NDP Submission to the Consultations on Indexing Minimum Wage: Feb. 23, 2017

In 2016, the Minister of Advanced Education and Skills announced two 25-cent increases in the minimum wage for 2017 to cover inflation since the Liberal government was elected in 2015. While an increase was certainly needed, these announced increases do not address the fact that minimum wage has not kept up with inflation since 2010, and does not address the fact that the minimum wage will still be a poverty wage.

The Facts

In 2015, there were 12,800 minimum wage earners in Newfoundland and Labrador, 66% (8,500) female and 34% (4,300) male, even though women make up half the work force. Minimum wage workers are often characterized as being mostly teenagers living at home, but data from Statistics Canada and the NL Statistics Agency say otherwise.

Only 25.7 percent of minimum wage workers are teenagers; 28.6 percent are aged 45 and older. In addition, 65.5 percent of minimum wage workers are in permanent jobs. Whether these workers are full-time or part-time, their wages are important to their families.

We have too many low-wage workers in Newfoundland and Labrador. A third of all workers in this province earn less than $15 per hour compared to only one-fourth in Canada as a whole. Most of them again are women (60 percent). Only 15 percent are teenagers. Half of them are sole earners, and two-thirds are working for medium to large employers.

Starting from behind

From 2010 to 2015, the minimum wage rose by only 50 cents (five percent) whereas the Consumer Price Index rose nearly ten percent and the cost of food rose 15 percent or more. We would have needed a minimum wage of at least $11.00 in 2016 to make up for this loss. And any increase in 2017 to reflect 2016 inflation should have been on top of that $11.00. Instead, we’ll only be reaching $11.00 by October.

Thus, Government’s proposed index is based on a minimum wage that has lost significant value. 

Even if this were corrected, the reality is that the minimum wage is a poverty wage. The latest poverty line—2014 Low-Income Cut-Off—was $20,952 before tax for a single person in St. John’s, and $38,931 for a family of four.[1] The annual full-time minimum wage salary is $21,840.

A higher minimum wage was identified in the provincial Poverty Reduction Strategy as an effective poverty reduction tool that makes a difference in the lives of low-income workers. This is why the minimum wage began to rise a decade ago.

Unfortunately, our minimum wage stagnated, while other provinces and territories continued to move theirs up, in recognition that their constituents needed to earn enough to feed, house and clothe their families.

The research is clear that poverty is a critical social determinant of health. Poor people are less likely to be healthy. An unhealthy population places added strain—and cost—on our health care system.

Furthermore, this is 2017. Our economy shouldn’t be built on a reliance on a substantial number of workers who live in poverty.

A review of the minimum wage should be based on an objective to lift as many people as possible out of poverty so they can realize their potential and maximize their contribution to our economy.

We note with interest the bold move in Alberta as well as a number of American cities to move in stages to a $15 an hour minimum wage.

While the mandate of this review is very narrow, no evaluation of the minimum wage in our province can reasonably be separated from an understanding of the consequences of poverty.

An abrupt, significant increase in the minimum wage could pose difficulties to businesses. But a planned, gradual yet meaningful increase has the potential to bring about significant positive changes in the economy, including increased spending in the economy by low wage earners, a reduction in employee turnover, and an accompanying increase in productivity.

Recommendations

While indexing minimum wage is an important beginning, a more comprehensive legislated minimum wage policy is needed, not just to provide annual indexing, but also to address the prevalence of very low-wage jobs in the province and the issues of poverty. Below are the NL-NDP recommendations.

That the starting point for indexing be adjusted to allow for “catch-up” of the purchasing power that was lost between 2010 and 2015 as a result of the inaction of the previous government.

That annual indexing for the cost of living be implemented effective immediately, using the Consumer Price Index for Newfoundland and Labrador.

That research be undertaken to determine the breakdown of spending by category (food, shelter, etc.) for people at minimum wage-level incomes, so that the CPI calibration can be fine-tuned to reflect their actual costs.

That a review of the impact on employment and the economy of the Alberta move towards a $15 minimum wage, and similar moves in several U.S. cities, be conducted by the end of 2018.

That a long-term strategy for future changes to the minimum wage be finalized at that time, taking into account the impacts—both positive and negative—of moving to what would more closely resemble a “living wage” for low-paid workers.

That the regular minimum wage review mandated in current legislation include formal participation by employees and employers, as well as public consultations throughout the province.

[1] Statistics Canada Cat. No. 75F0002N

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