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Submission to Ontario’s Minimum Wage Advisory Panel Mississauga Consultation September 19, 2013

minimum wage submission DRAFT4ofl.ca/wp-content/uploads/2013.09.19-Submission-MinimumWage.pdf · 1!! The!Ontario!Federation!of!Labour!welcomes!the!opportunity!to!make!this!submission!to!

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Page 1: minimum wage submission DRAFT4ofl.ca/wp-content/uploads/2013.09.19-Submission-MinimumWage.pdf · 1!! The!Ontario!Federation!of!Labour!welcomes!the!opportunity!to!make!this!submission!to!

             

           

Submission  to  Ontario’s  Minimum  Wage  Advisory  Panel                  

Mississauga  Consultation  September  19,  2013  

     

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 The  Ontario  Federation  of  Labour  welcomes  the  opportunity  to  make  this  submission  to  the  Minimum  Wage  Advisory  Panel,  which  has  been  tasked  with  examining  Ontario’s  approach  to  setting  the  minimum  wage.    In  the  lead  up  to  the  2013  Ontario  provincial  budget,  the  OFL  coordinated  a  province-­‐wide  consultation  that  culminated  in  the  release  of  a  People’s  Budget.  It  included  a  set  of  recommendations  about  how  to  make  Ontario  a  more  fair  and  equitable  province.  One  key  recommendation  was  to:  

“Raise  the  minimum  wage  to  $14  per  hour,  which  is  10  percent  above  the  poverty  line  based  on  a  35-­‐hour  week,  and  de-­‐politicize  the  minimum  wage  by  implementing  a  formula  that  would  determine  regular  future  increases.”  

Fairness  is  sometimes  as  simple  as  being  properly  compensated  for  the  work  you  do,  but  for  a  lot  of  Ontarians  having  a  job  does  not  necessarily  provide  adequate  support  for  themselves  and  their  families.  That  is  why  we  continue  to  stand  by  this  recommendation.    Minimum  wage  legislation  is  an  important  social  policy  because  it  establishes  a  wage  floor.  Everyone  deserves  the  opportunity  to  earn  a  decent  wage,  whether  it’s  a  single  mother  raising  a  family  or  a  student  saving  for  college.  An  adequate  minimum  wage  can  help  to  ensure  that  workers  with  little  bargaining  power  in  the  labour  market  are  paid  a  livable  wage.  The  minimum  wage  is  about  lifting  working  people  out  of  poverty,  but  it’s  also  about  fairness  and  the  value  of  work.  Even  for  individuals  not  living  below  the  poverty  line,  a  decent  wage  can  provide  opportunities  and  allow  them  to  contribute  more  to  their  families  and  local  economies.    Establishing  a  higher  wage  floor  can  also  help  to  address  inequality.  The  earnings  of  Ontarians  have  become  polarized.  Those  at  the  top  are  earning  more,  while  those  in  the  middle  and  at  the  bottom  are  facing  stagnating  wages.  Putting  more  income  into  the  hands  of  those  earning  the  least  can  help  address  this  inequality.  Establishing  an  adequate  minimum  wage  is  one  way  to  do  this.    The  prevalence  of  precarious  work  is  also  on  the  rise.  In  Ontario,  33  percent  of  workers  are  estimated  to  be  working  in  precarious  employment.i  In  the  Greater  Toronto  and  Hamilton  Area,  precarious  work  has  increased  by  50  percent  over  the  last  20  years  and  barely  half  of  those  working  in  the  region  today  are  in  permanent,  full-­‐time  positions  that  provide  benefits  and  employment  security.ii  Increasing  the  minimum  wage  cannot  address  all  impacts  of  precarity,  but  it  is  a  very  effective  instrument  for  addressing  one  key  aspect  of  precarious  work  –  low  wages.  

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 Since  2008  and  throughout  the  recession  that  followed,  Ontario  is  one  of  the  few  provinces  that  has  failed  to  continue  increasing  the  minimum  wage.      Ontario’s  minimum  wage  has  been  frozen  at  $10.25  per  hour  since  2010,  while  the  cost  of  living  has  continued  to  increase.    The  all-­‐items  Consumer  Price  Index  (CPI)  in  Ontario  increased  by  5.5  percent  between  July  2010  and  July  2013.iii  This  means  that  minimum  wage  earners  in  Ontario  have  watched  their  purchasing  power  erode  over  the  past  three  years.       Minimum  wage   Low  Income  Measureiv   %  below  LIM  2010   $10.25  per  hour            $18,  655  per  year*   $21,772  per  year   14%  2013   $10.25  per  hour            $18,  655  per  year*   $23,105  per  year**   19%  *Based  on  a  35-­‐hour  work  week,  which  is  below  the  average  work  week.  **Based  on  an  estimated  two  percent  increase  in  CPI  each  year  since  2010.  The  actual  increase  in  the  Ontario  all  items  CPI  was  3.1  percent  in  2011,  1.4  percent  in  2012  and  is  not  available  for  2013.  

 In  2010,  the  income  of  minimum  wage  earners  in  a  one-­‐person  household  working  a  35-­‐hour  week  was  14  percent  below  the  poverty  line.    In  2013,  that  income  fell  to  19  percent  below  the  poverty  line.  This  is  unacceptable.  Working  people  should  not  have  to  live  in  poverty.    While  the  minimum  wage  has  not  kept  up  with  the  cost  of  living,  the  number  of  Ontarians  earning  minimum  wage  continues  to  climb.  In  2012,  approximately  one  in  10  workers  in  Ontario  were  paid  minimum  wage.  Throughout  the  mid  2000s,  the  rate  was  fewer  than  one  in  20  workers.  In  a  very  short  period  of  time,  the  share  of  minimum  wage  earners  in  the  province  has  more  than  doubled.v      Opportunity  and  Fairness  for  Young  and  Vulnerable  Workers  Some  will  dismiss  the  importance  of  increasing  the  minimum  wage,  assuming  that  the  majority  are  young  workers  who  can  rely  on  their  parents  for  support.  But  not  all  minimum  wage  workers  are  young.  Provincially,  27  percent  of  minimum  wage  workers  were  35  years  of  age  and  older  in  2012,  up  from  17  percent  in  2004.vi      Furthermore,  even  within  the  73  percent  of  minimum  wage  earners  who  are  under  the  age  of  35,  many  still  need  support.  In  fact,  they  may  need  a  boost  now  more  than  ever  before.  Young  people  today  are  more  educated,  but  for  many  this  means  facing  high  levels  of  student  debt.  In  Ontario,  the  average  student  debt  after  a  four-­‐year  degree  is  $37,000.vii  In  addition,  more  young  people  are  living  at  home  longer.  In  2011,  42.3  

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percent  of  young  adults  aged  20  to  29  in  Canada  lived  with  their  parents,  much  higher  than  32.1  percent  in  1991  and  26.9  percent  in  1981.viii  In  Ontario,  this  number  is  even  higher:  50.6  percent  of  people  aged  20  to  29  were  living  at  home  in  2011.ix  A  higher  minimum  wage  could  set  young  Ontarians  on  a  path  towards  independence  and  self-­‐sufficiency  and  help  them  be  able  to  leave  home  and  pay  back  education-­‐related  debts.    

Women  and  newcomers  are  also  disproportionately  represented  among  minimum  wage  earners.  In  2009,  women  represented  just  over  60  percent  of  minimum-­‐wage  workers,  although  they  made  up  one-­‐half  of  employees.  The  overrepresentation  of  women  in  this  category  of  workers  is  observable  among  all  age  groups,  but  more  significantly  for  women  25  years  of  age  and  over,  whose  rate  was  twice  as  high  as  that  of  men  the  same  age.x  Research  also  shows  that  newcomers  are  more  likely  to  earn  close  to  minimum  wage  and  less  likely  to  have  high-­‐paying  jobs.xi  In  a  province  that  believes  in  equality  of  opportunity  and  fairness,  raising  the  minimum  wage  and  putting  more  income  in  the  hands  of  groups  who  are  overrepresented  among  vulnerable  workers  makes  good  sense.      Economic  Impact  Some  people  cite  the  potential  impact  on  employment  as  a  reason  not  to  increase  the  minimum  wage.  Yet  in  other  provinces  no  evidence  has  been  found  that  minimum  wage  increases  have  cost  jobs.xii  Overall,  there  is  no  consensus  in  the  literature  about  the  impact  of  raising  the  minimum  wage  on  employment,  which  suggests  that  if  a  relationship  does  exist,  it  is  weak.xiii          In  fact,  within  the  current  economic  context,  raising  the  minimum  wage  is  likely  to  have  a  positive  overall  economic  impact.  Increasing  the  purchasing  power  of  low-­‐income  earners  means  that  they  have  more  money  to  spend  in  their  local  economies.  This  is  particularly  important  in  times  when  the  economy  is  growing  slowly,  as  it  has  in  recent  years.  In  the  2013  Ontario  Budget,  the  provincial  government  projected  that  household  spending  would  drive  59  percent  of  economic  growth  in  Ontario  in  the  period  from  2013  to  2016.xiv      Role  of  Indexation  When  social  programs  are  not  indexed  to  the  cost  of  living,  their  value  erodes  over  time  and  those  relying  on  the  programs  lose  out.  Furthermore,  decreasing  the  value  of  social  programs  in  this  manner  is  not  transparent  to  the  public,  who  might  not  fully  understand  the  impact  of  inflation  on  their  purchasing  power.    

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The  same  holds  true  with  the  minimum  wage.  Indexing  to  ensure  that  it  keeps  up  with  changes  to  the  cost  of  living  simply  makes  good  sense.    The  indexation  of  social  programs  to  the  cost  of  living  is  particularly  important  for  low-­‐income  earners  who  are  disproportionately  impacted  by  inflation.  Low-­‐income  households  spend  a  higher  proportion  of  income  on  necessities,  such  as  food,  shelter,  transportation  and  energy,  which  tend  to  have  higher  rates  of  inflation.  For  example,  in  Ontario  between  2008  and  2012,  the  all-­‐items  CPI  increased  at  an  average  rate  of  1.9  percent,  while  the  CPI  for  food,  shelter  and  transportation  increased  by  an  average  of  2.5  percent.  The  CPI  for  food  alone  increased  by  an  average  of  3.3  percent  and  the  CPI  for  food  and  energy  rose  by  an  average  of  3.9  percent.  For  low-­‐income  households,  this  means  that  while  indexing  to  the  cost  of  living  is  crucial,  indexing  social  programs  to  the  all-­‐items  CPI  may  not  be  sufficient.    The  Need  for  an  Adequate  Minimum  Wage  While  indexation  is  necessary,  it  only  works  when  starting  from  an  adequate  minimum  wage.  As  illustrated  in  the  Caledon  Institute’s  2011  research,  if  the  Ontario  minimum  wage  had  been  adjusted  annually  for  the  cost  of  living  based  on  the  1965  minimum  wage,  it  would  have  only  reached  $6.90  per  hour  in  2010,  much  lower  than  the  actual  minimum  wage  of  $10.06,  which  had  been  subject  to  ad  hoc  increases  over  the  years.xv    Similarly,  if  today’s  minimum  wage  was  indexed  from  the  current  amount  of  $10.25  per  hour,  then  minimum  wage  earners  could  become  sentenced  to  working  poverty.  Thus,  the  most  important  component  of  discussions  about  setting  future  increases  is  establishing  an  adequate  starting  point.    

  Minimum  wage  Equal  to  2013  LIM     $12.70  per  hour  10%  above  2013  LIM   $14.00  per  hour  

 The  most  straightforward  way  to  establish  an  adequate  minimum  wage  is  to  set  it  above  the  poverty  line.  This  is  based  on  the  simple  idea  that  every  full-­‐time  worker  should  be  able  to  cover  the  basic  cost  of  living  and  reflects  a  society  that  values  the  contribution  of  every  worker  to  its  economy.    In  Nova  Scotia,  the  provincial  government  accepted  the  recommendation  of  the  Minimum  Wage  Review  Committee  to  benchmark  the  minimum  wage  at  the  Low  Income  Cut  Off  (LICO).  The  LICO,  however,  is  no  longer  accepted  as  the  best  measure  of  

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low  income  in  Ontario  and  it  has  not  been  updated  since  1992.  Instead,  the  Low  Income  Measure  (LIM)  is  now  the  accepted  measure  of  poverty.  It  makes  sense  to  benchmark  the  minimum  wage  to  the  LIM  in  Ontario  before  indexing  it.    That  is  why  the  province-­‐wide  campaign  to  raise  the  minimum  wage  has  suggested  an  immediate  increase  to  $14  per  hour.  This  would  establish  a  starting  minimum  wage  rate  that  is  10  percent  above  the  Low  Income  Measure  (LIM)  for  a  one-­‐person  household.  From  there,  if  the  minimum  wage  was  indexed  to  the  cost  of  living  it  would  help  to  ensure  minimum  wage  earners  can  continue  to  live  above  the  poverty  line  into  the  future.    Indexation  should  also  be  accompanied  by  an  annual  commission  that  would  be  tasked  with  assessing  the  challenges  facing  low-­‐income  earners  and  evaluating  how  the  minimum  wage  is  stacking  up  against  the  poverty  line  each  year.  This  would  provide  a  forum  for  discussing  whether  indexation  is  adequately  working.  It  would  also  help  to  facilitate  a  much-­‐needed  ongoing  dialogue  about  the  challenges  facing  low-­‐income  earners  and  could  become  one  component  of  a  broader  conversation  about  poverty  reduction  in  Ontario.  This  commission  should  be  a  tri-­‐partite  body  made  up  of  representation  from  labour,  business  and  government,  as  well  as  youth  and  community  members  to  ensure  that  the  perspective  of  minimum  wage  earners  themselves  are  reflected.    Conclusion  Most  research  shows  that  raising  the  minimum  wage  has  little  to  no  impact  on  broader  employment  trends.  While  in  the  current  economic  context,  it  is  more  likely  to  have  a  positive  economic  impact  because  it  will  help  drive  consumer  spending.  It  is  important  not  to  exaggerate  the  impact  of  raising  the  minimum  wage  on  areas  that  it  is  not  meant  to  address,  like  employment.  Instead,  focus  should  be  placed  on  areas  where  it  is  designed  to  have  a  significant  impact,  such  as  wage  determination  and  income  distribution.    Our  key  message  today  is  that  an  immediate  increase  in  the  minimum  wage  is  necessary  before  the  minimum  wage  is  indexed.  Otherwise,  working  people  are  at  risk  of  being  indexed  to  poverty.    An  adequate  minimum  wage  will  increase  the  wage  floor  and  put  more  money  in  the  hands  of  low-­‐income  earners  in  Ontario.  By  benchmarking  the  minimum  wage  above  

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the  poverty  line  and  indexing  it  to  the  cost  of  living,  our  province  has  an  opportunity  to  take  a  big  step  towards  eliminating  working  poverty  in  Ontario.      BSW/ss/cope343  

                                                                                                                           i“Vulnerable  Workers  and  Precarious  Work,”  Law  Commission  of  Ontario,  December  2012.  ii  “It’s  More  then  Poverty:  Employment  Precarity  and  Household  Well-­‐being,”  Poverty  and  Employment  Precarity  in  Southern  Ontario,  February  2013.    iii  Statistics  Canada,  CANSIM  Table  326-­‐0020.  iv  Statistics  Canada,  “Low  Income  Lines,  2011-­‐2012,”  Table  3.  June  2013.  v  Armine  Yalnizyan,  “Boost  the  Minimum  Wage,  Boost  the  Economy,  from  the  bottom  up”  Behind  the  Numbers,  Canadian  Centre  for  Policy  Alternatives,  February    27,  2013.  vi  ibid.  vii  “The  Future  of  Ontario’s  Post-­‐Secondary  Education  System,”  Canadian  Federation  of  Students-­‐Ontario,  September  2012.  viii  Statistics  Canada,  “Living  Arrangements  of  Young  Adults  aged  20  to  29,”  September  19,  2012.    ix  Statistics  Canada.  “Families  and  Households  Highlight  Tables,”  2011  Census.  September  19,  2012.  x    Statistics  Canada,  “Inside  the  Labour  Market  Downturn,”  The  Daily,  February  23,  2011.  xi  Jason  Gilmore.  Statistics  Canada,  The  2008  Canadian  Immigrant  Labour  Market:  Analysis  of  Quality  of  Employment,”  November  23,  2009.  xii  Iglika  Ivanova,  “Myths  and  Facts  about  the  Minimum  Wage  in  BC,”  Canadian  Centre  for  Policy  Alternatives.  February  2011.  xiii  For  discussion  see  John  Schmitt.  “Why  Does  the  Minimum  Wage  Have  No  Discernable  Effect  on  Employment?”  Centre  for  Economic  and  Policy  Research.  xiv  “2013  Ontario  Budget,”  page  181.  xv  Ken  Battle,  “Restoring  Minimum  Wages  in  Canada,”  Caledon  Institute,  April  2011.