Minimum Wage Fails

Labour Views column for July 23, 2014

Written by Mary Lou Cherwaty, President of the Northern Territories Federation of Labour

The minimum wage is one of the basic labour standards.  It identifies the lowest wage rate that an employer can pay their workers.  Today, one of its main functions is to protect workers in non-unionized workplaces, but it also influences the level of compensation for all workers.

Minimum wage laws were first introduced in 1918 in the provinces of British Columbia and Manitoba.  Every province and territory now has a minimum wage law, and the rates vary between each jurisdiction.

Last Wednesday, Statistics Canada released “Study: The ups and downs of minimum wage, 1975 to 2013.”

This study explains that the 2013 real minimum wage for Canada amounted to $10.14 per hour; a weighted average of all of the jurisdictional wage rates.

In the years between, the rate fluctuated: falling to the equivalent of $7.53 per hour from 1975 to 1986 and rising to $8.81 in 1996. The real minimum wage remained stable at around $8.50 until 2003, and then began climbing. But it hasn’t climbed nearly enough!

When you translate the 1975 equivalent into 2013 dollars, it was “almost identical” at $10.13. This means that real minimum wages in Canada haven’t budged in nearly forty years. Can you imagine back in 1975 even considering that your children or grandchildren were only going to make the same amount of money as you did then?

More disturbing statistics in the study show that “in 2013, the proportion of all paid employees earning the minimum wage was 6.7%, up from 5.0% in 1997”; and “the proportion of young employees aged 15 to 19 who were paid the minimum wage rose from 30% in 2003 to 45% in 2010.” This rise in the number of Canadians earning just minimum wage is a clear indicator of increasing income disparity and the shrinking of the middle-class.

While the Canadian Federation of Independent Business federation argues that increases in the minimum wage hurt businesses and the economy, this is patently false. Armine Yalnizyan, senior economist at the Canadian Centre for Policy Alternatives, points out, “Of the 13 U.S. states that recently raised their minimum wage rate, 10 have experienced above-average job growth.”

The current minimum wage rate in the NWT is just $10.00 per hour. The government of the Northwest Territories has not made any increase in over 3 years.

York University economist Jordan Brennan says “inflation consists of both wages and prices. But when both are rising, the only way to overcome increasing inequality is for wage inflation to outpace price inflation. Anything else just leaves workers poorer.”

Engaging in a fight for higher wages is not only the fair thing to do for workers, but the only way to save the Canadian middle class.

Maybe it’s time to abandon the current model of minimum wage and rate setting. Governments should enact laws to provide workers a ‘living wage’ based on what it actually costs to live in the community where they work. I believe this is an idea whose time has come!