Council candidates on a Living Wage ordinance…leaving more questions than answers.

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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.

 

The $15 Minimum Wage. Good politics, bad policy

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The latest salvo in the Nova Scotia NDP’s battle back from electoral oblivion has been fired. Newly minted leader Gary Burrill is launching the Nova Scotia franchise of the “fight for 15” minimum wage war. Good politics perhaps but this is bad economic policy. This massive minimum wage hike is modelled on the Alberta government’s last election platform and has become somewhat of a Cause Célèbre for organized labour across Canada and the U.S.

The “Fight for 15” walks hand-in-hand with the discussion of the Living Wage, a somewhat arbitrary economic line-in-the-sand being drawn by anti-poverty and social activists.

In a study commissioned last year by the United Way the Living Wage for Halifax was identified by the Canadian Centre for Policy Alternatives at $20.10 per hour. This benchmark describes what the CCPA believes each money earner in a family of two parents and two school age children must earn to provide what they saw as a “reasonable quality of life”, free of the stress of financial hardship.

However the 20 dollar plus Living Wage is more a Trojan horse. Behind this is what its supporters feel is the much more “reasonable” 15 dollar minimum wage. While the Living Wage is promoted as a voluntary measure, it’s not hard to draw a line directly to the minimum wage policy discussion. The headline in the Herald last year read, Study: Minimum wage only half of what it needs to be.

The Living Wage has been officially adopted by New Westminster, British Columbia and several cities in the United States. The Mayor of Vancouver is now mulling over the idea. The outcome for city employees is nominal as the vast majority of municipal government jobs pay near or above that mark anyway. Where it is really felt is in the private sector.  As a Living Wage community, it is a requirement for private contractors also to also meet that benchmark in order to be eligible to contract with the municipality.

Unions like this policy because it drives up wages and reduces the ability of private sector contractors to compete for union jobs. It effectively increases the government employee wage floor, makes collective bargaining easier and freezes out small private contractors, a perfect union trifecta.

While this Living Wage conversation goes on, discussions around the minimum wage are ramping up in Canada with the help of Alberta`s new government. It was in the NDP platform. When the NDP swept into power, Alberta was left with a minimum wage policy that remains nothing short of horrifying for small business.

Since that time the Alberta government’s own advisors say: “it’s reasonable to assume significant job loss is one realistic possibility” and the NDP government has not produced a single economic impact analysis demonstrating otherwise. Premier Rachael Notley even admitted Alberta’s fragile economy cannot handle this shock.

Nova Scotia’s economy is certainly no more equipped to handle this kind hike and the NDP here are proposing they can meet that goal by 2018. There is no economic impact analysis. They say small business will be exempt, but no criteria is identified. How will they determine how one business must pay a $15 minimum wage and another does not? The prospect of implementing this kind of discriminatory economic policy is nightmarish.

Punishing jumps in the minimum wage mean targeted business owners will need to hike prices, lay off staff, reduce employee work hours and reduce training. Profitability will decline, reinvestments and growth in business will diminish, and jobs which may otherwise have been created will simply not appear. In other words, nothing good.

On the other hand, government will reap benefits through higher personal income and payroll tax revenues. For the low-income employee, the benefit will be marginal at best.

In fact, minimum wage earners lost more in 2015 due to higher government deductions (e.g. CPP/QPP, EI, federal and provincial taxes) compared to 2010 in all provinces and territories except Newfoundland and Labrador. For example, Alberta minimum wage earners could see their payroll deductions increase from $1,965.60 in 2010 to $5,576.22 in 2018 with the minimum wage rate increase to $15 per hour.

Minimum wage hikes are harmful to youth employment.  According to a recent report from the Fraser Institute, for every ten per cent increase in minimum wage there is a resulting decrease of youth employment by three to six per cent.  The NDP proposal of a 29 per cent to the minimum wage would mean a reduction of 9 to 18 per cent in youth employment in Nova Scotia.

The report also notes that nearly 59 per cent of people earning minimum wage are people aged 15-24 who typically are entering the workforce.  Only 2 per cent are people who are single parents who have at least one dependent living at home.

Basic Personal Exemptions 2016

BPE

If government is looking for a policy change to help low income workers, they need look no further than the Basic Personal Exemption (BPE). This is the annual income at which a worker begins to pay taxes. Nova Scotia has the second lowest BPE is Canada at $8,481. We urge the Nova Scotia government to address this shameful statistic first before looking at reckless minimum wage hikes.

We were very pleased to see this week the Premier suggesting this is his preferred option. If so, CFIB will be looking for it in the next budget. Nova Scotians face some of the heaviest tax burden in the country. By allowing low income earners to keep more of what they earn, rather than enrich the treasury through minimum wage hikes, the government can actually do something meaningful to benefit those who need it most.

More than 140 Characters on the United Way, the Living Wage and Minimum Wage

scrooge mcduck

The “Living Wage” is an interesting term. To its credit, the Canadian Center for Ethics in Public Policy were gracious enough to invite the opinion of CFIB members to a forum tonight to discuss a recent report commissioned by the United Way of Halifax and executed by the Canadian Centre for Policy Alternatives (CCPA).

The United Way is a well know charity aggregation which provides its charitable clients organization and communication expertise. They have been great contributors to the social fabric of communities across Canada raising money for important organizations and projects.

Many small and medium size businesses contribute generously to the United Way as an effective method to give back to their community. CFIB has been a strong supporter of the United Way in years past as have individual CFIB members. The United Way has had many profoundly positive impacts on our community over the years and continues to play a valuable role. However, good works should not and do not inoculate any organization from scrutiny.

The Catholic Church has also effected many great works of charity, it is useful however from time to time that it should  be questioned on its social positions or associations. Agree or disagree, we live in a society where organizations that receive public funding should be held to account by the public at large. Such as it is with the Catholic Church and so should it be with the United Way.

This week, CFIB’s President Dan Kelly and I both came under fire for some comments around the United Way’s partnership with the CCPA. Over the weekend, I had made some rather benign comments about the CCPA’s living wage report stating that, as a voluntary measure, CFIB didn’t have many concerns about the identification of a pay scale predetermining a living standard, however arbitrary the methodology, provided it was voluntary.

I also cautioned that $20+ shouldn’t be used as a benchmark for the minimum wage discussion. Dan then weighed in on Monday on Twitter questioning the United Way’s association with the CCPA….and off we went.

There was an ensuing kerfuffle in the media as News 95.7’s Rick Howe and Sheldon MacLeod and the CBC threw a little gas on the fire. This was followed by the usual assortment of anonymousTwitter trolls and labour activists weighing in accusing CFIB of everything from calling for a “boycott” of the United Way to “h8ing” the poor. Neither of which are true but such is the level of debate on Twitter. (I did find one post amusing however which pointed out I was “too busy” to engage in this Twitter nonsense because as an advocate for small business I was swimming around in treasure like Scrooge McDuck…see above.)

Sue LaPierre, director of strategies and partnerships with United Way, told the CBC that their involvement in the study isn’t political, and is simply a tool to help them reduce poverty in the community. She said, “We certainly have not begun to advocate for small businesses or any businesses to pay a living wage…What we advocate for is a good quality of life for our citizens.”

It seems somewhat naive to believe that spending $23,000 to hire and work with a group that is both funded by, and an advocate for, big labour organizations (and by extension their political positions) would not be viewed by some as being a tad “political”. For example, had the United Way commissioned a Living Wage study by the Fraser Institute on the impact of a living wage, one can only imagine the hue and cry emerging from the so-called “progressives”.

But to the matter at hand, a living wage.  If a firm has the capacity to pay this $20.26 per hour “living wage” and sees the advantage of voluntarily doing so relative to employee retention, productivity and other metrics, then it should indeed do so.

That isn’t the point.

The living wage campaign is not simply an academic exercise or a “discussion starter”. It is clearly constructed to set a benchmark for legislators to increase wage floors and minimum wage levels and has been used to that effect in other jurisdictions. The city of New Westminster, British Columbia has adopted a living wage ordinance and you can rest assured the $15.00 minimum wage being implemented by the new government in Alberta was not a number picked out of thin air.

If the United Way of Halifax does not believe the living wage is connected to the minimum wage debate, it need only examine the Living Wage Canada: Call to Action. The two are inextricably linked and evidence is put forth to not only establish a living wage but to also pressure government to increase minimum wages. They might also note organized labour’s participation in the campaign and the “debunking” of myths around minimum wage and small business.

Our 5,200 members in Nova Scotia and 109,000 across the country, all of which are small independent businesses, do their best to offer competitive wages that will help them attract and retain valued staff. They have a serious issue with escalating minimum wage floors across the country and CFIB as an organization has the responsibility, as seemingly their only voice on this issue, to articulate their concern.

Several years ago CFIB’s report Minimum Wage: Reframing the Debate examined the compounding impact minimum wage increases have had in this current context. Most alarming is the revelation that minimum wage increases actually hurt the very people they are intended to help: low-skilled and low-income Nova Scotians.

As outlined in the report by Nova Scotia’s Minimum Wage Review Committee, CFIB’s research also finds that most minimum wage earners are young, live with family members, and are not from low-income households. In other words, increases in minimum wage do little to reduce poverty because, as with most blunt instruments, it does not have the ability or flexibility to zero in on the appropriate population.

In spite of the CCPA’s assertions to the contrary, there are volumes of data and decades of research which indicate minimum wage increases do have serious and unintended consequences: job losses.

CFIB’s latest figures based on the 2014 Labour Force Survey estimates that in Nova Scotia anywhere between 1,800 and 8,000 jobs have been lost with every 10 per cent increase in minimum wage. These job losses have taken the form of hiring freezes (jobs that would have been filled but were not), slower employment growth, or direct job cuts during an economic downturn…mostly in the cohort of workers 25 to 54 years of age since the negative employment impact applies to the bulk of the working population.

This data is supported by what we hear from our members every day, businesses that have to cutback staff, hours or training to offset costs due to ongoing wage pressures. Of course, the impact of minimum wage increases go beyond job losses as they also significantly increase payroll costs in a firm. Employers often feel pressure to increase the wages of all employees when the minimum wage goes up.

Additionally, with any increase in payroll comes an increase in payroll taxes, including Canada Pension Plan (CPP) contributions, Workers’ Compensation and Employment Insurance premiums. Payroll taxes are the most detrimental tax to businesses as they are profit insensitive – they do not adjust based on corporate or personal income growth, as corporate and personal income taxes do. Consequently, payroll taxes are widely viewed as an enemy of job creation.

While CFIB is not discouraging employers from deploying a voluntary living wage, we are deeply concerned this campaign will have an impact on provincial legislators who may look to the living wage benchmark when considering minimum wage.

Minimum wage is clearly meant for entry level positions, usually for young workers entering the workforce. Our research shows that only 6.8% of workers in Nova Scotia earn minimum wage and of those nearly 60% are between the ages of 15 to 24. Only 40% of those are full time jobs and a majority do not belong to poor households, live with their parents or family members, are not primary income earners and 47% leave their job within a year.

At CFIB we believe it is our responsibility to point out alternatives.Our reports on minimum wage are designed to do this. For years, CFIB has been urging government to improve the income position of all Nova Scotians, particularly low-income earners, through the tax system. New figures show the combined federal and provincial tax-take of Nova Scotia’s minimum wage earners is the fourth highest in the country.

Low levels of basic personal and spousal exemptions, combined with a personal income tax system that is not indexed to inflation (though the minimum wage is), regressive consumption taxes and disincentives to economic growth are the culprits. CFIB also believes it is simply unacceptable, and in many ways unethical, for government to benefit from minimum wage increases through increased tax revenues.

While little research is available in Canada – as only New Westminster has adopted living wage legislation in 2011 – there is research from the United States that shows that living wage laws, like minimum wage legislation, typically lead to fewer job opportunities for lower-skilled workers and spite of what its advocates are claiming, they don’t in fact help poor families escape the cycle of poverty. Additionally, there is a potential for living wage laws to inflate municipal budgets through higher costs for public services and to reduce the efficiency of local government.

Loath as I am to attribute motivation to any group, one must look at why this idea is being pushed forward by activists fronting for organized labour. It doesn’t take too much sleuthing to join the dots. Reviews of municipal US living wage policy however, have shown that because many living wage employers end up being large firms dealing with government, the institution of living wage policy acts to reduce or eliminate incentives for governments to contract out work done by public sector unions. In turn this increases unions bargaining power, raising wages of their members. Altruism indeed.

As for the United Way, saying they simply want to have “the discussion” about a living wage feels a bit disingenuous, especially in light of the fact that simply Googling “United Way” and “Living Wage” turns up lots of associated reading material. There is ample existing evidence available for the United Way to make a determination of whether or not it should support a living wage in Halifax.

If the United Way believes in using a living wage as a benchmark for paying its employees, it has every right to do so. However, if the United Way supports a living wage as a public policy initiative, then it should also say so. By paying $23,000 of its benefactors contributions to the CCPA, which does advocate for higher minimum wages through their living wage campaign, the United Way must surely must take some responsibility for advancing this ideology.

It may not seem like political advocacy to the folks at the United Way…but from this perch, it’s pretty close.

CFIB is simply pointing out, with the utmost respect, that if the United Way of Halifax is going to use its name to advance this campaign, it should understand there are a great many small business owners, contributors to the United Way, who may vigorously disagree with their position and they may choose not to want their contribution used to advance this policy.

Small business owners also want to help the working poor succeed – and contribute mightily to doing so in many ways. At the same time there are many small business owners who simply hold differing views on how to do so.