What is a Living Wage?
There are various definitions of what exactly a living wage means, but Public Interest Alberta defines a living wage as the income required to maintain a safe, healthy standard of living in a community.
Unlike a minimum wage, which sets an arbitrary limit beneath which hourly wages cannot fall, the living wage starts by asking what wage level is sufficient to allow workers to support their families and enable them to enjoy a safe and healthy life.
In response to this question, various communities have advocated for and implemented living wage initiatives in different ways.
The most common initiative is to pressure a municipal government to pass a living wage ordinance, which mandates that municipal and service contractor employees must receive a living wage. Some municipal living wage laws are applied broadly, covering every municipal employee and contractor as well as companies receiving economic development subsidies. In other cases, the living wage rules have exceptions - only applying to contracts of a certain size or excluding certain groups of workers, such as non-profit agencies.
Similar initiatives have been implemented in some communities at larger institutions, such as universities and airport authorities, which have passed policies requiring that anyone working for the institution or a contractor must be paid a living wage.
Other advocacy groups have run campaigns to raise the minimum wage, either provincially or federally, to a level that is a livable amount. In these cases, one of the commonly accepted government measures of poverty, such as the Low Income Cut-Off (LICO), is often used to set the wage. This conception of a living wage simply says that someone working full-time should earn enough not to be poor, and the minimum wage is set at or above the LICO.
The living wage takes into account that the amount needed to live decently varies from community to community. In a major urban centre, it may not be necessary to own a vehicle, but it may be the only option for someone living in a rural area or in a municipality without a comprehensive public transit system. Likewise, the cost of housing varies tremendously from Fort McMurray to Lethbridge.
A major difficulty with defining a living wage is that people have different ideas about what is necessary to have a decent standard of living. Does an individual or family need a car? Should a family be able to save money for their children’s education or for their own retirement?
Should a living wage include being able to afford recreation and culture, such as access to sports programs, the art gallery and movies?
Questions such as these are a critical first step in developing a common understanding of what we mean by a living wage.
Three Components of a Living Wage
Discussions of a living wage need to be viewed in relation to other elements in society. Whether an individual or family in any community is able to enjoy a decent standard of living can be conceptualized as having three components:
The labour market: How much money are people earning for their work?
Public goods and services: What access do people in the community
have to affordable housing, education, affordable quality childcare, health care,
public libraries and efficient public transit?
Income security: What supports, including pension plans, child tax benefits, unemployment insurance and supports for the severely handicapped are available to people in the community?
Clearly, what constitutes a living wage is tied to other public policy decisions made by all levels of government. For example, if wages are low in dollar terms but families have access to subsidized childcare and public and postsecondary education is sufficiently funded to keep tuition and user fees low, they may be better off than someone with higher wages who has to worry about paying for childcare and saving for their children’s education.
In Canada and Alberta, successive governments have made policy decisions which have moved away from concepts of collective responsibility and have shifted costs away from government and on to individuals and families. Cuts in social programs, increases in user fees and an under-funding of public goods and services have meant an increasing burden has been put on families to pay for more.
At the same time, minimum wages have not kept pace with the increasing cost of living in Alberta, meaning stretched budgets for some and deep and persistent poverty for others.
Who Would Be Impacted by a Living Wage?
While it may be comforting to think that only teenagers living with their parents earn low wages, the reality is far different. Statistics Canada 2004 employment data from six Alberta communities gives a snapshot of the reality of low wages in the province:
- 258,900 workers, or slightly more than one out of every five workers in these communities, earned less than $10 per hour.
- Of those 258,900 workers earning less than $10 per hour, nearly half (124,000) are over the age of 25.
- Two-thirds of all low income workers over the age of 25 are female, showing a strong correlation between women and low income.
Numerous studies have shown that aboriginal workers, recent immigrants and visible minorities are far more likely than the general population to be in low-wage positions.
In 2002, 78,000 children under twelve years old, or 15 percent of all children in Alberta, lived in families living below the LICO and 99,350 children lived in lone-parent families.
Living wages allow working families, especially those with children, to earn enough to move out of poverty and enjoy an income closer to a realistic cost of living. However, the benefits of a living wage go much further than just the household:
Community impacts
- Higher wages positively affect communities by providing a better tax base to build healthy communities.
- Higher wages mean more disposable income to spend on consumer goods and services, supporting the local economy. This is especially true since people with marginal incomes are more likely to spend money locally.
- Reduced poverty is directly linked with reduced costs to our health care, education and social service systems.
- Living wages can have the impact of making communities safer through reductions in some kinds of crime.
Government impacts
- Higher wages provide greater positive incentives to work, often leading to a reduction in social assistance rates and a concurrent increase in the tax base.
- Low-wage workers may currently qualify for social assistance programs. Higher wages may enable greater self-sufficiency and reduce reliance on these programs.
- There is a positive correlation between income and health, meaning lower costs for providing health care.
- Higher wages may reduce some types of crime related to poverty, reducing policing and court costs.
Business impacts
- Higher wages have been shown to be related to higher worker productivity.
- Higher wages often mean longer terms of employment, meaning less staff turnover and a subsequent reduction in the costs of hiring and training new employees.
- Higher wages are correlated with better overall health, meaning fewer days lost to illness.
- Higher wage floors enacted through municipal or provincial legislation also mean that employers who wish to pay their employees a decent wage cannot be undercut by other employers who do not see the benefit of doing so.
Minimum wages were meant to ensure that working people earn enough to keep them out of poverty. However, even with last year’s increase in Alberta’s minimum wage to $7.00 per hour, individuals and families working fulltime all year do not earn enough to escape poverty. This can be illustrated by comparing minimum wage earnings with commonly accepted measures of poverty.
|
Low-Income Cut-Offs (after tax) for 2004
|
| Population: |
Rural
|
Under 30,000
|
30,000-100,000
|
100,000 to 499,999
|
Over 500,000
|
| Individual Household |
$11,025
|
$12,617
|
$14,075
|
$14,253
|
$16,853
|
| Four Person Household |
$20,844
|
$23,856
|
$26,613
|
$26,948
|
$31,865
|
| Source: Statistics Canada, Income Statistics Division |
An individual working full-time, year round (40 hours a week for 52 weeks a year) earning $7.00 per hour in 2004 would have earned $12,806 after deductions and taxes. This does not even allow an individual without children to escape poverty, to say nothing of those supporting a family on one wage, or single-parent households.
Even if both parents in a family of four worked full-time all year, their combined income of $25,612 after deductions and taxes is still significantly below the amount needed to meet the basic needs of their family without social assistance.
Myths About the Living Wage
1. Municipal living wage ordinances will result in higher municipal taxes to pay for the increased cost of contracts.
Research on many Living Wage campaigns across the United States has demonstrated that governments and consumers absorb little or no extra cost as a result of living wage increases. Research from the Los Angeles campaign estimates cost increases at approximately 1% of production costs for the affected companies. Increased costs have been offset by cutting costs in non-wage areas, raising prices slightly, and phasing in the ordinance.
2. Implementing a living wage will result in job losses, especially impacting young people and those just entering the job market, such as recent immigrants.
There is little evidence that significant job losses result from the introduction of living wage ordinances. Studies from areas in the United States where limited living wage ordinances have been introduced have shown either small or no employment loses as a result of adopting living wages. Part of the reason is because of the gains made in productivity and decreased turnover and training costs, which help offset the costs of higher wages.
3. Living Wages are not needed because the majority of low wage earners also receive benefits, tax credits and other subsidies that raise them above the poverty line.
Keeping wages low enough to ensure that moving up to or above the poverty line is dependent upon accessing subsidies is one way to ensure that people remain in poverty. To lending institutions, such benefits are not considered income and therefore do not contribute to the worker’s creditworthiness, reducing their ability to apply for credit cards or loans.
We also need to ask why taxpayers should subsidize employers who pay low wages through social assistance programs that enable low-wage earners to survive.
4. Living Wage laws will result in low skilled workers being replaced by highly skilled workers, harming the very workers it is meant to help.
Again, this is a claim that is not supported by research. Low wage jobs are, by definition, jobs that do not require highly skilled workers. Research indicates that increased wages result in better retention of low skilled workers with related spin-off benefits to employers.
5. Small business owners and non-profit agencies will be most adversely impacted by a living wage.
Again, there has been little empirical evidence that living wages lead to job losses. Some small firms, especially when it comes to bidding for municipal contracts, actually benefit from living wage ordinances because they are able to compete with larger businesses which enjoyed an advantage due to lower costs resulting from low-wages rather than quality.
To address these concerns, many communities have exempted non-profits or have structured their living wage laws to not apply to firms with fewer than a certain number of employees. This eliminates this concern entirely.
6. Some jobs just aren’t worth high wages.
No matter what job is being performed, workers deserve to be paid enough to have adequate food and shelter and to live a life of dignity, health and safety. Low wage jobs are frequently physically demanding or involve unpleasant but necessary tasks, and workers doing these jobs deserve a fair wage.
Making Ends Meet
It is easy to forget just how costly the necessities of life have become. The following page will provide you with some basic information about the various costs households face. While not comprehensive, it may provide information that will help you as you fill out the survey on Living Wages.
Housing
Access to affordable rental accommodation, defined as being less than 30 percent of gross income, is a major concern for the working poor. Below are average rental rates in Alberta municipalities, according to October 2005 Canada Mortgage and Housing Corporation (CMHC) statistics:
| |
Bachelor |
2 Bedroom |
| Edmonton |
$513 |
$808 |
| Calgary |
$524 |
$732 |
| Red Deer |
$475 |
$666 |
| Lethbridge |
$439 |
$647 |
| Grande Prairie |
$554 |
$790 |
| Wood Buffalo |
$914 |
$1,478 |
Food
The Agriculture, Food and Rural Development department of the Alberta government publishes estimates of the cost of a nutritious food basket based on current nutrition recommendations. The latest estimated costs are:
| |
Average Monthly Cost |
| Individual male, 25-49 years |
$207.59 |
| Family of four, 2 school-aged children |
$676.96 |
Utilities
In 2001 the Alberta government completed deregulation of the electricity and gas market. Even with government subsidies to offset high prices, the average Albertan has seen an increase in power bills of between 60 and 100 percent.10 The City of Edmonton collects data on average monthly utility charges for a single-family house:
| |
Phone |
Power |
Water |
All utilities |
| Edmonton |
$23.86 |
$62.45 |
$26.06 |
$151.49 |
| Calgary |
$23.86 |
$67.20 |
$28.35 |
$141.97 |
| Red Deer |
$25.16 |
$61.53 |
$20.06 |
$133.64 |
| Lethbridge |
$25.16 |
$67.24 |
$26.01 |
$150.79 |
| Grande Prairie |
$25.16 |
$98.55 |
$24.13 |
$176.13 |
Transportation
Private vehicle ownership is very expensive, especially in the absence of a public auto insurance plan. Based on Alberta Motor Association figures, the average car costs at least $350 per month12 to own and operate, not including purchase price/depreciation and the cost of financing if a loan is required.
Monthly passes for public transit in Alberta municipalities range from $45 to $70 dollars. Many transit systems offer discounts for students and seniors, and Calgary offers monthly passes for low income Calgarians for $35.13
Health Care
Premiums for the Alberta Health Care Insurance Plan are $44 a month for individuals and $88 a month for families. Low income Albertans can apply for subsidies, and as of late 2004, seniors are exempt from payment of premiums.
The government of Alberta plans to introduce “third way” reforms which may see the costs of health care moved to individuals in the form of private insurance and coverage for some services dependent on an individual’s ability to pay. This policy will most impact those people without employment and whose jobs do not provide health care benefits.
Child Care
Many Alberta families struggle to find quality child care that allows them to work. Costs for infants range from $800 - $900/month, while costs for toddlers over 18 months range from $600 - $750. The current five-point plan, established by the Alberta government for childcare, subsidizes families who earn under $39,600 a year at the level of $575 for infants and $500 per child over 18 months. Families receiving the full subsidy are still required to pay between $100 and $300 a month.
The current federal government has promised to give families $100 per month for each preschool child but will cut the funding to Alberta’s five-point plan, which could mean that the subsidy will return to its previous level of $475 for infants and $380 for toddlers (a cut of $120/month).
Post-Secondary Education
Alberta university and college tuition rates have more than tripled since 1991-92, as the provincial government has cut funding to post-secondary education by almost a quarter over the same time period. Average undergraduate tuition at Alberta’s universities is now $4622 and college students pay $2840, the second highest in the country in both categories.16 This does not include the cost of books and other related expenses.
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