A Living Wage Lifts Workers and Economy

October 2, 2014

Originally published in the Winnipeg Free Press on October 2, 2014

The minimum-wage hike, to $10.70 per hour, that kicked in this week means full-time workers would earn just over $20,800 annually. This leaves a family of four, with both parents working, with an income more than $1,500 below the poverty line.

Single-parent families are worse off, at more than $8,000 short of the poverty line.

It is widely agreed a job can be the best pathway out of poverty. But this is only true if wages meet basic needs.

Approximately 38,600 Manitobans work for minimum wage, and they are not just teenagers looking to earn extra cash. Most are older than 20, and nearly half work for companies with more than 500 employees. Given so many minimum-wage-earners are adults, we need to ask why our minimum wage does not provide a sufficient income to raise a family.

A living wage is just over $14 per hour in Winnipeg, based on the costs of living here. This enables a family of four, with two working parents, to meet its basic needs. The living wage for a single-parent family is even higher, and there are 2,300 single parents working for minimum wage in Manitoba.

The living wage is based on a bare-bones budget without the extras many of us take for granted. Costs considered include food, clothing, rent, transportation, child care, health care, adult education, some household expenses and a small emergency fund. It does not include interest payments, retirement savings, home ownership, savings for children’s education, or the costs of caring for a disabled, ill or elderly family member.

The province should be recognized for making regular incremental increases to the minimum wage. There is, however, a long way to go before all minimum-wage families can live above the poverty line. But poverty-line wages do not build healthy communities or stimulate the economy. The province should take more aggressive action to close the gap between the minimum wage and the living wage.

Stronger government social policies and programs that benefit single-parent families with low incomes can help fill the gap by shifting certain costs off families’ shoulders — a universal provincial child-care program would substantially lower the wage single-parent families need to meet their needs.

In addition, the province and city should adopt a living-wage policy that ensures their own employees, and those of the businesses they contract with, are paid the living wage. Jurisdictions across the world have begun to implement living-wage policies, and New Westminster, B.C., is the first in Canada.

Employers can also demonstrate leadership by paying the living wage now. This can be achieved through wages or a combination of wages and non-mandatory benefits. Living-wage employers, such as KPMG, Deloitte, and Vancity Credit Union, can benefit from decreases in absenteeism, higher worker productivity and better worker retention.

Substantive minimum-wage increases and living-wage policies are much more effective at decreasing poverty than increasing the personal income tax exemption, an approach perennially advocated by business.

For example, Manitoba Federation of Labour calculations show a $1,000 increase in the basic personal tax exemption would save minimum-wage workers $108, whereas a 50-cent increase to the wage would improve the workers’ annual income by $1,040 per year.

Furthermore, the increase in the basic personal income tax exemption would apply to all Manitobans rich or poor. This and other ‘fixes’ to our tax system proposed by business would remove millions of dollars from revenues needed to pay for social programs and income transfers that help low-income Manitobans.

Our tax system does not need to be fixed — the net income of Manitoba’s lowest income-earners increases as a result of our tax and transfer system.

Business will always resist minimum-wage increases, arguing they lead to job loss. But the most robust economic studies show the net benefits to low-income people and the economy are far greater than any temporary job loss that might result from increasing the minimum wage.

Closing the gap between the minimum wage and the living wage is a win-win strategy that provides income security for Manitoba families while stimulating our economy.

Kirsten Bernas is Research and Policy Manager with CCEDNet in Manitoba. She received a BA (Honours) in Economics from the University of Manitoba as well as an MA from the Norman Paterson School of International Affairs at Carleton University in Ottawa. Kirsten represents CCEDNet on the Canadian Centre for Policy Alternatives‘ Alternative Federal Budget Steering Committee, Make Poverty History Canada’s Steering Committee, Make Poverty History Manitoba‘s Executive Committee, and on the Winnipeg Food Policy Working Group

Lynne Fernandez is Research Associate and Project Coordinator with the the Canadian Centre for Policy Alternatives in Manitoba. She has a Master’s in economics from the University of Manitoba, where she discovered that the so-called “dreary science” could actually be very interesting. She has a particular fondness for labour and environmental issues, as well as community economic development, government policy and economic history. Lynne works as the Errol Black Chair in Labour Issues.