Living wages boost economy

Opinion

Hey there, time traveller!
This article was published 02/04/2009 (5107 days ago), so information in it may no longer be current.

In this time of economic hardship, living-wage policies are one way to stimulate our local economy. A living-wage policy is employed by at least 122 American cities with more than 70 others U.S. cities working on it. There are two Canadian cities, Calgary and Hamilton, making this commitment to ensure contract employees working on behalf of the municipality are paid a wage above the poverty line.

Someone on minimum wage in Manitoba will earn about $15,470 per year for a 35-hour week before taxes and deductions. This is for $8.75 per hour, which became the minimum wage on April 1. This is $6,196, or over 30 per cent, below the poverty line. If that minimum wage earner has a few dependents, then the family, after paying for food and housing, has virtually no disposable income to pay for other things like transportation, clothing, tenant insurance, and everything else. An economy with 20 per cent of workers with no purchasing power is not good for the local economy.

A living wage is calculated in various ways. One way is to tie it to the Low Income Cut Off or LICO, as Calgary has done. For a city our size, the LICO for an individual is $21,666 per year, or $11.60 per hour. The City of Winnipeg currently tenders contracts for services like janitorial service, security, tree trimming and snow removal. For Winnipeg, a living wage would apply for about 2,000 employees. The total cost for these contracts is millions of dollars. If these employees were paid $11.60 per hour instead of $8.75 it would be a $10-million investment into the local economy. Virtually all of this additional money would be spent on goods and services in our local economy. There would be a benefit to businesses and to various levels of government.

A study from Santa Rosa, Calif., examined how low-wage workers would spend their increased income. The highest spending would occur in housing investment and repair, household purchases, cars and car repairs and clothing, as well as child care and recreation. Paying off debt and savings for large purchases was also high. Studies show that in cities where living wages have been implemented, the actual costs to business average less than three per cent of revenue, and that increased sales or small graduated price increases easily cover these added wages. Furthermore, there is no evidence indicating businesses shy away from living wage areas. Actually, a thriving economy is more likely to attract new businesses and encourage expansion, thereby increasing employment in the community.

The federal government and its provincial counterparts could employ a living wage policy, not only to ensure their sub-contracted workers are paid a wage above the poverty line, but senior levels of government could also offer funds to municipalities to help cover the costs to pay living wages to people who work on behalf of cities. This could be part of a larger strategy to address poverty, something long overdue.

A living wage policy does not have to increase pressure on high-end civil servants at the municipal level, as the conservative Frontier Centre recently claimed in a policy paper. The centre raised many false alarms, including the notion that young people might abandon educational opportunities for work, but we really don’t have to worry about living wages creating a disincentive to trash collectors giving up post-secondary education to earn under $15 an hour. Also, pay equity principles would apply so staff who are contracted by the city to do female-dominated jobs, such as child care, would make a living wage as much as other employees.

Living wage policies are one strategy that can be part of a larger poverty action plan that municipalities can undertake. This policy alone will not eliminate poverty, but it will make a big difference for poor employees under the control of municipal contracts, as well as add to the local economy.

Paying wages that cannot support an individual let alone a family is short-sighted. The difference between earning under $15,000 and $22,000 is significant, in terms of the quality of life and ability to participate in the community to play sports, go for dinner once in a while and afford tenant insurance. While government contracts that pay poverty wages contribute to a city of winners and losers, living wages are a win-win for everyone in the local economy and contribute to a city where everyone belongs.

Marianne Cerilli is a former NDP MLA and social activist.