Vancity adopts living wage policy

Despite additional cost and challenges, initiative about ‘doing the right thing’
By Sarah Dobson
|Canadian HR Reporter|Last Updated: 08/15/2011

Vancity has become Canada’s largest employer to adopt a living wage policy. While this approach has its detractors — who claim it’s just one of several ways to help lift people out of poverty — the credit union claims it’s the right thing to do.

“It’s very consistent with Vancity’s vision of redefining wealth and focusing on the long-term well-being of the members we serve and the communities that they live and work in,” said Ellen Pekeles, vice-president of HR at Vancity in Vancouver. “It’s really important so that we can influence other organizations to do the same. It’s very, very hard, especially in Vancouver, to be living on minimum wage and so, not that a living wage makes you rich, but it actually helps you live beyond the threshold of poverty.”

Internally, the new policy won’t have a huge effect on the credit union as only about two dozen casual and on-call workers will see their wages rise, out of 2,300 employees. But, externally, Vancity has 1,200 suppliers across 45 industry sectors and if they provide 120 hours or more of service, they must include a living wage clause in their request for proposal.

“It applies to all contracts that come up for renewal or any new relationships we’re entering into. That is just a huge challenge,” said Pekeles. “By having that kind of impact on so many suppliers, you start to spread the word, change the thinking of organizations in terms of living a more decent life, so it’s very profound.”

The living wage calculation includes basic expenses (such as housing, child care, food and transportation) for a two-income family with two young children, as well as government taxes, credits, deductions and subsidies. The latest calculation by the Canadian Centre for Policy Alternatives (CCPA), First Call: BC Child and Youth Advocacy Coalition and the Metro Vancouver Living Wage for Families Campaign found each parent would need to work full-time at an hourly wage of $18.17 in Vancouver in order to pay for necessities, support the healthy development of their children and participate in the social and civil life of their communities.

“It’s very thoughtfully formulated in terms of a family of four, living with basic needs in the Lower Mainland,” said Pekeles. “It’s the same formula used in all jurisdictions and obviously the dollar amount is different depending on housing and the cost of living. It’s a very transparent methodology of calculating.”

Vancity has budgeted about $1 million in increased costs for the new policy that will stretch out over a couple of years as contracts are renewed. But offsetting the costs are benefits in areas such as recruitment, retention and productivity, said Seth Klein, a director at CCPA.

“There is a net cost to employers but, too often, I think, employers contemplate this and they go right to the wage bill impact and that’s a mistake because that’s only looking at one side of the ledger. There are these other benefits and, in practice, as this unfolds, employers find the actual cost is less than they might have thought at first.”

In first contemplating a living wage policy in 2009, the City of New Westminster, B.C., had concerns around an external body dictating wage policy for the city, said Joan Burgess, the city’s director of HR.

“The calculation of the living wage is not necessarily the approach that we take for calculating wages. We do extensive job evaluations, we base wage rates on the value of the work.”

The city did its own living wage calculations and came up with a different rate but to be certified by the Living Wage for Families organization, it had to use that organization’s rate.

“(It’s) absolutely legitimate but different from the evaluation of the work that a position encompasses,” said Burgess.

The employer adopted the policy in January 2010 and, as with Vancity, it only affects a small number of employees — about 60 — among the 1,000 at the City of Westminster, along with many external contractors doing work on the city’s premises.

The overall cost of the new policy was a concern, said Burgess, however, “council felt that the principles of the living wage were sufficient to manage that cost and support that cost.”

There’s a certain cache to positioning oneself as embracing this policy from a philosophical or branding perspective, said Claudine Kapel, principal of Kapel and Associates in Toronto. Having a living wage policy can enhance an organization’s reputation and help position it as an employer of choice.

“From a human resources perspective, that can make it easier to attract and retain employees. If you look at it from a corporate branding perspective, it can help demonstrate an organization’s commitment to community and operating in a responsible manner,” she said.

The living wage campaign has true potential in the positive, ripple effect through sectors where so many low-wage, immigrant workers are concentrated, such as janitorial, food services or security, said Klein.

“As you get a few large employers who become living wage employers, and this is starting to happen, then they create a market for those local service providers who, in turn, pay the living wage and then those contractors start to get a recruitment and retention advantage with their competitors.”

However, employers should consider whether there could be a negative effect, said Kapel.

“It could put upward pressures on pay at all levels of the organization,” she said. “Like any type of paid premium, it can certainly help with the attraction and retention of talent, it just needs to be managed thoughtfully to ensure it’s affordable, it’s not having other types of consequences on other roles and how they’re compensated.”

“From a planning perspective, it’s not enough to look at the group who could get more money but to look at the whole workforce overall from a compensation perspective and understand if there’s a domino effect that might need to be managed,”said Kapel.

This kind of a policy probably won’t be financially viable for every organization, particularly as many organizations have struggled with the recent increases to minimum wage in various provinces, she said.

“The living wage perspective takes it and raises the stakes that much higher because they’re going well above the minimum wage in terms of where they think that floor or threshold in terms of wages should be.”

But when employers are walked through the calculation process, there is kind of an “eureka” moment, said Klein.

“As employers, we’re used to looking at compensation through the lens of what the norm is in the market, meaning, ‘What’s everybody else paying?’” he said. “When instead you invite an employer to look at compensation through the lens of what it actually costs to live or raise children, it’s kind of a moment of revelation.”

It also gets employers to think about benefits packages differently because the living wage calculation assumes no benefits other than statutory obligations and some minimal sick time, said Klein.

“What you realize is if you have more family-friendly leave provisions, if you have more health benefits, if you’re covering MSP premiums, all of that reduces your effective cash living wage.”

But, in the end, it’s an incomplete solution, said Burgess.

“There are larger concerns that the living wage doesn’t address, such as ensuring education and job opportunities are available for people. An improvement in the hourly wage has to be helpful and with the ever-increasing cost of living, of course, it can’t be a bad thing for those living on a limited income. But I do think work in other areas needs to go along with it; I don’t think the living wage on its own would fix the problem.”

Add Comment

  • *
  • *
  • *
  • *