Wednesday, 4 December 2013

The Minimum Wage should be a Living Wage

Ask anyone earning minimum wage if they’re able to pay their bills and meet the basic necessities of life and you’ll invariably get the same answer. If the person doesn’t outright laugh at the thought that they can make do at minimum wage, they’ll often give a pained, slightly panicked look, before simply saying “no”, they can’t meet the basic necessities of life at the current minimum wage. Many people are forced to work two minimum wage jobs just to make ends meet. And if the worker happens to be the parent in a single-parent household, often even two jobs isn’t enough. So if the minimum isn’t enough for workers to meet the basic necessities of life, where does this minimum come from?

In a lot of ways it’s a legal fiction. The government sets the minimum wage it’s believed employers can pay, and it’s the amount believed sufficient to induce people to get up every day and go to thankless jobs. And they’re sure to keep social benefits even lower, ensuring in this way that workers will be ironically thankful for their thankless jobs. This has historically been the Canadian situation – a minimum wage mandated by legislation and purportedly determined by market forces, discussed in a dialogue of corporate terms. But times are changing. The dialogue is changing and where once there was the faceless corporate interest there is increasingly a human face.

A case in point is the recent activity in Toronto whereby workers and community partners marched from the Sheraton Centre to Dundas Square to demand an increase in the minimum wage. Workers and anti-poverty community groups are bringing the human face to the discussion.

And it’s high-time we had a broader base of input for the minimum-wage discussion. Not only about the inadequacy of the minimum wage but also about the creeping prevalence of it. Benjamin Tal, a senior economist with CIBC has observed this latter problem, saying:

There’s clearly a movement from high-paying professional, public-sector and construction jobs to lower-paying and retail jobs. Even within manufacturing, there’s a movement from high-paying manufacturing jobs to lower-paying[1].

This isn’t news to most of us. Sid Ryan, President of the Ontaro Federation of Labour (OFL) has noted similar concerns and notes that unions have long been fighting to help workers secure a living wage:

The labour movement has always fought to raise the standards for every worker but the circumstances facing too many working people are worse than they have been in decades.

 Ryan also adds:

The portion of Ontario workers toiling for minimum wage has more than doubled from 4.3 percent to 9 percent over the past decade and the situation is only getting worse. Precarious work used to be the exception but it is fast becoming the norm. Ontario needs to introduce a host of measures to provide fairness and equality for every worker, but raising the minimum wage to $14 an hour is the most important first step[2].

As noted by Ryan and others, this movement from high-paying jobs to more low-paying jobs strongly underlines the need for the adoption of a wage that can, at the very least, allow workers to meet the basic necessities of life.

A Living Wage is good for Employers and the Government

Inadequate wage levels don’t just hurt workers. Employers and society at large are also impacted by low-wages. Workers facing debt problems and inadequate wages are more likely to suffer illness and depression. Increased absenteeism and lower productivity is the result. The children of parents earning inadequate wages also often suffer from health problems and do poorly in school. From a social perspective this translates into elevated health care costs and less income tax being generated by the government.

Employers often bemoan any possible raise to the minimum wage, arguing that they simply cannot afford greater payroll costs and that any increase would drive them out of business. Putting aside whether or not such claims are actually believable, there is a way the government can intervene to help workers without harming businesses.

I’m speaking, of course, of policy decisions. If there were greater public supports in place, workers may not need as much of a hike to the minimum wage to make it a living wage. Universal daycare is one obvious example of a public support that would reduce the financial burden shouldered by many workers and would lower the wage-level necessary to reach a living wage. In Brandon, Manitoba, changes to tax-policy that made more families eligible for provincial child-care subsidies and for a larger National Basic Childcare Supplement had the effect of lowering the financial burden on working families. The result? The living wage decreased by 36% at the same time as the cost of living increased by 7.6%.

Approximating a Living Wage
Unlike the minimum wage, there is no legislated floor to the living wage. A living wage will take account of costs and living expenses from region to region and so must be sensitive to the needs of workers in a particular area. The basic formula used for calculating living wage is:

            Annual family expenses = Living wage + Government Transfers – EI, CPP, Income Tax[3]
Annual family expenses will vary from area to area and the living wage for a worker in Toronto might not be the same as for a worker in Sudbury. But one constant is that no matter where workers are – the minimum wage is too low.

The minimum wage in Ontario is presently $10.25. Unions and anti-poverty groups are calling on the Ontario Liberals to address this inadequacy and to raise the minimum wage to $14.00. After that, the minimum wage should be indexed to the inflation rate. It’s believed that this would bring us somewhere in the neighbourhood of a general living wage[4].
All this is to say that we need a system of inclusive decision-making on this topic. Gone are the days (if ever there were such days) when top-down decisions from governments and business interests can reasonably dictate what an appropriate living wage should be. Employers, Governments and Workers must collaborate to reach an acceptable minimum wage level that will at once allow workers to meet basic needs, reduce absenteeism and boost productivity, and contain social and health care costs. In Ontario, the minimum wage hasn’t changed since 2010[5]. And even when minimum does increase, it’s not indexed to inflation and is only a bandaid solution that still doesn’t allow workers to meet their basic needs. It’s time the minimum wage was increased with a human face in mind – it’s time a living wage is the absolute minimum workers should expect from their society and their employers.

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