The business of the living wage

| February 23, 2016
Photo: flickr/ Ross G. Strachan

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Staff compensation packages can be a significant determining factor in the success of businesses.

According to workplace research, employees earning a fair deal on the job are more efficient, loyal to their bosses and less likely to get sick.

Kaylie Tiessen, national representative in the Unifor research department, says Canadian businesses hoping to improve the bottom line need to look at what's happening within their own employee base.

"When a company starts viewing their employees as a valuable input into production and sales, that has a direct impact on their productivity, their likelihood to stick around, their loyalty and their well-being," Tiessen says.

"This in the end has a positive impact on sales and on the bottom line for a company."

The Living Wage For Families campaign in B.C. and the Living Wage coalition in Ontario work with employers to implement a living wage in their workplaces.

At the moment, 80 employers are signed on in Ontario, and about 50 are certified living wage employers in B.C.

The amount paid by those employers to workers -- which includes direct employees and contractors -- is calculated according to costs outlined in the Canadian National Framework for a Living Wage.

The framework states the living wage should cover the basic needs of a family of four, as well as what it costs them to participate "socially and economically" in the community, Tiessen says.

Both parents are full-time workers and are able to pay rent for an apartment that fits their family comfortably on a living wage.

"They're able to pay for their transportation, they're able to eat healthy food," Tiessen. 

The cost of one parent attending a basic course enabling them to up-skill is also factored in.

"We also see that people are able to go out with their friends every once in a while -- that's what it means to participate socially."

The cost of a modest vacation such as a week camping, as well as any non-mandatory employee benefits are also included.

"We calculate all those costs and take into account taxes and transfers and other government support," Tiessen says.

As living costs vary between centres, the living wage calculation enables rates to be determined for individual areas.

In Metro Vancouver, the living wage hourly rate is $20.68, compared to $17.27 in Fraser Valley, $14.95 in Hamilton, Ontario and $18.52 in Toronto.

The rates are reviewed yearly, and new rates are announced April 1.

Rolling out the living wage

B.C.'s Vancity is Canada's largest credit union.

The Vancouver-based co-operative, which signed on to be part of the Living Wage for Families campaign in 2011, says it took several tries to find the best way to implement the living wage principles at Vancity.

Catherine Ludgate, Vancity manager in the community investment team, says the initial step involved increasing the salaries of about 50 of the credit union's 2,500 employees to the Metro Vancouver living wage rate.

Most of the employees worked at the call centre and were covered by a collective agreement between Vancity and the B.C. Government Employees Union, she says.

A "side agreement" was tacked onto the collective stating the wage increase to the living wage rate.

Next, the credit union tackled the 1,300 contractors it was purchasing services from.

"That was substantially more complicated and remains a much more complicated process," Ludgate says.

It began by identifying which were its most expensive contracts -- costing more than $250,000 -- and which contracts were most likely to be using low wage workers.

About 40 suppliers were being paid over the $250,000 threshold.

These contracts, mainly for higher-cost services like legal conveyancing or architectural services, also accounted for more than 90 per cent of the company's annual service contract spending, she says.

"We then went back to the drawing board [because we realized] we were not going to get at the ambitions of the campaign as that's not where the minimum wage workers were."

Instead, Vancity identified four service provider types most commonly associated with vulnerable workers: janitorial, catering, security and temping, Ludgate says.

The $250,000 threshold was then reduced in each of the categories.

For example, in catering it went down to $10,000 and for security it was set at $50,000.

"That added another 10 contractors -- so now we had 50-odd contracts to deal with," she says.

"Open houses" for potential contract providers explaining Vancity's commitment to the living wage then took place.

Providers were told contracts that demonstrated that workers were being paid a living wage would be privileged, Ludgate says.

Vancity also assured providers it did not expect them to pay extra labour costs for employees "out of their own margins" because it would take that on, she says.

Businesses returned mixed reactions. Some were interested in working with us, while others said it was too difficult.

For Vancity, the cost of compliance in its first year of being a living wage employer was $750,000.

"It might sound like a lot of money, but because we're so big, it was less than one quarter of one per cent of our operating budget," Ludgate says.

Employees work better earning a living wage

At Vancity, the biggest change ushered in by its living wage commitment was a lift in worker morale, Ludgate says.

"Everyone was so proud and talked about it with their families and friends and with members coming into the branches."

While the credit union hasn't collected data measuring possible effects on staff productivity, examples overseas show how quickly workers respond to fairer pay and conditions in the workplace.

In the UK, KPMG London -- which became a living wage employer in 2006 -- noticed major changes among its cleaning, mailroom and catering staff within the first year of its living wage commitment.

A drop in cleaning staff turnover from 44 per cent to 27 per cent was recorded, while in the mailroom, staff were more efficient due to better job allocation, according to a report published last year by the UK's Living Wage foundation.

Recruitment and retention also improved among catering staff making training and development easier.

Penrose Care, a home-care service based in London, England, also noted high rates of staff retention, better customer satisfaction and "negligible" staff sick day amounts after it committed to a living wage in October 2012.

Greg deGroot-Maggetti, program manager for Living Wage Waterloo region and chair of Ontario Living Wage Network, says as more employers commit to the living wage campaign, the concept of a living wage economy becomes more realistic.

"Where the living wage really has an impact is when it begins to reach more of those contracted positions -- the cleaning services, the catering services the security services," he says.

"As we get more large employees signing on, we'll create a market for service providers which are committed to paying a living wage."

Follow this series on Canada and the minimum wage:

Part 1: Wages vs. workers: How Canada's minimum rates compare

Part 2: Scraping by on the minimum wage and the Fight for $15

Part 3: Canada's minimum income experiment and the fight against poverty

Part 4: The business of the living wage

Part 5: Despite campaign pressure, minimum wages remain stubbornly low

Teuila Fuatai is a recent transplant to Canada from Auckland, New Zealand. She settled in Toronto in September following a five-month travel stint around the United States. In New Zealand, she worked as a general news reporter for the New Zealand Herald and APNZ News Service for four years after studying accounting, communication and politics at the University of Otago. As a student, she had her own radio show on the local university station and wrote for the student magazine. She is rabble's labour beat reporter this year.

Photo: flickr/ Ross G. Strachan




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