Ontario's employers are unhappy with the sharp increase in the province's minimum wage announced Thursday, but some say the idea of indexing future increases to the cost of living will at least help eliminate these kinds of big jumps in the future.

Ontario Premier Kathleen Wynne unveiled the rise, from $10.25 to $11 per hour, to take effect on June 1. Future increases, tied to inflation, will happen each Oct. 1 and be announced six months in advance.

The Ontario decision could lead to some job losses and reduced hours of work as retailers struggle in a hyper-competitive climate, warned Karl Littler, a vice-president at the Retail Council of Canada. Already some retailers are feeling the squeeze: Best Buy Canada, with increasingly savvy online and discount rivals, announced on Thursday it is cutting 950 jobs at its namesake and Future Shop stores. The previous day, Sears Canada Inc. sliced 624 jobs on top of thousands last year.

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James Rilett, Ontario vice-president of the Canadian Restaurant and Foodservices Association, which represents many minimum-wage paying fast food outlets, said the seven per cent increase will cost the average restaurant more than $9,400 a year. The increase will also add pressure to raise wages for people earning just above the minimum wage level, he said.

One consequence will be cuts in staffing levels, particularly among young people, he said. "It will definitely have an impact....And it is kicking in in June, just when restaurants are hiring youths for the summer."

Still, over the longer term, tying the minimum wage to annual change in the consumer price index is wise, Mr. Rilett said. That will ensure there are no large increase in the future. And since most companies look at the CPI for other planning purposes, it makes sense to "take the same number to plan labour costs."

Steve Long, president of musical instrument retailer Long & McQuade said he agrees that annual increases based on the CPI is good solution, "because then there is never a drastic change for businesses." And workers will also benefit because they will see their pay rise in line with expenses.

Mr. Long, who has very few employees at the minimum wage level, said he thinks it would make sense to have a lower minimum wage for young people under 21, because they are in a very different situation than older workers who might be trying to support a family. "For someone that leaves high school at 17 with very limited skills, who is probably living at home, it would make a lot more sense for them to be able to get a job at $8 per hour and learn some skills," he said. "By the time they were 21 they would have a few years experience in the work force, and then they would be able to make a higher wage."

Ontario currently has a lower minimum wage rate for students who are under 18 and work part time. It is $9.60 an hour and will rise to $10.30 on June 1. There is also a lower rate for liquor servers who earn tips.

Mauro Mila, vice-president of Bruno's Fine Foods, a small upscale grocery chain in the Toronto region, said the rise in the minimum wage will definitely cut into already-thin profit margins at the company's four stores. He can't just cut back on the number of workers in order to compensate, he said. "If I need two people behind the meat counter between 4 and 8 p.m., and the minimum wage goes up, I can't have one person. I still have the same amount of service that needs to be done."

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Bruno's pays most of its full time staff – who have experience and specific skills – well above the minimum wage, Mr. Mila said. It is the part-timers who tend to be paid at the minimum level. But he has trouble getting part-timers with a strong work ethic and the social skills to work in retail, he said. "We are not getting the productivity and the quality of work we should get for $11 an hour."

Retail Council president Diane Brisebois said the minimum wage jump is effectively "double counting" past CPI increases. She said Ontario raised minimum wages by 28 per cent between 2008 and 2010, or $2.25 an hour, which more than captured all the CPI inflation from 2008 to today. The latest decision is "bad for job creation and bad for the economy," Ms. Brisebois said. And the move would result in Ontario's minimum wage being "seriously out of step with other Canadian provinces and neighbouring U.S. states."

Canada's largest private sector union, on the other hand, said the increase is far too small. "A minimum wage of $11 an hour is still a poverty-level income. Tying it to inflation only ensures it stays below the poverty line," Unifor national president Jerry Dias said in a statement.