Halifax journalist/blogger Tim Bousquet has re-opened up a particularly interesting debate during this municipal election by asking candidates for council their opinion on a living wage ordinance.
On his Halifax Examiner site, Tim is dedicating a page to a couple of questions, one of which is, “Will you support a living wage ordinance?”* Tim provides some background where he argues his position in favour of such a policy and also includes another link to material promoting the idea at Living Wage Canada. There are no counter arguments presented.
*This might be behind a paywall, so if you really want to read the responses…click here
I’ve commented about this before, but here we go again.
For anyone unfamiliar with the idea, the Living Wage for Halifax was identified by the Centre for Policy Alternatives in a report commissioned by the United Way in 2015 and set at $20.10 per hour. The study sets the wage by establishing a baseline standard of living for a family of two working parents with two school aged children.
It weighs the needs of the family to live what the CCPA considers a dignified life with opportunities for advancement. There are a great many reasons to question the methodology, but for our purposes, let’s accept the figure at face value.
Bousquet sells the idea, explaining how he is puzzled how anybody not paying employees over 20.00 per hour can “look at themselves in the mirror” and goes on to note that at his publication, the Halifax Examiner, he pays everyone a living wage.
As a small business owner, Tim’s desire to see those he employs earning a fair wage is admirable. It is also not particularly uncommon. Most small business owners try to do the same. However, many small business owners do not have the luxury of meeting an arbitrary living wage target by simply employing part-timers and freelancers on an ad hoc basis.
Employers with full-time employees base their salaries on a variety of economic factors including the industry standards, the economic value and availability of labour, revenue and business costs, the profit margin of their company, payroll taxes, benefits and a myriad of other market-driven external economic pressures beyond the employer’s control.
Living wage ordinances are nothing new. They’ve been in place in many jurisdictions in the US since the 90’s but it is difficult to compare the Canadian and US experiences as the minimum wage rates and labour standards, in most states, have historically been much lower than the levels we have in Canada.
The beachhead for these living wage policies in Canada is in British Columbia. New Westminster has had a living wage ordinance in place since 2011, followed by Port Coquitlam.
Vancouver also recently approved a plan to become a living wage employer. However, interestingly, evidence now shows almost no one will earn more under this policy. Why? Because Vancouver established much stiffer criteria around who should be paid a living wage. Among other restrictions, only contractors who have an annual service contract with the city more than $250,000 and provide regular and ongoing services on city sites fall within the scope of the city’s guidelines.
The result is the Vancouver living wage policy is little more than a feel-good, public relations campaign so politicians can say they are doing something about wage inequity or poverty.
For municipal employees and large-scale suppliers, such as is the case in Vancouver, it won’t matter a whit. The vast majority, if not all, already are making more than $20.10 per hour already. In Halifax, many make much, much more, but for smaller firms where profit margins are slim, costs continue to escalate and labour is hard to find, it would matter a great deal.
Without the sort of restrictions we’ve seen in Vancouver, a living wage ordinance would be highly discriminatory for many small businesses who want to bid on city contracts.
It is a simplistic notion to think all companies doing business with the city can set an arbitrary full-time wage floor of $41,808 annually. Adopting a municipal ordinance to enforce such a notion would be disastrous for some small firms, which as part of their business model, do business with the municipality.
What would such an ordinance mean for employers who pay their seasonal employees $15.00, $17.00, $19.00 per hour? Are they simply be disqualified from the tendering process? It stands to reason a policy of this sort would also force employers wanting to be compliant to eliminate full-time positions and replace them with temporary, contract positions to meet the $20.10 per hour threshold.
Also, how would such an ordinance be enforced? How much red tape is required? Would the city demand all businesses submit their payroll to the municipality to confirm they employees are meeting the requirement or do they just sign a declaration? Does CRA get involved? Also, how would it affect the competitive tendering process?
And what happens to employment opportunities for lower-skilled workers? Certainly, employers are not going to be providing entry level positions at that pay scale. This means employment opportunities will simply dry up for youth and entry-level employees.
There would also be job losses with larger employers. CentrePlate has a contract with the city and provides both part-time and full-time employment. Their workforce employs many youths and other entry-level or lower-skilled workers. For some, it’s an all-important first job, for others, it’s additional household income.
If the city were to institute a living wage policy, even one with the sorts of exemptions we see in Vancouver, CentrePlate would be captured. By almost doubling the wage floor from the current minimum wage of $10.70 to $20.10, a significant labour market distortion is created. CentrePlate would then have decisions to make. They would either reduce staff, cut service or operate at a loss. What do you suppose would happen?
My guess is the more experienced workers would keep their jobs, all full-time entry level positions would be eliminated, workers hours would be reduced and service levels lowered. How exactly does this help? Would council decide to exempt Centreplate? If so, what then becomes the criteria for exemption?
A municipal living wage ordinance would also mean private sector service providers would lose competitive advantage against municipal unions, which (in case the connection is not clear) is why CUPE, Unifor, and other labour organizations are funding these Living Wage campaigns.
There could be other unintended consequences as well, including upward pressure on other salaries. If $20.10 is the new base rate, experienced employees will rightly be asking for higher levels of compensation for their work. As labour costs rise, so will inflation.
With increased costs to government, businesses would also be forced to absorb higher taxes in this equation. Along with the higher wages, there will be additional payroll taxes in higher EI and CPP contributions and additional municipal property taxes.
So the two options emerging are; adopting a living wage policy with many exemptions such as in Vancouver or; adopting a universal living wage for all municipal staff and contractors. The first option is a do-nothing, status quo, public relations exercise, the second is an arbitrary, inflationary tax grab and job killer. Take your pick.
Money obviously just doesn’t magically appear when a policy like this is adopted. For most small businesses trying to grow, there is no money tree they can harvest or a pot of unused cash to make up these wages.
I do applaud Tim and the Examiner for injecting this question into the municipal election. While we don’t agree on this, there is no doubt it will be an important public policy debate in the months and years ahead. The labour movement is plowing lots of money into this campaign and there are lots of social activists cheerleading this as a poverty reduction measure, so it isn’t going away.
For those prospective councillors who have provided answers, I would respectfully suggest it might be a good idea to go back and do a little more research and then make up your mind. From the answers I read, for many, there appears to be confusion around what is a minimum wage, a living wage and for that matter, where and how the idea is being adopted.
You can find other background material here and here. I also don’t think it’s unreasonable as citizens to expect well thought out responses to complex problems from our prospective politicians after they’ve taken the time to evaluate more than one argument.