How much should the minimum wage increase? This is the question being considered by a committee reporting to the Minister of Environment and Labour.
To most of us the need for a substantial raise in the rate is obvious – it not only puts money in the pockets of Nova Scotians who most need it, it also contributes to our economy.
Levels of poverty are too high by any measure and certainly if you consider the amount of wealth in our society. Part of the reason for high levels of poverty is the low minimum wage rate. Running a household on $6.50/hour or $1,100/a month before taxes is impossible for a single person, let alone a larger household. A four person household, where parents are working a combined total of 60 hours a week for the minimum wage, is left trying to make ends meet on $1,600 a month before taxes.
Minimum wage workers need a real raise. When inflation is taken into account the minimum wage in Nova Scotia has not increased in more than 20 years . In fact the buying power of the minimum wage has actually decreased since the mid 1970s. This has made the situation for the working poor worse.
Minimum wage workers are among the most vulnerable in our communities. Many are teenagers, but the majority are over 20. They are disproportionately women. Minimum wage workers depend on part-time and short-term work Many depend on parents and relatives for affordable housing.
Minimum wage workers are in need of support. They are often trying to get a start in life and gain more independence. Some are saving for tuition in the province with the highest tuition fees in the country. In many cases they are simply trying to keep their household afloat.
The minimum wage sets the bar for other wages. A low minimum wage keeps other wages low, whereas increasing the minimum wage puts upward pressure on other wages. This is especially true for lower wages. Both employees and employers keep and eye on the minimum wage and adjust their negotiations accordingly.
The effects are by no means insignificant. In 2003 more then 71,000 workers in Nova Scotia (19% percent of the workforce) earned $8.00 per hour or less.
Increasing the minimum wage is good for economic development in Nova Scotia. Jobs are being created in the province. But according to the Atlantic Provinces Economic Council (APEC), between 1997 and 2002, “Atlantic employment has grown 19% in low-wage industries but advanced only 7% in high-wage industries.” “In all four [Atlantic] provinces, accommodation and food services – [a sector in which] earnings are less than half of the all-industry average – accounted for a rising share of total employment between 1991 and 2002.” Not surprisingly the accommodation and food services sector tops the list of industries in Nova Scotia that pay minimum wage. Another indication of this trend is the decrease in average real weekly earnings in Nova Scotia over the past decade, whereas in other regions of the country real earnings have been increasing.
Allowing the minimum wage to remain low permits businesses to depend upon low wages instead of increasing their productivity through training workers and investing in equipment and technology.
A higher minimum wage contributes to increased worker satisfaction and commitment to their job and employer. Higher minimum wages also contribute to the local economy. When low income earners get a raise they tend to spend it locally on basic necessities.
Some business advocacy groups are against a significant increase in the minimum wage. They claim that it will force some small businesses to close shop. There is no question that marginal businesses will find it difficult to adjust to minimum wage increase. But is the higher wage the real problem or is it that these businesses are unable to respond to short-term challenges through innovation? What are we saying about the value of workers if we agree that in order for businesses to be successful, workers must be paid a wage that does not provide them with even a modest standard of living?
But of course not all businesses that have benefited from a low minimum wage are small. The fast food chains come to mind – McDonald’s, Tim Horton’s etc. – profitable companies that choose to reward executives, share holders and owners rather than pay workers a living wage. Low-income Nova Scotians are forced to subsidize these companies with their underpaid labour and our communities are increasingly left to subsidize corporate profits through charities such as food banks. Government supports low-income workers as well when they are earning so little each month that their income must be subsidized though social assistance.
For those small businesses that cannot quickly adjust to an increased minimum wage temporary support should be provided through, for example, short-term tax measures.
So what kind of a increase are we talking about? The minimum wage needs to increase to at least $8.25 an hour just to lift individual workers out of poverty. Such a move would benefit not only those most in need but contribute to healthy communities and a vibrant productive economy.
John Jacobs is director of the Nova Scotia office of the Canadian Centre for Policy Alternatives (www.policyalternatives.ca), an independent public policy research institute.