Minimum Wages Aren’t Living Wages

Labour Views June 3rd, 2015
Written by Gayla Thunstrom, Acting President Northern Territories Federation of Labour

On June 1, the minimum wage in the Northwest Territories rose from $10 an hour to $12.50.  The increase in minimum wage came about following a recommendation from an advisory committee including business, labour and social justice representatives.

With the new $12.50 wage, a single person working 40 hours per week earns just $26,000 per year.  By any standard and in any NWT community, that’s not enough to live on by itself.

Making minimum wage means you will live in poverty.  Many communities are advocating that families should earn an income sufficient for them to pay for the basic necessities of life, so they can live with dignity and participate as active citizens in our society.

This is called a “living wage”.

A living wage is not the same as the minimum wage.  Minimum wage is the legal minimum all employers must pay. A living wage establishes what earners in a family need to bring home based on the actual costs of living in a specific community.

The living wage is based on a bare-bones budget without the extras many of us take for granted. Living wage costs include food, clothing, rent, transportation, child care, health care, adult education, some household expenses, and a small emergency fund.

It does not include interest payments, retirement savings, homeownership, savings for children’s education, or the costs of caring for disabled, ill, elderly family members.

The living wage is calculated as the hourly rate at which a household can meet its basic needs, once government transfers have been added to the family’s income (such as the Universal Child Care Benefit) and deductions have been subtracted (such as income taxes and Employment Insurance premiums).  A Canadian standard evaluation tool—the Living Wage Framework—provides a definition, methodology and principles to make consistent and reliable estimates of living wages in individual communities.

One important strength of the living wage tool is its ability to include social supports in the calculation. Where there are higher levels of income support and services provided through public policy (such as public health care, public transit, public child care service), the amount needed to make a living wage is lower.

The same is true of the operation of the tax and transfer system: the more generous, for example, are fiscal supports provided to families with children (through child tax credits or other policies), the lower is the private wage that parents must earn in order to support their families adequately.

While employers may be resistant to paying more to employees, living wages are shown to be beneficial overall for employers and the economy. Employers benefit from decreases in absenteeism, higher worker productivity, lower staff turnover and recruitment costs.  Economies benefit from increased wages spent predominantly in local markets.

The increase of the territorial minimum wage was a welcome step, but it is an interim step.  Until we ensure that having a job means you are making a living, deep poverty will continue to plague the NWT.