What if the minimum wage was a living wage?

November 5, 2012

Increasingly, leadership for policy change comes from outside of government, not from within.

It’s why many Ontarians who are focused on reducing and eliminating poverty in this province have engaged in a broadening conversation about how to end working poverty through decent jobs, a better minimum wage, and a concept that’s gathering force: a living wage.

Here’s how they relate to one another.

Eight years ago, a process to raise the incomes of Ontario’s working poor began under a multi-stakeholder process known as MISWAA: Modernizing Income Security for Working Adults.

The MISWAA process is widely credited for having provided the political space for the Ontario government to finally agree to raise the minimum wage after a nine-year freeze that was acting as a dead-end for the province’s working poor.

The campaign to raise Ontario’s minimum wage yielded important successes. As Jordan Brennan writes in this paper,  “the raising of the minimum wage in 2010 to $10.25 brought it to the highest point on record in both absolute and inflation-adjusted terms (2010 constant dollars).”

But the discussion about the adequacy of the minimum wage didn’t veer far from the traditional frame – it remains situated within corporate terms rather than human terms. As a result, Ontario’s minimum wage is still not what we would consider to be a living wage. In Ontario, one in three children who live in low-income families have at least one parent who is working – meaning work doesn’t pay enough to lift them out of poverty. That’s the problem with using the minimum wage as the only standard. It limits the conversation to what’s the lowest amount we can pay workers that’s politically acceptable.

A living wage doesn’t have the legislative teeth the minimum wage does – and legislative rigour matters, because it takes the idea of minimum pay beyond the notion of voluntary and creates a mandatory ‘floor’ that every business is legally required to meet. That’s why resurging efforts in Ontario to raise the minimum wage are an important part of the discussion about how to end working poverty.

But there are several important differences between the minimum and living wage that can make them complementary to one another within the growing movement for decent jobs.

As Bob White writes in his forthcoming CCPA paper Corporate Social Responsibility and a Living Wage, “The living wage is defined as the minimum hourly wage necessary for each of two workers in a family of four to meet basic needs and to participate in the civic/social life of their community.”

A living wage is based on actual expenses. It considers what level of pay families need to be able to afford basic everyday things. A living wage isn’t extravagant. It doesn’t allow families to save for retirement, to save for their children’s education or to service their debt. But it does reflect the cost of affording the basics of life – something the minimum wage doesn’t do.

In short, a living wage would provide a greater degree of economic security than does the minimum wage. Ideally, the minimum wage would be a living wage, but we’re not there yet. It starts by changing the conversation.

The idea of a living wage allows for a different conversation than talking about the minimum wage on its own generates. When we talk about the minimum wage, the frame is always: Can businesses afford to pay that amount? The conversation descends into fear-mongering about business requirements, not human requirements.

When we start the conversation about what it takes for a family to meet basic needs, the question of pay gets situated within a very human dynamic. The frame becomes: Can working people afford to pay the rent, buy food, or pay the transportation costs necessary to get to work every day? We start talking about what it means for workers to have a decent standard of living, not just what corporations need to make more profits. We start talking about how to make work pay within real human terms.

What amount of income does it take to have a decent quality of life? For every community, the answer is different. It’s based on a calculation of local considerations that factors in a family’s annual expenses, income from employment, income from government transfers, and considerations such as EI and CPP premiums, as well as federal and provincial taxes.

My colleagues Hugh Mackenzie and Jim Stanford estimated in 2008 that “two working parents raising two young children would need to earn $16.60 an hour each, with both parents working full-time and year-round, to be able to live adequately within the Greater Toronto Area.”  That’s equivalent to $57,000 a year in after-tax disposable income.

In this report published by the CCPA Ontario in 2011, the Kingston Community Roundtable on Poverty Reduction estimated a Kingston family with two parents working full-time would need to make $16.29 an hour to be considered earning a living wage.

Given the fact that Ontario’s minimum wage falls considerably short of what we would consider a living wage, a growing number of people are considering ways to ensure the minimal standard wage contributes to decent-paying work.

There’s a made-in-Canada success story to build from on this issue. In B.C., a broad-based coalition has been promoting a conversation around the living wage that has yielded promising results. Given the level of interest in Ontario, the CCPA Ontario office hosted a living wage conference at Ryerson University in October 2012 to showcase the B.C. experience and to create the space for a conversation about what it could mean for this province. (See the agenda for our workshop here).

CCPA B.C. Director Seth Klein delivered the workshop’s keynote address, describing the nature of the living wage campaign in that province. Click here for that video.

Among B.C.’s successes:

  • The cities of New Westminster and Esquimalt, B.C. have passed a living wage ordinance that commits them to pay municipal workers a living wage.
  • Vancouver’s largest credit union, Vancity Credit Union, SAP Labs Canada and Briteweb are three examples of businesses that have committed to pay a living wage as a result of the B.C. campaign.
  • Parksville/Qualicum became the first school district in B.C. to pass a living wage policy.
  • Living wage campaigns have also sprouted on the campuses of Simon Fraser University and the University of Victoria.

The conversation they’ve started with corporations in B.C. is an interesting one. Where the minimum wage conversation is usually directed at governments, the living wage conversation in B.C. is taking place with governments, businesses, as well as civil society. The B.C. experience isn’t just about one target or even one conversation.

The B.C. coalition has yielded success at the municipal level, beginning with the leadership of New Westminster Councillor Jaimie McEvoy, who helped convince that city to adopt a living wage resolution for its employees. He proved it can be politically popular to take leadership and make a living wage a reality in your community. It didn’t hurt that he had reinforcements from a coalition working hard to change the conversation.

When it comes to municipal governments, the case for a living wage is focused on this: “Why should municipal governments care about this? Because it is municipal governments themselves that end up paying a large price for these low wages. Families earning low wages mean there is less money circulating in the local economy, and parents (forced to take on more hours or a second job to make ends meet) have less time to spend with their children. Municipal governments and school boards consequently end up filling the gaps by paying for additional services and policing costs.”

The conversation B.C. has started with businesses is even more interesting, because as Bob White points out in the study he wrote for our living wage workshop focusing on corporate social responsibility, many HR employees aren’t even aware of the living wage idea. He writes that members of the ISO 26000 Canadian stakeholder group who responded to a living wage survey said they didn’t know about and hadn’t used the living wage in determining employee compensation. They said their organization paid what the market dictated.

White writes: “It was interesting to note that the CSR leader in the organization often had to consult with the human resources department to learn how compensation for the lowest paid employees was determined. …While some of the individuals interviewed indicated that their organizations consult with their employees on what they should be paid, except for the one person whose organization uses the living wage benchmark, none said that their organization took into consideration the employee’s needs for the items covered by the living wage.”

In this commentary, Michael McCarthy Flynn and Seth Klein write: “Some business leaders are concerned about the living wage. They claim that it will negatively affect the private sector. Yet leading businesses around the world are voluntarily agreeing to become living wage employers. Businesses like KPMG and LUSH in the UK, and now Vancity credit union here at home. These employers commit to pay the living wage, not only to their direct staff, but also to contracted staff in traditionally low-paying sectors. And here’s the big surprise – they have all determined that doing so is good business practice.”

SAP Manager Kirsten Sutton corroborated that observation during our living wage workshop by sharing her organization’s learning curve in terms of determining who was receiving a living wage and who wasn’t. It’s like peeling back the layers of an onion, she says. Suddenly you notice the guy who’s been cleaning floors for years. You don’t know if he makes a living wage and suddenly you care about that. It represents an important shift in how the company is viewing its own workers.

During his presentation to our living wage workshop, Klein said “when an employer first hears what the living wage figure is, there is a bit of a sharp breath in when they hear what the number is, because it’s quite a lot higher than the minimum wage. But then when you walk them through the calculations, something amazing always happens. Because, instead of looking at the question of compensation through that market lens, when you instead walk them through the calculation of seeing what it actually costs to live and raise children here in the community where we are, it’s this revelatory moment. They’ve never done it. And it creates this great opening.”

Klein said even conversations with employers who say they can’t afford to adopt a living wage policy don’t end there. The coalition then talks about how businesses wouldn’t have to pay such a high living wage if there were better public supports, such as public child care, which would lower a family’s cost of living. Suddenly, businesses are approached as allies in public programs they’ve been conditioned to oppose. Suddenly, the conversation turns to the value of public programs as well as the value of decent paying work.

Suddenly, the conversation starts to change.

More resources on the living wage are available here.

Trish Hennessy is director of the CCPA Ontario office.