horizon. Security, cleaning, and maintenance companies cannot completely absorb larger increases as the one that was imposed on October 1, 2023. Profit margins for such service providers are very lean as they try to maintain competitiveness in this marketplace while, at the same time, they have to pay employees more to attract talented people.
What’s Next ? The Ontario’s average living wage is now $19.72 per hour. With the latest increase on October 1, 2023 that was set at $16.55, there is still a $3.17 shortfall that the government will very likely want to fill at some point. That represents a 19% gap.
How long will it take for the Ontario government take to fill this 19% gap? That is a political question that the government will struggle with. One thing is for sure; however, the Ontario government has signaled their intention to raise the minimum wage again on October 1, 2024 and thereafter at least once a year. Each year there will be a cat and mouse game of service providers asking for more money and boards demanding companies sharpen their pencils.
When will it end? It is a reality that government imposed minimum wage increases are here to stay for the foreseeable future until the wage gap narrows. So, for everyone who lives in Ontario at least for the near future, we all can expect higher costs of consumable goods, rent, restaurant tabs, and yes, condominium maintenance fees every October. Maintenance fee increases are never an easy pill to swallow especially for those on fixed incomes, but it is a reality that everyone must prepare for.
For board members and property managers come budget time, be prepared. This is the new norm. Boards and service providers need to come together and have full, frank, and open conversations to manage expectations on service quality versus the costs involved.
October 1st is a new anniversary that workers will look forward to each year moving forward but not so much for those who have to foot the bill.
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