The Living Wage: An Idea Whose Time Has Come

January 10, 2014

Should anyone working full time still live in poverty?

In a wealthy society that values the concept of working hard in order to provide for yourself and your family, it makes no sense that fully employed people in our economy still have to choose between feeding their kids or paying their rent or paying school fees or saving for any kind of emergency. People who work hard should have enough for these basic needs, and should not be forced into dangerous choices that put them and their families at risk.

This is the premise of a rising North American campaign for living wage laws. It is a statement that our communities are failing if fellow citizens put in an honest day’s work, but their family’s participation in our fruitful society is dampened by economic constraints placed on them by remuneration that leave them in poverty. This is particularly troubling when those workers are public servants, employed by a governing body whose mandate is to ensure the well-being of its citizens. This is why the Mayor of Seattle recently supported a $15 minimum wage for all City employees.

At the Canadian CED Network – Manitoba’s annual Policy Summit, our member – led network passed the policy resolution 2014 – 4 Living Wage for All Manitobans. It is a request for the Province of Manitoba and municipalities in Manitoba to take a lead in ensuring all working Manitobans have a fair chance by developing a Living Wage Policy for their employees and contracted services.

Lynne Fernandez, the Errol Black Chair in Labour Studies at the CCPA-MB, wrote a fantastic article (reproduced below) explaining the need and benefits of, as well as the method of calculating, a living wage in Manitoba.

The Living Wage:  An idea whose time has come

Minimum-wage workers are not just teenagers working at fast-food restaurants after school. According to the Manitoba Federation of Labour, 55 per cent of minimum wage earners in Manitoba are adults twenty years and older; 51 per cent of minimum-wage earners work for companies with 100 workers or more and 42 per cent work for companies with 500 or more employees. With approximately 38,600 Manitobans earning minimum wage ($10.45/hour) and fully 73,700 Manitobans making only 10% more, we need to ask if the minimum wage provides sufficient income to raise a family.

Whether it be throughout the US, Canada or the UK, the inadequacy of the minimum wage to meet basic needs is well documented. When tens of thousands of American fast-food workers walked off the job for one day last August, they did so to deliver a message: they cannot survive on minimum wage jobs. In the August 2013 edition of The New Yorker, James Suirowiecki, explains that 46 per cent of family income in the US is earned by low-wage workers, a figure that demonstrates the sea change in the American economy which has shifted many middle-class workers to the new precarious labour market. This phenomenon is not restricted to the US.

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.”  Mr. Tal goes on to explain why this trend is problematic; low-income earners have less disposable income and cannot provide much-needed demand in the economy. But the problems do not end there.

Low-income families – many working more than one job/parent – face difficult choices: pay the rent or buy food; forego dental care in order to buy school supplies; put off saving for retirement in order pay off some debt.

Low-income families – many working more than one job/parent – face difficult choices: pay the rent or buy food; forego dental care in order to buy school supplies; put off saving for retirement in order pay off some debt. Parents faced with these dilemmas are stressed to the point of becoming physically ill and/or depressed. Their children suffer as a result; they do worse in school and endure health problems of their own. These issues in turn cost both employers – in terms of lower productivity, absenteeism and employee turnover – and society in terms of healthcare costs, lower effective demand and revenues paid to income tax.  In short, the effects of low wages are not just suffered by the employers who pay them, they are externalized in the form of social exclusion and higher costs to government. If families could earn a living wage, many of these effects would be lessened.

A living wage is different from the minimum wage, being the legal minimum employers must pay. A living wage is based on the principle that fulltime work should provide families with a basic level of economic security. It allows a family of four with two parents working fulltime to pay for necessities, support the healthy development of their children, escape financial stress, and participate in the social, civic and cultural lives of their communities.

We have estimated the family living wage for 2013 in Winnipeg at $14.07/hour. The living wage calculation is based on the needs of a two-parent family with young children, but it would also support a mix of family types throughout the life cycle so that young adults are not discouraged from having children and older workers have some extra income as they age. The living wage is a conservative, bare-bones budget without the extras many of us take for granted.

Approximately 38,600 Manitobans earn a minimum wage of $10.75/hr. In the United States, 46 per cent of family income  is earned by low-wage workers.

The living wage considers the cost to meet basic needs in a particular community, including: food, clothing, rent for a three-bedroom apartment, transportation, childcare, basic extended healthcare plan, part-time education for one parent, a contingency fund for emergencies and some other household expenses. It does NOT include: interest payments, retirement savings, home ownership, savings for children’s education, or costs of caring for a disabled, ill or elderly family member. The method for calculating the living wage is:
Annual Family Expenses = Living Wage + Government Transfers*  – EI, CPP, Income Tax

Given the role of employers in determining the living wage, there is a call to public and private-sector employers (larger ones in particular) to pay a living wage. This can be achieved through wages or a combination of wages and non-mandatory benefits, such as extended health benefits, profit sharing, subsidised transit passes and childcare. But as the above equation demonstrates, the l