Social Policy in Ontario

Could Alberta implement a living wage?

Posted on May 13, 2015 in Social Security Policy Context

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TheStar.com – Opinion/Commentary – One of the boldest pledges made by premier-designate Rachel Notley of Alberta is a $15 minimum wage.
May 12 2015.   By: Carol Goar, Star Columnist

Alberta is poised to leapfrog over Ontario to become the province with the highest minimum wage in Canada.

Premier-designate Rachel Notley has pledged to raise her province’s wage floor to $15 an hour during her first mandate. That would catapult Alberta from the bottom of the national rankings at $10.20 an hour to the top, surpassing the current leader, Ontario at $11 an hour, by a wide margin.

“It is simply unacceptable that in a province as prosperous as ours that hard-working Albertans cannot make ends meet,” the NDP leader said on the campaign trail. She calculates that a $15 minimum wage — $31,200 a year for a full-time worker — would lift a couple or a single parent supporting a child out of poverty. (That is consistent with Statistics Canada’s low-income cut-offs, which vary from $15,371 in rural areas to $29,004 in large urban centres.)

Notley’s plan is much bolder than anything Kathleen Wynne was willing to risk. When she took office, Ontario’s self-styled “social justice premier” raised the minimum wage by 75 cents to $11 an hour and pegged future increases to the cost of living. (It is slated to go up to $11.25 in October.)

Her decision was a crushing disappointment for anti-poverty activists who had been calling for a minimum wage of $14. “It is the fairest position we could have taken,” she said, arguing that a higher wage floor would have hurt business and reduced employment.

Under her formula, Ontario’s minimum wage will reach $15 by approximately 2030. Notley intends to get there by 2018.

Like all campaign promises, this one should be viewed with caution. The new premier’s goal might prove too ambitious for her fellow Albertans. She might encounter such fierce resistance from restaurateurs and retailers that she decides to lower her target or stretch out her timetable. She might discover that her province’s economy, weakened by last year’s precipitous drop in oil prices, can’t absorb a 47-per-cent minimum wage hike. She might be consumed with other priorities.

But if she proceeds, Notley will become the first political leader in Canada to legislate a living wage and the first premier to break out of the austerity regime that now prevails at all levels of government.

In many ways, Alberta is an ideal place for the experiment. Its unemployment rate is low (5.5 per cent compared to a national average of 6.8 per cent).Very few Albertans — 1.5 per cent of the workforce — earn the minimum wage, according to provincial statistics. It has the highest median family income in the country ($92,300 compared to Ontario’s $73,700). And so far, the damage done by last year’s oil-price shock has been minimal.

Although Notley’s $15 wage floor would set a new benchmark in North America — where statutory minimum wages range from $5.25 to $11 — it would not be a global game-changer. A study released by the OECD (Organization for Economic Cooperation and Development) last week showed that a minimum wage earner working 20 hours a week can support a family of four in Britain, Australia and Ireland.

It is not solely because these countries have high minimum wages. They also co-ordinate their taxation and benefit systems to ensure that the lowest paid workers get to keep their earnings and don’t lose vital social services such as child care. “Tax policy may be as important a driver of net wages and labour costs at minimum wage levels,” the study points out.

By this standard, Alberta wouldn’t do very well. It has a flat provincial income tax rate. Everyone, regardless of earnings, pays 10 per cent. Its human services department allows individuals moving from welfare to work to keep the first $230 a month they earn. After that, it starts clawing back their benefits. Ottawa compounds the problem by requiring all workers to pay employment insurance premiums although the vast majority of low-wage workers are ineligible for benefits.

Nevertheless, as the OECD points out, legislated minimum wage rates are “the most direct policy lever” governments can use to ensure that work pays enough to live on. They also serve as a basic labour standard and an essential tool in poverty reduction.

Notley will no doubt be warned that Alberta can’t afford to be in the vanguard in these uncertain times; that employers will balk; that jobs will disappear and that the working poor will be the biggest losers.

Every political leader in Canada faces these arguments. No one has ever tested them. Who better than the premier of the country’s richest, most surprising province?

< http://www.thestar.com/opinion/commentary/2015/05/12/could-alberta-implement-a-living-wage-goar.html >

Tags: economy, ideology, jurisdiction, poverty, standard of living, tax

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