Hiring workers just got more expensive in two Canadian provinces. Ontario’s minimum wage rose to $14 an hour in 2018 and jumps to $15 in 2019, while Alberta plans to go to $15 later in 2018. In response, some businesses are pulling up stakes and getting out of town, heading to what they believe are greener pastures in provinces still allowing low wages. But economists warn that uprooting a business over wage hikes is a poor strategy rife with logistical challenges, high costs, and business disruptions.
Moving to a new house or apartment is the pits. Relocating a business can be a veritable nightmare. That’s twice as true if you’re changing provinces.
Consider all the issues you have to resolve before loading a single piece of furniture. There’s finding a location and negotiating a lease. There’s learning the regulatory differences and how they affect your business. There’s phasing out operations at your current location.
What about your employees? Are they going to follow you to your new home? If not, add researching the local labour market to your to-do list. Sure, you might get cheaper help there, but are you sure you can find the same quality of workers?
Lastly, consider your customers. Perhaps you’re an online retailer, a call center, or another such business with customers that are not all local. That removes one concern — though you still have to wrangle with business licensing and regulations and finding workers and a host of other factors. If your business relies on foot traffic or establishing a local customer base, moving it means literally starting over.
Anyone who’s ever moved knows it isn’t cheap. Depending on the size of your business, moving from one province to another could easily cost tens of thousands of dollars.
You know your business’s financials and cash flows better than anyone — or at least you should. A good question to ask yourself is, how long before your labour cost savings make up for your moving expenses? Are you talking months, or are you talking years? If you run those numbers, you might be surprised by what you find.
Then there’s this — do you really think the other provinces won’t follow suit and install a $15 minimum wage within the next few years? Both Canada and the United States are hurtling inexorably toward higher wages across the board. You might end up shelling out a bunch of money to move somewhere with cheaper labour costs, only to find those cheap costs disappear upon your arrival.
When you move your business, you incur not only direct costs but also opportunity costs. Think about the time it takes to wind down operations at your current location, conduct the move, and get everything up and running until you’re going full speed again at the new site. You’re losing out on revenue that whole time.
What’s more, whenever your business isn’t available to serve customers, you’re effectively hanging a "closed" sign on the door. That’s true whether you’re an offline or online business. How many of those customers wait for you to resume operations, and how many go elsewhere?
Higher minimum wages in Ontario and Alberta are giving many business owners wanderlust. Before you schedule the U-Hauls, though, consider all the costs involved.