Blog | May 05, 2013

By Diana Gibson, May 2013, Alberta Views“Making an extra $20 a day could make a big difference for transitioning out of homelessness. It could mean the difference for my children between going to school with or without a snack. Bus tickets just went up; milk is going up next week. Minimum wages never keep up with inflation. I’d need $13 an hour just to get off the street. That wouldn’t mean living comfortably. I’d still have to do shared accommodation and shared food just to make ends meet.”Kevin’s story is more typical in Alberta than one might think. This province’s minimum wage has languished at the lowest level in the nation for over a decade. The provincial government increased Alberta’s minimum wage last year, briefly boosting us from bottom to second-last. But on December 1, Saskatchewan increased its minimum wage from $9.50 to $10, leaving Alberta behind again with $9.75 per hour for everyone except liquor servers, who are assured only $9.05.Minimum wage earners working a standard 35-hour workweek make a monthly income of $1,365. And Alberta has among the highest average rents in the country. A one- or two-bedroom apartment in Edmonton, for instance, costs on average $841 and $1,140, respectively—in other words, 62 per cent and 84 per cent of a minimum wage earner’s monthly income.The cost of housing alone explains why just getting a job is not the solution for poverty-stricken Albertans; even with two parents working full time at close to the minimum wage, many families struggle to meet their basic needs. In 2009, 47 per cent of children living in poverty in Alberta (some 34,310 kids) lived in households where one or both parents worked full time.For these reasons—and more—some Albertans are questioning the province’s minimum wage model, which designates the lowest hourly wage an employer can pay. Replace the minimum wage, they say, with a “living wage” model, which designates the lowest wage on which a worker can actually live. Alberta College of Social Workers (ACSW) vice-president Lori Sigurdson calls the latter model a critical piece of the puzzle of solving deep poverty. “A living wage takes into account the real cost of living in Alberta,” she says. “It would go a long way to reducing suffering for the most vulnerable and marginalized.”A living wage is typically defined as the income an individual would require to meet basic needs, maintain a safe, dignified standard of living and save for future needs and goals—often interpreted as an income that meets the poverty line. A living wage varies by region, depending on key costs such as housing. The non-profit anti-poverty organization Vibrant Communities Calgary (VCC) puts Alberta’s big-city living wage for an individual who has no dependants and works full time (35 hours per week, 52 weeks a year) as $13 with benefits or $14.50 without.As Kevin suggests, even a living wage wouldn’t enable a comfortable living, but it would at least ensure an absolute basic level of income, sufficient to make ends meet, albeit in shared housing.A common myth paints Alberta’s low-wage workers as mostly teenagers otherwise supported by their parents. The statistics paint a very different picture. In 2012 almost one in four employed Albertans earned less than $15 per hour (a whopping 23.8 per cent). Province-wide this amounted to 418,900 Albertans, and most weren’t teenagers. “More than three quarters of Alberta’s low-wage workers are in their prime earning years,” says Public Interest Alberta (PIA) director Bill Moore-Kilgannon. “The majority are actually women, and only about one in five is a teenager.”How can a living wage go from idea to reality? Where the concept has taken root, it has typically done so at the local level, with municipal governments. As of January 1, 2011, the BC city of New Westminster became the first Canadian municipality to adopt a living wage policy. Their program applies to all full- and part-time employees working for the City as well as anyone contracted to perform physical work on City-owned properties. Their living wage is calculated as the hourly rate at which an individual can meet basic needs after government transfers such as childcare benefits and deductions such as taxes. That rate turns out be $16.74 per hour, more than $6 above BC’s minimum wage, or $19.14 without benefits.More than 140 US cities and counties have passed living-wage ordinances. They include large cities such as Los Angeles and Boston, and smaller centres such as New Britain, Connecticut, and Lawrence, Kansas. Most of these ordinances require city contractors and subcontractors—and in some cases companies receiving city subsidies, loans or tax abatement—to pay salaries that put employees at or above the poverty line. The Greater London Authority in the UK has also adopted a living wage.Alberta’s municipal governments, however, remain unmoved. In January 2007 the City of Calgary, the region’s largest employer, began to discuss a living-wage policy. The proposal was championed by VCC and won outspoken support from councillors Bob Hawkesworth, Joe Ceci, Druh Farrell and Brian Pincott. Calgary’s Chamber of Commerce spoke up in favour of a living wage ordinance. On April 6, 2009, however, city council voted 8–6 against such a motion.While living wage policies are different in each city, their motivations are often similar. Municipal governments can see cost savings from a living-wage policy. Higher-earning citizens put less demand on social programs, for example, which means lower government spending. A living wage reduces use of food banks, homeless shelters and income supplement programs. It reduces crime and healthcare costs. A recent study by VCC and Action To End Poverty in Alberta, Poverty Costs, found that these expenses (e.g., the more frequent use of the healthcare system by low-income citizens compared to high-income citizens) add up to $7.1–$9.5-billion in Alberta per year. Research shows that income is causally connected to education outcomes, and thus a living wage improves students’ long-term prospects as contributing citizens.Higher wages also mean higher tax revenue immediately, and even higher tax revenue in the long run as workers pay more taxes. Workers spend their money at local businesses, which pay more taxes.These benefits for local and regional governments and local economies aren’t immediately obvious, however, which is why the living wage has encountered resistance wherever it has been proposed. The business community is often divided over the model. Chambers of Commerce in such places as Minnesota and Black Country, UK, have spoken out in opposition to a living wage. In Brighton and Hove, UK, the Chamber of Commerce is actually leading the living wage campaign launched in August 2012, while the Tourism Alliance, which represents hoteliers, restaurateurs and attraction operators, is opposed.Living-wage opponents have plenty of objections—for instance, that the model leads to layoffs, a concern especially raised by small-business owners. At first glance this seems intuitive. However, an Alberta Federation of Labour (AFL) five-year study of the Alberta occupations most likely to pay minimum or low wages (e.g., retail sales, food and beverage service, travel and accommodation) actually shows the opposite effect. Since 2005 Alberta has made four increases to the minimum wage, and every time, the number of people in low wage jobs went up. In 2005, for example, the minimum wage went from $5.90 to $7. On
e year after the increase took effect, 26,700 more Albertans were working in the food and beverage, service and travel and accommodation industries.This pattern holds in other places where such studies have been done, too. Richard Freeman, a labour economist at Harvard University, concluded in a 2000 living wage study that “the entire literature” on the minimum wage suggests that employment losses related to wage increases are “modest.” Similarly, the Economic Policy Institute in Washington, DC, found that the employment effects of the US’s most recent minimum wage increase have been “economically small and statistically insignificant” and mostly positive.Another concern is the risk of cost-of-living increases: As wages rise, so too can the cost of the products and services offered by those wage earners’ employers. These concerns are valid, but they can be overstated. A University of California-Berkeley study, for example, shows that if Walmart—the US’s largest employer—paid a living wage instead of a minimum wage, and passed 100 per cent of the wage increase on to consumers, its prices would rise 1.1 per cent, the equivalent of $0.46 per shopping trip, or $12.49 per year, for the average consumer. Living-wage advocates also argue that wages are just one of many factors that affect the cost of consumer goods, and they note that living-wage policies typically cover only a minority of workers in the labour force.Closer to home, some of the opposition is more ideological. During the City of Calgary living-wage debate, alderman Jim Stevenson told FFWD Weekly that the city doesn’t “have the right” to tell companies what to pay their workers. He said, “The people I’ve heard from think it’s ridiculous that we’re even considering this—that it’s intervention in the marketplace, we should keep out of.” (Stevenson didn’t say whether he also opposes the minimum wage, itself an intervention in the marketplace.)One of the other challenges in Alberta is jurisdictional. This was raised in Calgary’s council chambers when the living wage ordinance was voted on. Much of the social-program-cost savings and greater tax revenue would be realized at the provincial level, so perhaps a living wage should simply replace the provincially mandated minimum wage. However, other savings to municipalities, and economic stimulation, make a living wage worthwhile civic policy—as dozens of cities across North America and in Europe can attest.Much of the opposition to living wage initiatives has hinged on concerns that paying higher wages will hurt bottom lines, especially at small businesses. However, research by Jerold Waltman, Allan McBride and Nicole Camhout, published in the Journal of Economic Issues, shows no discernible correlation between US minimum wage increases and a rise in business failures, either in the year of the increase or in the following year. If anything, the evidence leans the other way. This may explain why more and more businesses in Alberta and around the world support a living wage policy.Those that have taken the leap report success. Calgary’s Community Natural Foods reported that a living wage policy improved their bottom line. Accounting giant KPMG saw a 50 per cent drop in turnover among cleaning staff after implementing a living wage in their UK offices. Barclay’s Bank saw turnover diminish by 87 per cent. “When we invested in paying our employees a living wage, we had no idea how quickly we’d see returns,” Community Natural Foods general manager Bruce Martin told VCC. “Not only did employee loyalty increase, but overall payroll costs decreased, as we spent far less on recruitment, retention and training.”When the Calgary Chamber of Commerce took up VCC’s challenge to local businesses to adopt a living wage, president and CEO Heather Douglas explained the reasons for the chamber’s support: “The most successful organizations pay a living wage, not for recompense in the afterlife but for the economic returns,” she said. “The only way we can build Calgary into a renaissance city is to ensure no one is left behind. We are wealthy and vibrant. This should be easy.”Douglas was referring to growing evidence of positive experiences for businesses and governments that have scrapped the minimum-wage model. A living wage can lead to less turnover, more productive staff, improved customer service and fewer sick days, she said, all of which save employers considerable amounts of money.Alberta’s small non-profit organizations could especially benefit from a living-wage model. When PIA launched its living-wage campaign in 2008, the Alberta Council of Disability Services reported that annual staff turnover at the over 100 support agencies it represents—many of which pay minimum wage—was a staggering 40 per cent.Sufficient wages can also mean a more engaged, productive employee and better quality and service levels. “You don’t have productive employees if they’re struggling to meet their basic needs,” says Edmonton Food Bank’s Marjorie Benz. “People aren’t productive if they’re not able to pay their rent or are worried about how to get enough to eat.”A survey of living-wage employers in London, UK, by Queen Mary University found other benefits for businesses. Companies saw improvements in the stability, attitudes and other characteristics of their workers. The majority of workers earning a higher wage felt more positive about their employment and more loyal toward their employers. Companies also reported reputational benefits, finding it easier to attract new customers and recruit staff.Raising the wage floor means that small businesses can compete on grounds other than low salaries. For example, levelling the playing field on wages would see businesses competing on the quality or innovativeness of services offered. Another benefit to business is from increased spending in the local economy. People on low wages don’t tend to vacation in a condo in Hawaii; they spend their money in the local economy, on goods and services sold by local businesses. A living wage would mean more customers for those businesses.A significant number of Calgary employers have signed on to the VCC campaign. They include a social services agency, a bakery, a cafe, a food store, a recycling and auto parts business, a spa and an apothecary. In BC a broad range of businesses have signed up, including VanCity bank, which became the largest employer in Canada to commit to a living wage in May 2011 when it joined the Metro Vancouver Living Wage Employer Program. In announcing the move, president and CEO Tamara Vrooman said, “Paying a living wage to our employees and service providers will help make families stronger and communities healthier… We want to be part of a community that invests in the long-term prosperity of individuals and the economy.”In London, UK, over 100 employers have committed to paying a living wage. These include large companies such as HSBC Bank, Lloyds of London and the Olympic Delivery Authority, as well as small businesses, borough councils and the London School of Economics Students’ Union.With Alberta’s high employment rate and high average incomes, the living-wage debate might not seem urgent. But Alberta also has Canada’s highest rate of children and employed people using food banks, and according to the province’s Hunger Count 2012, one in three Alberta households helped by food banks had income from current or recent employment. The majority of the homeless who use the services at Alberta’s largest homeless shelter, the Calgary Drop-In & Rehabilitation Centre, are employed, according to recent surveys.Indeed, Alberta is the province most in need of a debate about a minimum acceptable income and decent wages. Albertans in poverty are poorer than other low-income Canadians, partly thanks to the high cost of living, especially for housing. The ACSW’s Lori Sigurdson also blames our low minimum wage and low social assi
e rates. She notes that Alberta’s indigenous people and women are at the highest risk of poverty.Local organizations such as VCC and PIA as well as national organizations such as the Canadian Labour Congress continue to advocate for a living wage. The living-wage model is a key part of the social-policy frameworks published by the ACSW and the Parkland Institute in 2010 and 2012 respectively.Alberta’s municipalities need not wait for the province, however; any of them could institute living-wage policies right away. It could be a smart move for their local economies: As the provincial economy continues to heat up, inflation will erode wages and fixed incomes and exacerbate the shortage of affordable housing, which is particularly acute in Alberta’s cities. Wages of $9.75 (or $9.05) per hour will make it increasingly difficult to attract employees to the province’s cities. Alberta’s municipalities and businesses literally cannot afford to continue to marginalize workers such as Kevin.But moving to a living wage at the provincial level—replacing the inadequate minimum-wage model—would be the better way to go. It would boost the provincial economy and begin the process of addressing a pernicious problem: Alberta’s systemic inequality. A recent study published by the Parkland and the ACSW shows that Alberta already has both the richest rich and the poorest poor in the nation, and the inequality is worsening. The wealthiest half of Alberta’s households has 82 per cent of all the income, leaving only 18 per cent of total household income for the other half.Alberta’s minimum-wage model has improved since it was tied in 2011 to cost increases—to Alberta’s annual average weekly earnings and the Consumer Price Index. Changes to minimum wage now occur each September 1 and are announced with three months’ notice. AFL president Gil McGowan calls the new model an improvement: “a simple system, a transparent system a predictable system.” He notes, however, that Alberta’s base rate is still the lowest in Canada, a legacy of being neglected for too many years, and that it continues to leave minimum-wage earners far below the poverty line.The Redford government has shown a more socially progressive face than its predecessors, increasing AISH payments and committing to end child poverty in five years. The heated legislature debate over 2012’s minimum-wage increase, however, shows that a living wage would not be an easy policy win. And the province has already failed to meet its own commitments to at least tie the minimum wage to inflation. On the more optimistic side, a living wage does provide a golden opportunity for the Redford government to meet some of its bold social promises without increasing government spending.Raising wages would also open the door to discussions of other potential solutions to poverty, including a guaranteed annual income for all citizens, and the living wage could act as a floor for other income support programs. As Marjorie Benz of Edmonton’s food bank said, “A living wage is important for people who are working, and could also be used as a benchmark for social welfare programs that are providing inadequate incomes. None of these groups are having their basic needs met.”Businesses and governments the world over that have committed to a living-wage model report positive outcomes for all members of society. It’s time Alberta adopted a similar program. As father of modern economics Adam Smith said, “It is but equity… that they who feed, clothe and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, clothed and lodged.” Or, as Heather Douglas from the Calgary Chamber of Commerce told City Council, a living wage is simply “the right thing to do.” Edmonton’s Diana Gibson researches and writes about topics ranging from health and inequality to energy and trade policy.Published in Vol 16 No 04, May 2013, pgs 34-37.Read the article on Alberta Views