Hot! Is the ‘Living Wage’ Enough?

TheTyee.ca – News/2012/05/14/Living-Wage-Enough – Fair wages bring equality to workers. But what is fair? And what about people who can’t work? First in a Tyee Solutions Society series on tackling poverty.
May 14, 2012.   By Katie Hyslop

British Columbia’s lowest-paid workers finally got a raise last spring, when Premier Christy Clark announced the first increase to the province’s minimum wage in 11 years. The wage increased by $1.50 to $10.25 an hour, in one year bringing it up from the lowest in the country to tie for second highest with Ontario, just behind Nunavut’s $11 per hour.

But even with an increase, full-time minimum wage workers in B.C. aren’t earning enough to meet Statistics Canada’s low-income cut-off line (commonly cited as Canada’s poverty line) for families. Raising the minimum wage also does little for people who can’t work full-time, can’t work at all, or who can’t find work. That means the recent rise in the minimum wage, welcome as it is, won’t do much to rescue the one in 10 households now living below the poverty line in this province.

But if a higher minimum wage isn’t enough, then what income policy is the best choice for eradicating poverty in British Columbia? Economists and social policy groups have no shortage of solutions to suggest. Ideas include a so-called “living wage,” higher welfare rates, a universal guaranteed minimum income, even something called a “Demogrant.” (For a more complete list, see the sidebar to this article, “A Glossary of Anti-Poverty Policies.”)

For the Tyee Solutions Society, I’ve been exploring the pros and cons of three of the most widely advocated of these proposals to put an end to poverty: the living wage, a guaranteed annual income, and government wage subsidies. I spoke to anti-poverty activists, social policy theorists, academics, and economists. Some have devoted careers to advocating for a specific method; others take a more flexible approach to reducing poverty.

Reports in the days to come will detail the merits and drawbacks of a guaranteed annual income and of government wage subsidies. We start here with a look at the pioneers who are turning the idea of a living wage from generality into a meaningful number.

The difference a living wage made for one mother

When Alex Moya started as a shipper/receiver at software maker SAP in Vancouver last September, she was earning $15 an hour. Almost $6 above minimum wage at the time, it was enough for her to get by. But still, she admits it was sometimes “stressful.”

When SAP became a “living wage” employer earlier this year however, Moya’s salary jumped to almost $19 an hour. It was a big help for a young mother who, along with her husband, has a young daughter in daycare and commutes from their home in New Westminster to work in Vancouver.

“Just to have extra cash, it helps for those things that you’re not prepared [for], like if your car breaks down or something happened to your computer. I don’t feel so stressed out. I feel I can have a little bit of extra cash for the ‘just-in-case’ things,” she says.

“I feel like I can have a more normal life, like if I want to just go out and have a dinner or go to the theatre, I have that extra money.”

Unlike a minimum wage, a living wage is calculated using the cost of living in a specific municipality. The idea is that the salary you make should be enough to cover the cost not only of food and shelter, but also of transportation, basic medical care, household goods, school supplies and clothing needs. Differences in rent and food prices mean living wage rates vary across the province.

Anti-poverty advocates like the Canadian Centre for Policy Alternatives, First Call: BC Child and Youth Advocacy Coalition, and half a dozen public sector unions support the idea through A Living Wage for Families Campaign. The non-partisan organization pushes municipalities, private businesses, and the provincial government to adopt living wage salaries for their own and their contractors’ employees.

Each year the campaign releases an updated calculation of living-wage rates for full-time work in several B.C. municipalities. They range from an hourly wage of $14.16 in Cranbrook to $19.14 in Metro Vancouver. Those rates may be lowered, however, if they’re matched with benefits like health and dental coverage, day care subsidies, or bus passes.

For Michael McCarthy-Flynn, director of the campaign, it’s the best method for eliminating poverty for workers who don’t meet the low-income cut-off lines: “It’s a wage that will lift people out of poverty and it’s based on the sophisticated methodology that looks at the basket of goods that the average family needs.”

The basket is quite limited: the “needs” it recognizes include food, clothing, rent, healthcare, transportation and education costs. Notconsidered needs are debt payments, retirement or education savings, home ownership, caring for a disabled or elderly relative or covering emergency costs like car trouble, vet bills or any of those other “just-in-case” moments Alex Moya used to worry about.

And the idea has its detractors. They say a living wage does nothing for people who for a variety of reasons aren’t working. When B.C.’s unemployment rate sits at just about six per cent, tying a poverty reduction strategy to work, they argue, won’t solve income inequality.

Living wage catches on in BC

Although living wage campaigns sprang up across the United States and the United Kingdom in the early 1990s, they’ve only come to the forefront of B.C. anti-poverty discussions in the last decade.

It’s a theory at least two municipalities have already bought into. New Westminster made history in 2010 when it became the first municipality in Canada to adopt a living wage for its workers and contractors. The Capital Regional District of Esquimalt followed suit in January 2011.

This April the Qualicum School District became the first district in the province to adopt a living wage strategy. Over 130 municipalities in the U.S. and more than 100 U.K. employers have also adopted living wage polices.

Several B.C. employers have also embraced the living wage. The most high profile is VanCity Credit Union, which officially joined the ranks of living wage employers last summer. Others include non-profit organizations like the BC Teachers’ Federation, United Way of the Lower Mainland and The Canadian Cancer Society — B.C. and Yukon Division, as well as for-profit companies like SAP’s Vancouver presence and Now Communications.

A public for-profit software company, SAP’s involvement with the Living Wage for Families Campaign started with its pro-bono development of an online living wage calculator. It grew into a living wage commitment from the Vancouver office when managers there realized how the campaign fit into their social and economic sustainability goals.

“SAP is a global multinational company, and we’re very much interested in doing good in the world,” says Kirsten Sutton, managing director for SAP Labs Canada. “But what’s most important is for each location to make sure they’re doing good in their community, and for us here [instituting a living wage] was one way to do that.”

Most of SAP’s own Vancouver employees were already making above the living wage, so the firm’s effort focused on the 50-plus contractors who provide its office custodians, security staff and facility managers. (Shipper/receiver Moya is actually employed by Compass Group Canada, an SAP contractor.)

Sutton says it means paying more money for these contracts. But for their office it’s important not to pass the poverty on: “A good business these days is not just a bottom line,” she insists. “It’s worrying about many other things.”

During the run-up to last November’s municipal elections in B.C., the Living Wage for Families Campaign joined 54 other organizations in a push to convince candidates in Metro Vancouver to support a living wage for workers. Although the effort failed to persuade additional cities to adopt living wages, most of the candidates contacted expressed interest in the idea, even if they did not immediately endorse it.

And the campaigning seems to be paying off in other ways. While the election season was on, the Columbia Institute commissioned a poll asking a representative sample of voters whether they would support their town or city adopting a bylaw to ensure all municipal employees and contractors adopt a living wage. Over 67 per cent said they would.

A partial answer at best

While that kind of support may be promising for the future of municipal employees and contract workers, critics point out that a living wage benefits only people who are able to work, and can never be more than one part of a broader poverty-reduction plan.

“A successful, comprehensive, poverty reduction strategy would include some policy to deal with adequate wages,” says Margot Young, a University of British Columbia law professor. “But [must also] ensure those who aren’t in the paid labour sector have an ability for flourishing, both economically and in terms of participating in the community, that is just and fair.”

Young co-authored a report on the more inclusive idea of a guaranteed annual income for the Canadian Centre for Policy Alternatives (one of the groups with a seat on the Living Wage for Families Campaign advisory committee). It’s a subject we’ll look at in the second part of this series.

Living Wage campaigner McCarthy-Flynn accepts Young’s criticism. “The [guaranteed] income is looking at people who are on welfare, ensuring that they have a dignified existence and [getting] rid of the bureaucracy, whereas the living wage looks at the working poor,” he reasons. “So they’re sort of complementary rather than in competition.”

Simon Fraser University economist Krishna Pendakur endorses paying workers enough money to live on, but he’s uncomfortable with policies that favour select groups. Because only a handful of municipalities and businesses yet endorse a living wage policy, that’s exactly what it does.

“One obvious mechanism the state has is to pay its own workers a lot,” he says. “But not everyone gets to be a public sector worker.”

It’s an investment: McCarthy-Flynn

Then there’s the cost of implementing a living wage. Although it’s difficult to determine what the total cost would be because of the range of living wages across the province, the average hourly wage for workers over 25 in B.C. is significantly above the living wage for a four-person household. Many people’s wages wouldn’t change at all under a living wage.

But according to the Canadian Centre for Policy Alternatives, in 2008 almost eight per cent of the population earned less than $12 an hour.

McCarthy-Flynn says cost is a poor excuse for inaction. He believes governments and employers should see a living wage as an investment in the future, rather than an expense for today.

“We seem to be very good at spending money on poverty after it exists, ” McCarthy-Flynn says, “rather than investing in programs that will prevent poverty from happening in the first place.” Those, he says, “are, one, cheaper, and two, a lot better socially in the long run.”

McCarthy-Flynn cites a CCPA report which estimates an annual poverty cost of $8.1 to $9.2 billion in B.C. alone. A large chunk of that money goes to pay for the healthcare and policing costs associated with poverty.

By comparison, the same report put the cost of a comprehensive poverty reduction plan at $3 to $4 billion per year.

Another CCPA report Working for a Living Wage: 2011 Update cites a finding that employers who paid a living wage in the U.K. saw a decrease in employee absenteeism. Unchecked absenteeism in Canada, itestimated, costs employers up to $6 billion per year. Other changes that came with a U.K. living wage include a reduction in staff turnover, improved performance and production and greater customer satisfaction.

The centre’s research doesn’t directly link a reduction in health costs with a living wage. But it does cite evidence that higher stress levels among low-income households relative to those in the mid-to-higher income bracket lead to poorer overall health and a greater use of health services in the long-term.

To McCarthy-Flynn, a living wage would allow those who have been taking the most from our social safety net to start paying back into it. That, he argues, benefits more than just the people at the lower end of the economic scale.

“If people get a living wage and are lifted out of poverty, they have a higher opportunity to become fully engaged, productive, contributing members of society in terms of the economic return they give and the social return,” he says.

Growing support in the business community and the wider population for instituting a living wage hasn’t been enough to sell B.C.’s Liberal government on raising the provincial minimum wage again any time soon. Its NDP rivals have come out in support of indexing the minimum wage to inflation; it’s unclear whether those changes would become reality should the party come to power in next year’s provincial election. And plainly, when one British Columbia household in 10 struggles below the low-income cut-off line, getting everyone to a living wage is going to take more commitment — from government, the business community and most of all, voters.

But the living wage isn’t the only policy device to help get us there. We’ll look at others in reports to come tomorrow and Wednesday.  [Tyee]

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A GLOSSARY OF ANTI-POVERTY POLICIES

Economic jargon is hard enough to penetrate without encountering multiple names for the same ideas. Here is a glossary of terms to help cut through the economese.

Living Wage: An hourly wage that covers the essential costs of food, clothing, housing, healthcare, transportation, education, childcare and incidentals in the region where it applies.

Minimum Wage: The lowest hourly wage you are legally allowed to pay a worker in a jurisdiction like British Columbia. An exception in B.C. is the $9 “liquor server” wage for employees who serve alcohol.

Guaranteed Annual Income (GAI): A base income guaranteed to all residents of a country, regardless of employment status, and provided by the state to those who do not earn it in the labour market.

Other ways we do, have, or might support low-income Canadians:

Past:

Family Allowance: Beginning in 1945, the federal government sent a monthly cheque to the parents of every Canadian child to help with the cost of their care. Canada’s first universal social program, it lasted until 1973. A Liberal federal government replaced it with a selective tax credit in 1978.

MINCOME: A pilot project in Dauphin and Winnipeg, Manitoba, that provided a guaranteed annual income to people there from 1974-1978. Funded jointly by the federal and Manitoba governments. Only a select few Winnipeg workers received the benefit, but it was open to both working and non-working individuals in Dauphin.

Self-Sufficiency Project (SSP): A federal pilot project for a never-instituted national wage subsidy to keep single parents working and off welfare. Ran in British Columbia and New Brunswick for a decade starting in the early 1990s.

Present:

Guaranteed Annual Income Supplement: A federally issued income supplement that tops up the annual income of retired Canadian seniors. Calculated based on their accumulated lifetime earnings.

Universal Child Care Benefit:Federal payments of $100 per month per child paid to Canadian families with children under the age of six. Intended to supplement childcare costs. Descendent of the Family Allowance program, Canada’s first universal social welfare program, which gave all Canadian mothers a monthly, tax-free benefit from 1945 to 1973. Except in Quebec, where the cheque was issued to fathers.

Working Income Tax Benefit (WITB): A national federal government wage subsidy program for Canada’s low-income workers. Workers typically apply via income tax returns, but there is a separate “advanced payment” form if tax returns are too far in the future. Cheques are issued four times per year.

Earned Income Tax Credit: A federal government wage subsidy program for American low-income working families. Unlike the WITB, which is open to individuals, recipients of the Earned Income Tax Credit must have children under 18.

Canada Child Tax Benefit: A monthly tax benefit paid to families with children under 18, regardless of parents’ working status. Benefits are usually issued around the 20th of each month, from July to June. Benefits can be paid in one lump sum if under $240 annually. The benefit is clawed back based on the amount of income a family makes.

Envisioned:

Negative Income Tax: A way to guarantee annual income by paying a “negative” tax to people earning below a minimum amount. Payments decline the closer a recipient comes to the guaranteed income through their own means. Anyone who earns more than the base amount does not receive money, and pays taxes instead.

Universal Demogrant: Another way to pay a guaranteed annual income where everyone, regardless of income or employment status, receives the same payment (the Family Allowance was a type of demogrant since all parents, rich or poor, received it).

Wage Subsidies: Government payments to subsidize work-related income. Can be delivered as tax benefits like the existing Working Income Tax Benefit, or be added onto paycheques at an hourly rate.

— KH

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