BC's minimum wage should not be a poverty wage

July 31, 2008

Labour and social justice groups in BC have long urged the provincial government to increase the minimum wage to a level that guarantees a path out of poverty for a single person working full-year, full-time. Year after year, the government has turned them down with the argument that BC already enjoys the highest minimum wage in Canada and raising it further would be uncompetitive.

Back in 2001, when BC's minimum wage was increased to $8, we could indeed lay claim to the highest minimum wage in Canada (with the glaring exception of the $6 "first job" wage). But BC's minimum wage has been frozen for a staggering seven years, and other provinces have moved on.

Between March 31st and May 1st 2008, minimum wage increases came into effect in all other nine provinces. As a result, BC slipped down the rankings to having one of the lowest minimums in the country, along with Newfoundland (also $8), PEI and New Brunswick (both paying $7.75).

And that's not all. A number of provinces have committed to further increases over the next several years, including some of our fellow bottom-ranked provinces. For example, Newfoundland has just announced plans to reach a $10 minimum wage by 2010 and PEI's is scheduled to rise to $8 later this year.

It is time to raise the minimum wage in BC. Not just because the rest of Canada is doing it, but also because you can't live on $8 per hour — especially here in BC.

A minimum wage earner working 40 hours a week all year makes $16,640. This is considerably less than Statistics Canada's low-income cut off (or "poverty line") for a single person in a major city — $21,666 in 2007. It is less than the low-income cut off for even the smallest urban area — $16,968.

Clearly, paid work in today's labour market is not a guaranteed path out of poverty even for individuals with no children. If the market does not provide an adequate wage for full-time, full-year workers then the government must intervene. Legislating a decent minimum wage can be an effective anti-poverty tool and it would be cheaper than providing direct income supports to the working poor.

To earn an annual income equivalent to the 2007 low-income cut off for large cities ($21,666), a worker would have to make about $10.40 per hour. Adjusted for inflation, this is equivalent to the $10 minimum wage that labour and social advocacy groups called for back in 2005.

Along with setting the minimum wage to a level that lifts individuals out of poverty, the government should index it to inflation. This would ensure that the real wages of the lowest paid workers do not erode over time, as they often have in the past. For example, our $8 minimum wage is worth 11 per cent less today than when it was introduced in 2001.

This is not a novel idea. Yukon's government brought in annual inflation adjustments effective April 1st, 2007. Alberta's minimum wage is also indexed, although it is adjusted based on the average increase in weekly wages over the past year instead of inflation rates.

Many critics claim that minimum wage policies have a limited effect because few people actually work for the minimum wage. Only 4.6 per cent of BC's paid employees earned minimum wage in 2007 according to BC Stats. However, raising the minimum wage above $10 per hour would also benefit the much larger group of workers who currently earn less than $10.

More than 16 per cent of BC employees — 300,000-plus people — worked for less than $10 per hour in 2007. The proportion of BC jobs paying low wages has barely declined since 1997, despite a booming economy and record low unemployment in the province. Increasing the minimum wage will not eliminate the problem of the working poor, but it is an important part of a comprehensive anti-poverty strategy.

It's time to take the politics out of the minimum wage and scrap the old practice of sharp one-time increases followed by long periods of inaction. Let's set the minimum wage using clear criteria (such as setting at it a level which allows a single full-time worker with no dependents to escape poverty) and then index it to inflation to ensure its value is preserved over time.