Making the minimum wage a living wage

| February 9, 2007
After years of pressure from anti-poverty advocates it seems that politicians and the media across the country have taken a renewed interest in the minimum wage. A number of provinces are in the midst of minimum wage discussions. Internationally the minimum wage has also been in the headlines. In Europe significant increases are being implemented and the U.S. Congress has recently passed minimum wage legislation to provide the first increase in almost 10 years.

In Canada, Harry Arthurs, the federal Commissioner appointed to review labour standards, got the ball rolling. In his report last fall entitled “Fairness at Work” Arthurs concluded that in setting the minimum wage “the government should accept the principle that no Canadian worker should work full-time for a year and still live in poverty.”

The commissioner's report to the federal government finally brought some official recognition of what anti-poverty activists have been pushing for years — the minimum wage must become a living wage.

The minimum wage is an increasingly important means of addressing poverty. In the absence of social programs such as affordable housing and child care, low-income earners are left to rely on the minimum wage to try and make ends meet. Without significant funding for post-secondary education, tuition fees continue to escalate and students increasingly depend on the minimum wage jobs to try and cover their costs.

Increasing the minimum wage benefits all of the working poor, not just those working for the minimum wage. The minimum wage is the benchmark wage or the reference point for both employers and employees in the setting and negotiating of wages. Increasing the minimum wage puts upward pressure on other wages, especially low wages; if it remains low, these wages will stagnate.

The Nova Scotian economy has been producing a disproportionate number of low wage jobs. Boosting the minimum wage can reverse this trend by encouraging businesses to invest in equipment and training rather than rely on low wages to remain profitable.

While there is considerable consensus that the minimum wage should increase, how high the rate should be set is much more contentious.

In Nova Scotia the rate is currently set by the labour minister based on the recommendations of the provincial minimum wage review committee, which is made up of two members from the business sector and two from labour. In December the committee recommended an increase of more the six per cent from $7.15 to $.7.60 to take place in April. The recommended increase is well above inflation and a good start.

The increase has support from some unexpected quarters. The vice-president of the Halifax Chamber of Commerce supports the increase stating, “We know that there is an impact on our members âe¦ That said, we are certainly in a war to keep talent here in Nova Scotia, and the ability to offer a competitive salary is one of the weapons we have.”

It appears that the workers leaving Nova Scotia to feed the economic boom in Alberta are having an unintended consequence — forcing businesses in Nova Scotia to increase wages.

The biggest shortcoming of the provincial advisory committee's recommendations is that it does not explicitly recommend a specific method for setting the minimum wage.

Federal commissioner Arthurs recommended that over a “phase-in period âe¦ the federal minimum wage should be raised until it meets the low-income cut-off (LICO) index.” Pegging the minimum wage to the LICO, Statistics Canada's measure of low income, concurs with what many anti-poverty activists have been recommending.

But does the Nova Scotia advisory committee agree that the target should be a rate that enables a worker to get out of poverty? And if so what should be the timeline for reaching the target? On these issues the committee was apparently unable to reach a consensus.

The committee does acknowledge the LICO as a possible target for setting the minimum wage. Using the low income formula discussed in the committee's report, the Nova Scotian rate for 2007 should be in the $9-an-hour range some anti-poverty advocates are pushing for. With an annual 6.3 per cent increase, such as proposed for 2007, it would take at least five years for the minimum wage in Nova Scotia to become a living wage.

We need to move faster. This is not new terrain; we've been here before. In the 1970s workers earning the minimum wage received a rate that was roughly equivalent to $9 an hour today. Thirty years later the Canadian economy is producing much higher levels of wealth and profit, but paying its most vulnerable workers less.

Perhaps, as recommended by the committee, small businesses in the low-wage sectors should receive government support in making the transition to paying a living wage. But we should not be subsidizing very profitable trans-national corporations such as McDonalds and Tim Hortons. In general, I think consumers would be willing to pay a few cents more for their coffee if they knew it was going into the pockets of the workers who most need it.

Here's the bottom line from my perspective. In the end, if a business can't afford to pay its employees a living wage it shouldn't be in business — paying anything less is exploitation.

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