Social Policy in Ontario

Ontario’s cost of living would be rising by 2.1 per cent, not the official rate of 1.5 per cent.

This matters to millions of Ontarians — workers with COLA clauses, pensioners, tenants, students, recipients of drug benefits, employment insurance, disability support and social assistance. As of June 1, it will matter to the 535,000 people earning Ontario’s minimum wage.

Premier Kathleen Wynne announced last week that her government wouldboost the province’s minimum wage to $11 an hour this year and peg it to the rate of inflation thereafter.

Any increase is welcome. The current minimum wage, stuck at $10.25 for four years, is not enough to live on.

But Wynne’s decision to boost Ontario’s lowest wage by a modest 75 cents an hour — and link future increases to the consumer price index (CPI) — is disappointing.

The premier is following the recommendations of an advisory panel she set up last June. No doubt its members — a management professor at the University of Toronto; a first-year student at Wilfrid Laurier University; the president of the Tourism Association of Ontario; the director of government relations at the Ontario Federation of Labour; his counterpart at the Retail Council of Canada; and the head of an anti-poverty organization in Windsor — were well-intentioned. No question they faced a difficult and divisive challenge.

But Wynne’s appointments were lobbyists, advocates and academics, not minimum wage workers. They blithely assumed the consumer price index was a “transparent, predictable and fair” escalator for the minimum wage.

Had they taken a hard look at the CPI, they would have realized that hundreds of the goods and services in the “fixed basket of commodities” Statistics Canada uses to track price movements are irrelevant to people struggling to pay their rent, buy groceries and keep the heat and lights on.

They don’t buy the latest smart phone, purchase new cars, go out to restaurants or subscribe to magazines. They can’t afford air travel, life insurance or dry cleaning. Even within the food component of the index, many of the products StatsCan monitors – fresh fruits and vegetables, meat, seafood, eggs, and milk – are out of reach for minimum wage earners.

The items low-income Ontarians must buy are prone to steep price increases. Energy charges for instance, go up at four times the general inflation rate. Shelter costs increase at double the overall rate. (The only exception is clothing, thanks to the influx of apparel from China, Bangladesh, Vietnam and other low-wage countries.)

It wouldn’t be hard to design a price index that reflects the spending habits of the working poor (or the elderly or people with disabilities). In the early 1980s, the U.S. Department of Labor came up with a consumer price index for pensioners in response to complaints that Washington’s one-size-fits-all index was unsuitable for retirees.

Clearly this is not a job for a committee of non-statisticians. But Wynne’s advisory panel could have pointed out the shortcomings of the CPI and recommended the government find — or create — a better escalator.

For her part, the premier could have been less hasty in pegging the earnings of Ontario’s poorest workers to a price index built for the “average” family.

As a result of her two decisions — the initial 75-cent boost and the understated cost of living adjustment — minimum wage earners will be left 16 per cent below the poverty line, slipping backward every year.

Her first decision was manifestly political. Forsaking boldness, she steered a relatively safe middle course between employers who wanted no increase in the minimum wage and low-wage workers who wanted a 37-per-cent increase.

She knew this would compromise her commitment to be Ontario’s “social justice premier.” But she wanted a policy she could defend on the election trail as pragmatic, progressive and economically responsible.

Her second decision — to skimp on indexing — was harder to understand. It wouldn’t have upset business if she had pledged to implement a fair adjustment mechanism. It would have allowed her to say honestly that she built a solid floor under the province’s poorest workers.

< http://www.thestar.com/opinion/commentary/2014/02/04/ontarios_minimum_wage_plan_locks_many_into_poverty_goar.html >