Minimum Wage: Staying the course right decision

March 24, 2009

The Minimum Wage Review Committee, with representatives from labour and business organizations at the table, is an example of how public policy should be made –based on meaningful participation from those who understand the issues from different perspectives, and using a solid evidence-base. But missing from the table is a representative of those most directly affected – nonunionized workers earning the minimum wage. Precisely because nobody really represents them, we need a fair minimum wage set by this committee.

The recommended formula will annually index the minimum wage to the Consumer Price Index and thus ensure that inflation doesn’t eat away at this wage. This part of the formula would kick-in once the rate achieves what has been deemed an acceptable level by the committee - $9.65 by March 2010. This figure would ensure that most workers working full-time for the full year would receive a minimum wage that is equal to the poverty level. It wouldn’t lift people over the poverty line, and in more expensive regions (like HRM) would still be below the poverty line.

This wage is still not a liveable one, but it is a step in the right direction and is in line with broadly shared public values. In an Environics poll conducted just when the economic storm was hitting in the Fall, 93% of Atlantic Canadians supported raising the minimum wage so that full-time work lifts people above the poverty line.

It is also a step that has been a long time coming. Because of inflation, minimum wage earnings have been stagnant or even declining over the last few decades. In inflation-adjusted dollars, the minimum wage increased only 64 cents between 1991 and 2005. The current minimum wage ($8.10) buys less than minimum wage earnings did in 1977 when the real minimum wage (adjusted for inflation) reached its peak of $8.54.

The reality is that there never seems to be a good time for businesses to raise wages. Let’s look at some of the arguments put forward by business owners against raising the minimum wage.

One argument is that wages should be determined based on workers’ jobs and not other circumstances, like family circumstances or real costs of living. But employers do often use these circumstances to justify keeping wages low. For example some employers, notably in the restaurant and bar industry, justify keeping minimum wage low because they claim their employees are predominantly young people, often students living at home. Students in Nova Scotia have to pay some of the highest tuition fees in the country. So parents and families have to subsidize low student wages by providing extra money for tuition, books and room and board to adults who should be supported to be more independent.

A second claim is that employers only resort to minimum wage for part-time workers and for short-term transitional periods. But the reality is that a sizeable proportion of minimum wage workers are in their core working years (25 to 54) and many do work full time. Some are also the sole earners supporting children. And because more women than men earn a minimum wage, keeping these wages low also places them at a disadvantage.

Nova Scotia has one of the higher rates of workers working at or just above the minimum wage. According to Statistics Canada, the share of minimum wage jobs has increased and will most likely continue to increase-- from 4.9% to 6.4% of the Nova Scotia job market between 2000 and 2008. And 22% of employees (54,000 workers) earn between the minimum wage and $9.99 per hour. Raising the minimum wage is likely to boost wages for many low-income earners.

Third, business owners claim higher wages will mean fewer jobs. But, evidence shows higher minimum wages can result in less staff turnover, easier recruitment, and a subsequent reduction in the costs of hiring and training new employees.

Finally, there is the claim that we just can’t afford to raise the minimum wage now. With so few unemployed having access to EI, people will move from a better paying job to a poorer paying job, or no job at all. Raising the minimum wage is something meaningful the province can do to offset this contraction of purchasing power. Money in the pockets of the lowest paid will go right back into our economy, and likely back into the very businesses that are concerned about the economic downturn in the first place.

While we applaud the Premier for staying the course as part of the government’s Poverty Reduction Strategy, we also urge the Premier to release the strategy for all Nova Scotians to see.

A version of this editorial appeared in the Chronicle-Herald.