It’s time for Nova Scotians working for the minimum wage to get a big raise. A substantial increase in the wage will go some way to addressing poverty experienced by low income workers and households in Nova Scotia. It would stimulate the provincial economy and contribute to productivity growth at no cost to the Province’s finances.
The provincial government is conducting its annual review of the minimum wage rate in Nova Scotia. At $6.00 per hour the rate is in line with the other Atlantic Provinces but far below the $8.00 per hour in British Columbia and $0.60 an hour below the national average.
When adjusted for inflation we see that the minimum wage rate has fallen dramatically since 1977. It buys 25% less today than it did 25 years ago. To have the same purchasing power as it had at its peak in 1976, the current rate would have to increase by more than 30% to $8.00 per hour.
The current rate does not keep workers out of poverty. A full-time worker in Halifax making the minimum wage ends up with income that is 22% below the poverty line. A couple with two children depending on 60 hours of minimum wage work a week earns an income that is almost 40% below the Low Income Cut Off.
Some commentators have claimed that the minimum wage only effects a small portion of the workers in Nova Scotia and that most minimum wage workers are teenagers.
In fact most minimum wage workers in Nova Scotia are women (63%),over 19 years old (57%), working in part-time jobs (57%) and they are disproportionately represented among low income-earning households.
The benefits of increasing the minimum wage extend far beyond those currently working for $6.00 per hour. The minimum wage bears directly on other wages in the economy, as noted by the Canadian Council for Social Development, “[t]he level of the minimum wages is important not only to minimum-wage workers, but also to those whose wage are $2 to $3 above the minimum rate. By establishing the level of the bottom rung on the income ladder, the minimum wage
greatly influences the levels of the next few rungs as well.” If the minimum wage rises, other low wages across the province will be pressured to follow suit.
A substantial increase in the minimum wage would therefore improve the livelihoods of many more Nova Scotians than the 15,000 currently working for the minimum rate. In 2000 25% of the waged workforce in Nova Scotia worked for less than $8.10 per hour (within $2.40 of the minimum wage rate). An increase in the minimum wage would stand to improve the livelihoods of more than 100,000 of Nova Scotia’s workforce of 435,000. It would also contribute to closing the gap between the wages men and women earn. Research repeatedly shows that more women in Canada live in poverty than men. Not surprisingly women are disproportionately represented in the low wage category – 25% of women waged workers earn less than $7.25 per hour whereas 25% of men work for less than $9.50.
An increase in the minimum wage would also contribute to increased productivity. Low wages contribute to low moral amongst workers, this can lead to decreased productivity as workers become disillusioned, reduce their work effort and move from one job to another or are let go by their employer. Low wages
also allow inefficient firms to carry on. They survive through low wages and put off making investments in training and technology that increase productivity. A higher minimum wage also increases economic activity as the income of low waged workers increase. Low waged workers, out of necessity, are likely to spend their wages on goods and services provided in the local economy rather than for example, putting funds into an RRSP.
A recent report by GPI Atlantic found that “Nova Scotia’s poor are the poorest in Canada” and that income inequality is increasing – the rich are getting richer and the poor poorer. What are the socio-economic costs of maintaining a low minimum wage and the poverty it spawns? The Canadian Policy Research Networks has identified the following consequences of low-paid work: “poverty: unable to provide for themselves and their families; poor health: people who are poor make greater use of the health care system; poor child development: more children at risk of health, behavioral, and cognitive problems; under-utililization of existing human capital; under-development of future human capital; lost productivity growth.”
So why not provide a substantial increase in the minimum wage – research in Canada and the US has shown that increasing the minimum wage is not the job-killer some would have us believe. Peter O’Brien of the Canadian Federation of Independent Business noted that the last increase in the minimum wage in Nova Scotia would not have a significant impact on the members of the federation. “[the minimum wage] is not a major thing anymore. It gives people who are at the lower end of the income scale … a little more spending money.”
Nova Scotia should become a leader in setting an adequate minimum wage in Atlantic Canada. The Atlantic provinces currently have among the lowest rates in Canada. No matter how you look at it, increasing the minimum wage is good public policy in Nova Scotia. Setting a minimum wage rate that allows workers to get over the poverty line is one key policy tool that allows the government to meet social and economic welfare objectives and it stimulates the economy. A failure to set a fair minimum wage in the context of the high unemployment that characterizes the region contributes to unacceptable poverty and hardship for hundreds of thousands of households in Atlantic Canada. A failure to set an adequate minimum wage increases costs for social programs that address the needs of the working poor. It’s time for a big increase in the minimum wage.
John Jacobs is the Director for the Canadian Centre for Policy Alternative – Nova Scotia. Stephanie Hunter is the Coordinator for Feminists for Just and Equitable Public Policy.
