The poorest families in Ontario are earning less than they were in 2000, while during the same period richer families have watched their income grow, according to a new economic report.

The analysis by the Canadian Centre for Policy Alternatives (CCPA) describes an increasingly "polarized" Ontario labour market that is shifting away from stable manufacturing jobs to more precarious service sector work and rewarding higher-earning families while punishing poorer ones.

"Really there are two different labour markets in Ontario," the report's author and CCPA senior economist Sheila Block said in an interview.

The new report, titled Losing Ground, analyzed income data for families with children between 2000 and 2015. During that time, higher earning families increased their share of the income pie.

The top half of Ontario families in terms of income now takes home 81 per cent of all earnings, up from 78 per cent in 2000.

"It's a totally different story for families in the bottom half," Block said.

The poorest half of Ontario families' share of earnings shrunk from 22 per cent in 2000 to 19 per cent in 2015.

Ontario's labour picture is looking worse than the rest of the country in terms of income inequality. At the national level, the report says average earnings grew consistently for 90 per cent of families between 2000 and 2015, due in part to the natural resource boom enjoyed in other provinces.

The report says the income inequality is being caused by a "seismic shift" taking place in Ontario's labour market with the decline of stable, working-class jobs in the manufacturing sector.

Shiela Block is the author of new study from the Canadian Centre for Policy Alternatives that shows income inequality is growing in Ontario. (Canadian Centre for Policy Alternatives)

Government assistance helps prop up poorer families, but the CCPA says labour laws need to be changed to reflect the change in the market and "level the playing field."

"Governments can't do all the heavy lifting," Block said.

The report praises the provincial Liberal government's plan to increase Ontario's minimum wage to $15 an hour, but calls for "more aggressive" labour reform aimed at employers.

Block says new regulations around shift scheduling and advance notice are needed to help part-time workers, whose pay, she says, should be equalized with permanent employees.

New laws are needed to make it easier for people in the service sector to unionize, Block says.

At six per cent, the accommodation and food sector has the lowest unionization rate of any employment sector.

The effect on business

However, the "aggressive" modernization of labour laws the CCPA is calling for is bound to be met with opposition, something that is already happening with the government's plan to raise the minimum wage.

On Monday, a newly released study suggested that the government's plan could cost businesses up to $23 billion and put 185,000 jobs at risk.

The study was commissioned by the Keep Ontario Working Coalition, which includes the Ontario Chamber of Commerce and the Retail Council of Canada.

"Fifteen dollars an hour is only good if you have a job," Karl Baldauf, vice president of policy and government relations at the Ontario Chamber of Commerce, said in an interview.

Baldauf says the wage hike and other labour reforms proposed by the government will cause a financial hit to Ontario businesses equal to what they experienced during 2008 recession, and some of those costs will result in higher prices for consumers.

However, Block says the consequences felt by businesses don't outweigh the benefits to low-wage workers.

"We have 20 years of economic research and analysis that says increases in minimum wages have positive impacts on poverty, positive impacts on inequality and don't result in falling employment," Block said.