Living-wage policies gain traction

But business group says ‘very flawed’ policies increase unemployment
By Shannon Klie
|Canadian HR Reporter|Last Updated: 09/26/2008

Joe Ceci would like the City of Calgary to spend more money on labour.

The alderman wants to see his city adopt a living-wage policy. A living wage, often higher than the minimum wage, is the amount an individual needs to earn to afford to live without social assistance or food banks. There are 139 cities and counties in the United States with a living-wage policy, yet none in Canada has a similar policy.

But that could change as at least four jurisdictions — Calgary, Hamilton, Waterloo Region in Ontario and the Town of Pelham, Ont. — are currently considering living-wage policies for employees and contractors.

“I’m hopeful that Calgary will be the first Canadian municipality to have a living wage,” said Ceci.

The minimum wage in Alberta is $8.40 an hour but Vibrant Communities Calgary, an organization that combats poverty, determined a living wage in the city would be $12 an hour with benefits, or $13.25 without benefits. So an employee working 40 hours a week with benefits would earn $24,960 a year before taxes.

When examining the possibility of a living wage, the city discovered about 682 of its 12,000 employees earn less than a living wage and 11 per cent of city suppliers don’t pay a living wage.

“I think we should do better at the City of Calgary,” said Ceci. “I’m meeting people all the time who are working a job here and a job there to put together a living because they need to be employed in more than one place to get by. So it would make a big difference for those employees.”

At the end of April, council asked city staff to develop a more detailed plan of what a living-wage policy would look like and report back in January.

While Ceci would like to see the city’s living wage have a positive effect on other workers in the city, he stresses the policy would only directly affect the wages of city employees and contractors.

Could cost jobs

Groups that work to alleviate poverty in Calgary see the policy as progressive but small businesses worry a living-wage policy for city employees will push up their own wages in an effort to compete and will mean jobs have to be cut.

Many studies around the world show living-wage policies actually end up hurting the people they’re supposed to help, said Garth Whyte, executive vice-president of the Ottawa-based Canadian Federation of Independent Business, which represents 105,000 small businesses across the country.

“Some employees may gain and others will lose because whenever the living wage or a higher wage is enforced, there’s a correlation to higher unemployment,” said Whyte. “We see it as a very flawed policy.”

Instead of imposing a higher wage, governments could help workers more by reducing the tax burden and giving them more take-home money, he said.

“But they don’t want to do that because it impacts on them directly,” said Whyte.

Could improve productivity, loyalty

However, some studies support the benefits of a living wage, said Mary MacKeigan, executive director of Opportunities Waterloo Region, a community organization aimed at preventing and reducing poverty.

“If you look at all the literature that’s coming out of the States, they’re saying there’s very little negative impact of a living wage on a community,” she said.

Higher wages don’t result in job cuts, according to the book

Myth and Measurement: The New Economics of the Minimum Wage.

Authors David Card and Alan Kreuger looked at three instances of increases in the minimum wage (state and federal) in the U.S. In each case they found increases in the minimum wage led to increases in pay but not job losses.

A living wage increases loyalty and productivity while decreasing absenteeism, turnover and training costs, said MacKeigan. “It’s better for your organization to pay a living wage.”

Organizations don’t have to increase the cost of products to make up for the higher wages. Instead, they can transfer the savings of a living wage, such as decreased turnover and training costs, to wages, said MacKeigan.

And that’s just what one small business, a bakery café, did in Waterloo. It decreased its overhead costs and now pays employees $15 an hour, she said.

A living wage is also better for governments and taxpayers because if people aren’t earning a living wage, governments and communities have to pick up the tab through social-assistance programs.

In Ontario, the minimum wage is $8.75 an hour (increasing to $10.25 in 2010). Last fall, Opportunities Waterloo Region presented a living wage of $13.62 an hour for workers, about $10 an hour after taxes, to the Waterloo regional council. “It’s a very modest budget,” said MacKeigan

As with the proposal before Calgary city council, Waterloo’s living-wage policy would apply to region employees and contractors. The region surveyed employees and found all of them, except co-op and summer students, earn more than $13.62 an hour, but some of the region’s janitorial, cafeteria, security and landscaping suppliers don’t pay employees a living wage.

Last month, the council instructed staff to develop a working plan for a living-wage policy, including a timetable and costs, to be presented to council in October.

Council also wants more consultations with the community, said Michael Schuster, commissioner of social services for the Region of Waterloo.

One of the biggest concerns municipalities have is that a living wage will be too costly. However, Baltimore, Md., the first American jurisdiction to implement a living-wage policy back in 1994, has found the cost to be insignificant.

“We’re talking less than one-half of one per cent of the city’s budget,” said Sheldon Shugarman, executive director of the City of Baltimore’s wage commission.

The policy covers a living wage of $9.93 US an hour (the federal minimum wage is $6.55 US). Suppliers account for the extra wage costs in bids for city contracts, so the city, not individual businesses, bears the cost, said Shugarman. The policy also sets a good example for businesses in the community, he said.

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