As minimum wage increases in Ontario and other provinces this fall, BWA’s new analysis reveals what’s actually driving small business cost pressures. Our Fixed Cost Crunch report presents five years of comparative data showing that fixed costs – not wages – are squeezing Toronto’s smallest businesses.
For a typical 1,000 square foot business with 3 employees, here’s what five years of cost increases actually look like:
Commercial rent: Up 142% over five years – costing businesses an additional $5,534 annually, often realized as a sharp jump at lease renewal
Business insurance: Up 26% annually, with 50% of small businesses reporting premium increases of 10% or more
Electricity costs: Up 10-33% annually with no negotiating power or relief options for small operators
Minimum wage costs: Up 23% over the same period – adding $3,994 annually for a typical 3-employee business
Rent increases alone cost Toronto businesses $1,540 more per year than wage increases. Overall, fixed costs had a 60% greater impact on the sample business expenses than wages.
Why This Matters for Micro-Businesses
More than half of Canadian businesses operate with just 1-4 employees – coffee shops, dry cleaners, corner stores. For these micro-operators, cost increases hit disproportionately hard, but there’s a crucial difference between cost types.
Wage increases like Ontario’s October 1st hike deliver measurable returns through employee loyalty, retention, and stronger customer service. Workers spend increased earnings locally through the local multiplier effect, strengthening the community economy.
BWA’s analysis shows that increases in commercial rent, business insurance, and electricity costs are essential to keep a business operating, but provide no return on investment. The report reveals these costs are not only unpredictable – with commercial rent jumping 68.5% in just one year from Q3 2023 to Q3 2024 – but have collectively surpassed wage costs by 60% for typical micro-businesses.
Research confirms what BWA members experience: academic analysis shows minimum wage employment effects are ‘elusive’ while Ontario’s economy grew following its 2018 wage increase.
“As a manufacturer, we need consumers to be able to afford our products, and that can only happen with higher wages. I can plan for wage increases because they’re announced in advance – but sudden rent or insurance spikes? That’s what actually threatens small businesses like mine.” – Anita Agrawal, CEO & Designer, Jewels 4 Ever
Unlike wages, which are planned and create community returns, fixed cost increases arrive suddenly (maybe we need a new name for these costs?) and tend to flow out of communities. This combination makes them a destabilizing force for local businesses and the main streets they anchor.
Micro-Business Recognition Could Help
BWA’s analysis suggests that recognizing micro-businesses (1-4 employees) as a distinct category could help all three levels of government engage meaningfully with micro-businesses – which account for over 55% of all businesses in Canada. From there, governments can explore measures to help these businesses absorb shocks.
Municipal: Create more micro-business friendly spaces, like at Mirvish Village, to bring transparency and fairness to lease negotiations.
Provincial: Create a Commercial Renter Bill of Rights to bring transparency and fairness to lease negotiations.
Federal: Modernize the Canada Small Business Financing Program to reflect today’s property prices and succession needs.
Three Key Takeaways
- Fixed costs hit harder than wages: For a typical Toronto micro-business, rent increases add $5,534 annually while wage increases add $3,994 – a $1,540 difference that extracts money from communities.
- Micro-businesses need recognition: Over half of Canadian businesses operate with 1-4 employees but aren’t recognized as distinct from much larger operations in policy and programs.
- Targeted solutions exist: Municipal governments can encourage right-sized retail, provinces can create fairer lease rules, and federal programs can reflect today’s property costs.
“Over half of Canadian businesses are micro-businesses getting squeezed by costs that provide no return on investment – unlike wage increases that actually boost productivity and loyalty. Our Fixed Cost Crunch analysis shows exactly what these businesses are facing. We need an all-hands response from every level of government because they all have tools to help.” – Aaron Binder, Better Way Alliance
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