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.