The ‘living wage’ makes for poor living

According to Statistics Canada the unemployment rate hit a 32-year low this past March. With only 6% per cent of Canadians out of a job, we are by all accounts a country hard at work.

But what kind of work are we doing? Unfortunately, many of the new jobs being created are part-time and many more are jobs that pay at or below the minimum wage.

Minimum wage, or ‘living wage’ as it sometimes called by those droll little policy makers who’ve likely never had to ‘live’ on the paltry sum, is the minimum hourly wage that an employer is allowed to pay an employee.

Anyone who has worked for McDonald’s or as a checkout clerk at a grocery store knows how little this is. One out of 25 working Canadians is paid minimum wage.

In Quebec that means $7.60 an hour, and in Ontario it is slightly higher at $7.75. The lowest minimum wages are found in the Atlantic Provinces, with all four hovering around the $6.50 mark. The minimum wage is highest in Northern Canada with Nunavut and the Northwest Territories at $8.50 and $8.25 respectively. This is due in part to the high cost of living in those areas.

Despite these seemingly high ‘minimum’ wages, all of these represent decreases in the minimum wage from where it used to be.

The Minimum wage was first implemented in the 1920s as a reaction to labour unrest among workers who did not have the benefit of unions to protect their rights. In 1919 a Royal Commission on Industrial Relations recommended that “minimum wage laws be enacted in all the provinces to cover women, girls and unskilled labourers.” The Commission commented on the discrepancy between the elevated cost of living and low wages as one of the “chief causes of underlying industrial unrest” and suggested that wage guidelines be adopted “to allow the worker to obtain a fairer reward for his toil and a living wage.”

While the cost of living has skyrocketed, the minimum wage has failed to keep pace with inflation. This means that today’s minimum wage has a dollar or so less buying power than it did in the mid-’70s.

More often than not, the living wage is far below what the feds consider to be the poverty line.

It is a situation that in many cases makes being on social assistance more profitable than being “gainfully employed.”

In Canada, about 65 per cent of minimum wage earners are women. Most minimum wage earners are members of low-income families. Children of these families are the real victims of the ‘living wage.’

A report on child poverty released by UNICEF’s International Research Centre in 2005 put Canada in 19th place out of 26 Organization for Economic Co-Operation and Development [OECD] countries. About 15 per cent or roughly one million Canadian kids live in poverty.

Many have argued that increasing the minimum wage in this country would benefit behemoths like Wal-Mart and Canadian Tire, and make things difficult for small business.

In fact, last fall Lee Scott, president of Wal-Mart, that workers’ Shangri La, announced that his company would put pressure on the U.S. Congress to implement a hike in that country’s minimum wage “to help working families.” During this same announcement Scott had the cheek to note that Wal-Mart employees make on average twice the minimum wage. What Scott failed to mention was whether this average included his own salary.

Even the Wall Street Journal balked at Scott’s announcement. Why? Because another fact the Scott omitted was that Wal-Mart is already paying its employees a few pennies more than the minimum wage, hardly enough to make a meaningful difference in their lives, but enough so that Wal-Mart’s bottom line wouldn’t be affected by a hike. Of course, the people who would have to make adjustments would be Wal-Mart’s competitors, which means tough times for the little guy.

Many economists would agree that boosting the minimum wage would lead to difficulties for small businesses and thus, less jobs, and for the most part, these economists are right. Raising the minimum wage may make it more difficult to find a job at the bottom end of the wage spectrum. And it may even lead to an increase in the unemployment rate.

However, that is only part of the picture. According to numbers from the Canadian Centre for Policy Alternatives and Statistics Canada, raising the minimum wage has historically meant a minor slowdown in job growth. In fact, the purported correlation between minimum wage increases and job losses is tenuous at best. What usually happens is a slowdown in hiring while things level off, followed by a subsequent resumption of job growth.

There is no quick fix for poverty. But incrementally raising the minimum wage across the country would be a good start. Politicians need to put their money where their mouths are and implement policies that combat poverty rather than contributing to it. We should not simply be looking at the quantity of people at work, but whether they’re being paid an actual ‘living wage,’ so that working is a more enticing option than welfare.

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