Here we go again! Controversy has surfaced over discussions in Canada and the U.S. over raising the existing minimum wage levels at the federal, state and provincial levels. In both countries, minimum wages differ among states and provinces. In the U.S., the federal minimum wage is currently $7.25 per hour. In Canada, minimum wages vary among provinces: the highest being in the territory of Nunavut at $11.00 per hour to the lowest in Alberta at $9.75 per hour. The current provincial average rate in Canada is around $10.00. There is no Canadian federal minimum wage for industries under federal jurisdiction, as the federal government has simply adopted provincial minimum wages in its labour standards legislation.
In his February 2013 State of the Union address, President Barack Obama urged Congress to raise the federal minimum wage from $7.25 to $9, saying the move would reduce poverty and stimulate the economy. As usual, critics argue that increasing the minimum wage would raise businesses’ costs and, in turn, reduce the number of employees they could hire. However as noted by the Department of Labor, the federal minimum wage was only $3.35 per hour in 1981. When adjusted for inflation the current federal minimum wage would need to be more than $8 per hour to equal its buying power of the early 1980s, and more than $10 per hour to equal its buying power of the late 1960s.
This brings us to the question of what is a minimum wage and how is it determined? Originally, minimum wages tended to be calculated based on some percentage of the average industrial wage. For example, one may have desired it to be set at 50 or 60 percent of the average industrial wage. Today according to Statistics Canada, the average hourly wage in Canada for persons 15 years and older is $23.75. In the U.S., the average hourly wage in the private sector is around $24.00. However, what has happened over the recent decades has been a lag in minimum wage levels when compared to yearly increases in industrial wages. Indeed, average minimum wages have rarely even kept pace with inflation rates, not being adjusted for the annual cost of inflation increases. Instead, increases in minimum wage rates are dependent on governments to prescribe in law, a process often taking place over the course of several years.
We are now no longer talking about a “living wage”. How can a family of four expect to live comfortably in an urban setting on one income based on a minimum wage? At or slightly above the poverty line, this is why there are so many families with both couples working: often referred to as the “working poor”. With the loss of good paying jobs in manufacturing in particular, the so-called “middle class” is slowing shrinking. Many unemployed persons are forced to seek employment in the retail and services sectors where minimum wages play a much greater role in effectively determining wages.
Moreover, politicians are less likely to be influenced by anti-poverty groups than by industry lobbyists. Recently, members of the Association of Community Organizations for Reform Now (ACORN) in Canada stated that almost 20 percent of Ontario workers were forced below the poverty line in the three years since the provincial Liberal Government froze the minimum wage at $10.25 per hour. ACORN’s province-wide campaign is calling for the rate to be immediately increased to $14, reflecting the rise in inflation since 2010. A Minimum Wage Advisory Panel, appointed by the Liberals in July 2013, is examining a potential provincial minimum wage increase in 2014. However, one can be certain that industry representatives will once again raise the age-old specter of increased unemployment in those sectors where minimum wages are currently used as base income levels. As in the U.S., it is very unlikely that there will be any significant changes to minimum wage rates in Ontario or in Canada. Perhaps, it’s about time for Ontario to take the lead and ensure that workers are entitled to a real “living wage”.
FROLITICKS 