Minimum wage needs to be re-engineered
TheStar.com – business/economy – For the nearly one in 10 Canadians paid the minimum wage, pre-tax annual income is $20,500, woefully inadequate to raise a family.
Aug 06 2013. By: David Olive
Properly understood, the minimum wage is a stimulus benefiting the entire economy.
The minimum wage puts a floor under poverty among the working poor. (It would surprise many people to learn that most poor people work.)
It enables entry-level employees, notably youth working their way through college and university and immigrants intent on self-sufficiency, to get a solid start as dynamic contributors to a more prosperous Canada.
And in times of anaemic GDP growth like these, increases in the minimum wage boost economic activity to the advantage of all.
Anti-poverty activists chastise Queen’s Park over the province’s three-year freeze of the minimum wage, at $10.25 an hour. They should keep in mind that it was the Liberals who hiked the minimum wage by 50 per cent since taking power, ending a nine-year freeze at $6.85. If they imagine that a Premier Tim Hudak will show similar concern for the working poor, I’m the King of Siam.
These activists also despair that it has taken two years for the Liberals to honour their promise to set up an advisory panel on how best to calculate the minimum wage. Here they are on more defensible ground. Still, it’s understandable that Queen’s Park would be skittish about a panel that will likely call for a hike in the minimum-wage, when the powerful employer groups opposed to one will so easily cite a weak economy as reason not to do so. (A canard, as I’ve noted above: this form of stimulus is needed now more than ever.)
Plus, the advisory panel Queen’s Park named July 17 shows promising signs of reforming the minimum wage as one of government’s most effective tools for achieving at least a semblance of economic justice, along with the social safety net, job-training programs, and income supplements.
To this point in the history of the minimum wage, increases have been an ad hoc affair. This has given neither workers nor employers adequate explanation for their timing or desired effect, and obviously provided no one a chance to plan for and adjust to them.
Anil Verma is the University of Toronto business-school professor and specialist in industrial relations and human resources named to head the six-member advisory panel of business, labour and youth representatives. Verma wants to go still further in reforms.
Typically, inflation alone is used in calculating minimum-wage increases.
By contrast, Verma has an admirably holistic regard for the minimum-wage. It should be a tool for combating poverty, he believes, one that’s better integrated with other poverty-fighting practices. It should also be re-engineered to boost the overall economy and the productive capacity of the workforce.
Helping low-paid workers keep up with skyrocketing costs in housing, tuition and energy is fine and good. “But that ignores two other vital factors,” Verma told The Star when his appointment was announced. “One is the overall growth in the economy and the second is productivity on the job.”
Only a simpleton would fail to grasp that an under-educated workforce will not deliver the productivity gains required to enhance Canada’s global competitiveness. And that the formidable expense of undergraduate and mid-career adult education is holding us back in creating the world’s smartest workforce.
It’s sobering to consider that just over 1 million Canadian workers are employed at minimum wage jobs, 534,000 of them in Ontario. That’s because low-wage work in the service sector has surged, while traditional, higher-paying manufacturing jobs have been fading away. Note the stupendous growth of minimum-wage employers like Wal-Mart and Tim Hortons, Canada’s biggest retailer and fast-food operator, respectively.
For the nearly one in 10 Canadians paid the minimum wage – more than double the portion of only a decade ago — pre-tax annual income is $20,500, woefully inadequate to raise a family. By comparison, the average industrial wage is $45,588 per year. And the average pay for the 100 best-paid corporate CEOs is $7.7 million.
To judge from the Wall Street meltdown and the Lac-Mégantic tragedy, CEOs have not become noticeably more competent as their pay has soared. Yet it’s among their ranks that one hears loud objections to a few more shekels for the working class.
In a Canadian economy where consumer spending drives 54 per cent of GDP growth, it just makes sense to put more money in the pockets of those who quickly spend on necessities the additional pay they earn. Corporate Canada, by contrast, has been withholding from the economy its tax breaks, subsidies and burgeoning profits since the onset of the Great Recession.
I can’t say it better than the economist Armine Yalnizyn: “Employers don’t create jobs; consumers do.” As long as so many of the employees at my local Tims are forced to hold down two jobs to get by, I’ll know we’re not nearly the caring society we pride ourselves in being.
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