Understanding the Living Wage Concept

Lynne Fernandez, Errol Black Chair in Labour Studies, CCPA MB.

“Living Wage Laws don’t help the most vulnerable” by the Fraser Institute’s Lammam and MacIntyre, is based on a misunderstanding that is evident in the title. Living wage campaigns across Canada are not calling for legislative enforcement of a living wage; the idea is to convince governments and large corporations of the advantages to adopting a living wage policy which considers a combination of wages, employer non-mandatory benefits, and benefits provided by government.

The living wage is different from minimum wage. Minimum is set with no consideration of cost of living and is the legal minimum any employer can pay. For the past 15 years minimum wage in Manitoba has kept pace, and more, with inflation, but the problem is that minimum wage has never been set to actually cover the cost of living in any particular region, so although increases help, they still don’t mean that an individual, much less a family, can live decently on it.

According to CIBC senior economist Benjamin Tal, “There’s clearly a movement from high-paying professional, public sector and construction jobs to lower-paying and retail jobs. Even within manufacturing, there’s a movement from high-paying manufacturing jobs to lower paying.” This trend is worrisome for our whole economy, as evidenced in a New York Times article that found a disturbing trend in consumption patterns. The brands, stores and restaurants that service America’s middle class are struggling, even closing, while those that cater to the high end 10% earners are flourishing. It’s important to note that minimum wages have been stagnant in the US for decades. A living wage would help turn this trend around.

A living wage first calculates what is needed for a family of four (two parents, two children) to live. CCPA Mb. finds that such a family, with both parents working 35 hours/week, needs to earn $14.07 hour in Winnipeg, $13.41 in Brandon and $13.46 in Thompson.  But the living wage also calculates the value families get from government, such as the Canada Child Tax Benefit, Universal Child Care Benefit, GST rebate, etc. Without these benefits, the living wage would be much more and any improvements to them would lower it. Adoption of a provincial childcare or pharmacare program, for example, would lower the living wage significantly.

Paying a living wage benefits employers. Those who have adopted a living wage policy realize reduced absenteeism and staff turnover, increased skill, morale and productivity levels, reduced recruitment and training costs and improved customer satisfaction.

The benefits to employees, whose health improves and whose children thrive, eventually spillover to government in terms of reduced healthcare and law enforcement costs and increased revenues from taxation. Higher disposable income means that corporations do better as consumption increases – a phenomenon Henry Ford figured out decades ago.

Communities across Canada are calling on both employers and governments to consider the tremendous benefits of a living wage, and to work together on this policy. We do not suggest that it will be a silver bullet to combat poverty, but combined with a comprehensive strategy that includes steady minimum wage increases, improvements to EIA rates and serious consideration of a Guaranteed Annual Income, it could play an important role in restoring our economy and our shrinking middle class.