Ontario's minimum wage is increasing by 25 cents this month — from $11 an hour to $11.25 — as part of the provincial government's commitment to index the minimum wage to inflation every October.
While raising the minimum wage to reflect the rising cost of living is a win for workers, it isn't a raise that will increase purchasing power for these low-wage workers.
It simply absorbs the rising cost of housing, food, transportation and other basics.
There's another job left unfinished at the provincial level that would set a higher standard for Ontario's minimum wage: develop a proper benchmark that informs what the ideal minimum wage rate should be in the first place.
In June 2013, Kathleen Wynne's provincial government struck a panel to provide advice on how to determine minimum wage increases in the future.
The panel came back six months later with advice that only did half the job: tie the minimum wage to inflation. That is a crucial, welcome step, but here's why the panel's job remains unfinished.
There are two questions the panel was widely expected to provide advice on:
- What is an appropriate benchmark for the minimum wage?
- What is the best approach to raising the minimum wage in the future?
The panel took a narrow view of its mandate and addressed the second question but remained stoically silent on the first.
Many economists, policy-makers, business people, and low-wage workers agree that tying future minimum wage increases to the Consumer Price Index is a fair and progressive approach. The move also embeds predictability into the system, allowing workers and business owners to plan for the future.
But without establishing a goal to inform the setting of a minimum wage, we're still stuck indexing to a minimum wage that was arbitrarily set in the first place.
So, to which benchmarks could the minimum wage be tied?
One possibility would be to benchmark the minimum wage to productivity. Ontario's minimum wage has fallen far behind productivity gains. Between 1965 and 2012, productivity increased by 125 per cent. The real minimum wage by only 64 per cent — and all of that growth happened before 1975.
A second possibility is to set the minimum wage at a rate that compares to what it takes to earn a decent living. Ontario's minimum wage falls far short of all living wage calculations across the province. In Waterloo region, the living wage is $16 — $4.75 higher than the minimum wage.
The minimum wage should lift a full-time, full-year worker out of working poverty. At $11.25, the minimum wage doesn't cut it.
The fourth suggestion — one the Canadian Centre for Policy Alternatives' Ontario office is advancing — is to benchmark the minimum wage against the average industrial wage.
There was a time when setting the minimum wage to within 50 to 60 per cent of the average industrial wage was a common goal. It was an implicit recognition of the inherent value of all work in an economy.
Ontario has seen a seismic shift in the quality of jobs available across the province. In Ontario today, more than one in every 10 workers work for the minimum wage. About three in 10 workers are earning an income below the poverty line.
It doesn't have to be this way. Tying the minimum wage so that it is within 50 to 60 per cent of the average wage would mean Ontario's minimum wage would be closer to $15 an hour, not $11.25.
Seattle, Los Angeles, and San Francisco have all committed to increasing the minimum wage to $15 an hour. Alberta is working on a plan to get its minimum wage to $15 an hour.
It's time for Ontario to revisit the question of an adequate benchmark to ensure that no low-wage worker is left behind.
Kaylie Tiessen is an economist with the Canadian Centre for Policy Alternatives’ Ontario office. This piece first appeared in the Waterloo Record.
Raising the Bar
Revisiting the Benchmark Question for Ontario’s Minimum Wage