For Immediate Release
28 March, 2024
The NDP has sent a submission for consideration by the province’s Minimum Wage Review Committee calling for changes to minimum wage that will bring workers out of poverty so they earn a livable wage for the labour they provide in the economy.
“First, we believe that in a society as wealthy as ours, nobody should live in poverty or be forced to survive without their basic needs being met. Secondly, we saw that many of the people earning minimum wage were deemed "essential" during the pandemic, and as a society, we lauded them for their courage and sense of duty,” said Dinn. “Once conditions improved, however, we quickly forgot how important these workers are to our economy and society.”
“Our party is calling for a graded series of increases to the minimum wage, ultimately to reach a livable amount over a period of a few years, and then index the rate to inflation thereafter,” said Dinn. “Nobody- especially these people - should work 40 hours per week and still not be able to make ends meet. If society truly values their work, they should be paid accordingly”
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A copy of the submission in its entirety follows.
For further information, contact Eddy St. Coeur, Director of Communications, NDP Caucus at 729-2137 (o), or eddystcoeur@gov.nl.ca
March 28, 2024
Minimum Wage Review Committee
Department of Environment and Climate Change
4th Floor, Confederation Building
P.O. Box 8700
St. John's, NL A1B 4J6
Dear Committee Members,
First of all, I want to thank you for your work on this very important issue. The livelihoods of tens of thousands of workers across our province depend on your careful reflection on the evidence submitted by members of the public and experts. It is a challenging and often thankless task, and I want to assure you that we appreciate your time and effort.
The advocacy of the Newfoundland and Labrador NDP on the minimum wage is guided by two key principles. First, we believe that in a society as wealthy as ours, nobody should live in poverty or be forced to survive without their basic needs being met. Secondly, we saw that many of the people earning minimum wage were deemed “essential” during the pandemic, and as a society, we lauded them for their courage and sense of duty. Once conditions improved, however, we quickly forgot how important these workers are to our economy and society. Nobody – especially these people – should work 40 hours per week and still not be able to make ends meet. If society truly values their work, they should be paid accordingly.
Unfortunately, the current legislated wage does not live up to these principles. The minimum amount that employers are allowed to pay is inadequate, and has been so for many years. Multiple news stories have shown that many in our society cannot keep up with the cost of living and are therefore juggling multiple jobs. In fact, this is now the plight of over one million Canadians, about two and a half times the proportion it was in 1976.[1] Usually, one or more of these jobs is a minimum-wage position. Those forced to take on more work due to insufficient wages describe long days with little sleep, elevated stress levels, lack of social connection, and an inescapable sense of despair. Their precarious financial situation ultimately causes high levels of stress and anxiety among this population, negatively affecting their quality of life.
Quantitative data backs up the extensive testimony featured in the news stories of recent years. In 2019, the Canadian Centre for Policy Alternatives (CCPA) calculated that a liveable minimum wage in St. John’s was $18.85 per hour.[2] In the period since that study, inflation has risen at a pace unseen in forty years. As a result, the CCPA released fresh calculations just last December. This time, however, they calculated rates for the different regions of the province. They found that a living wage was now $24.20 in eastern Newfoundland, $23.95 in the central region, $23.80 in the west, and $26.80 in Labrador.[3] By any of these calculations, the current minimum wage falls far behind what is required to afford the basics of life across all of Newfoundland and Labrador.
What is perhaps more concerning is the fact that the low minimum wage only serves to compound existing inequalities in our society. Disproportionately, the workforce earning minimum wage consists of women, gender-diverse people, members of Indigenous nations, and visible minorities. Due to social, linguistic, educational, and other barriers, people within these categories are more likely to be found in minimum-wage positions, whether or not they have the skills to find work in other fields. New Democrats believe that people should not be condemned to poverty simply on the basis of their gender, race, or other personal attributes.
Our party is also concerned that the status quo acts as a perverse form of corporate welfare, one which relies on supressing the wages of those who create the wealth so as to expand the profit margins of the owners. While most in the public tend to associate minimum wage jobs with small businesses, the data does not entirely bear this out. In Canada, only 25% of minimum-wage employees work for firms with fewer than 20 employees. Nearly half work for companies with deep pockets that employ more than 500 people, such as Walmart, McDonald’s, or Tim Hortons.[4] As a result, the federal and provincial governments have to step in and use their revenues to provide costly anti-poverty measures to ensure that minimum-wage earners and others do not face total destitution. Moreover, the provincial government is far from being in a position to use its revenue to subsidize corporations that refuse to pay a living wage, given its precarious financial situation.
Our party is especially concerned about the ability of employers to use the depressed minimum wage as a means of corporate welfare because we have been advocating for the implementation of a Guaranteed Basic Livable Income program for several years. By raising the minimum wage to a liveable amount before such a program is implemented, policy-makers would ensure that companies would not be able to use GBLI as another form of corporate welfare to keep down payroll costs at the expense of taxpayers. As a result, the price of GBLI would be reduced substantially, as far fewer individuals would require assistance from the program if they were earning a liveable wage.
For all the reasons cited above, our party is calling for a graded series of increases to the minimum wage, ultimately to reach a liveable amount over a period of a few years, and then to index the rate to inflation thereafter. Small, incremental raises do nothing to address the plight of workers struggling to survive. When speaking on this issue in the past, I explained to government that “if someone is drowning two feet under water, raising them up by six inches isn’t going to save them.” There are many benefits to taking our approach to the minimum wage.
A commitment to a series of minimum wage increases over a multi-year period would provide some predictability for business that rely on minimum-wage labour. It would allow them to make sounder business decisions regarding budgets and plans for future growth. Businesses also benefit from higher wages through decreases in employee turnover and increased worker productivity.[5] Such considerations are of prime concern for employers at a time in which labour is relatively scarce.
Another benefit to significant increases of the minimum wage is economic growth. When the wealthy receive more income, they tend to invest it outside the province, deposit the funds in offshore bank accounts far from the prying eyes of tax collectors, or spend it on luxury goods. However, when those with low incomes receive more money, they tend to spend it on basic goods and services in the community, thus boosting the local economy.[6]
Most importantly, a significant increase to the minimum wage would benefit a sizeable chunk of the working population. In this province, seven percent of workers earn a minimum wage, while another 16% make between $15-20 per hour.[7] Disproportionately, the beneficiaries of such a move would be women, gender-diverse individuals, Indigenous people, and visible minorities. Thus, a liveable minimum wage would contribute immensely to closing gender and racial wage gaps.
A liveable minimum wage would also go far in eradicating poverty in this province, and therefore the hidden and costly expenses associated with alleviating its effects. In 2021, the CCPA tabulated the cost of poverty in this province to be an astounding $955 million per year. The greatest costs were in health care, justice, lost economic growth, and forgone tax revenue. Lucy Matson of the Social Justice Co-Operative spoke out on the findings, stating that “no one complains when potholes are fixed or a bridge is shored up. But we are very careless about the living breathing infrastructure that will propel us forward or, without adequate investment, drag us down.”[8] By lifting so much of the current workforce out of poverty, the government would ultimately relieve a great deal of pressure on public services, free up resources for other purposes, and thereby contribute to improved fiscal stability. Growth in pay would also lead to increased tax revenue for the federal and provincial governments, creating opportunities to fund new or improved services.
Overwork also contributes to the burden on the already-strained health care system, as employees seek treatment for fatigue, mental health conditions, and other ailments arising from the secondary effects of stress. For many people, the current “grind” they endure is unsustainable, and the day will come when they require extensive medical interventions for preventable, stress-induced conditions. A 2019 meta-study from the City University of Hong Kong also found that overwork increases the risk of developing heart disease, diabetes, depression, and anxiety, all chronic diseases that are highly prevalent in this province. The study also found that overwork contributes to individuals adopting behaviours that jeopardize their health, such as drinking, smoking, and physical inactivity.[9]
While advocates of a liveable minimum wage point to the cost-savings and social benefits that a higher income brings, opponents point to a number of risks. Their most common objections assert that increases to the minimum wage harm small businesses, lead to depressed job losses, or cause inflation. However, the evidence clearly shows that these concerns are either unfounded or exaggerated.
One of the most common arguments leveled against minimum wage increases is that it harms small business. While the majority of minimum-wage employees work for firms with more than 20 people, many small businesses rely on such positions in order to function. However, when discussing small businesses, skeptics tend to dismiss the counterbalancing effects of higher productivity and lower turn-over associated with wage increases. In addition, Jesse Wursten and Michael Reich note that “discussions of minimum wage policies often assume that wage and employment effects will be larger in small businesses than in larger ones,” an assertion that they were the first to test empirically. Not only did they find no evidence of any declines in the number of establishments in their sample as a result of minimum wage increases, but they also found no negative effects on employment.[10] The latter conclusion is significant since all firms, no matter their size, tend to begin by cutting their workforce when faced with significant downturns or threats to their survival. In any case, the provincial NDP supports the elimination of the small business tax on firms with fewer than 20 employees, as a means of helping them adjust to increased labour costs.
Though the Wursten and Reich study found no decrease in the number of employees at small firms as a result of minimum wage increases, the overall effects of such a policy on job creation and retention continue to be disputed among scholars. Intuitively, economic growth as a result of increased demand should spur business expansion, especially since the segment of the population receiving more income is highly disposed to spend that money locally on basic goods and services. Nonetheless, Canadian economist David Card won the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel in 2021 for his research into the matter. He found no causal link between minimum wage increases and the number of minimum-wage jobs in the economy.[11] Later, he and a colleague also conducted a statistical meta-analysis to determine the effect of the minimum wage on employment. Card and Krueger found that previous studies demonstrated clear evidence of a publication bias, in favour of research that confirmed the traditional wisdom on employment and its response to increases to the minimum wage.[12] Although this has proven to be a serious methodological indictment of the anti-minimum wage researchers, they have chosen to ignore the evidence rather than attempt any significant rebuttal. Hence, the misconception lives on as one of the so-called “zombie ideas” in the field of economics.
The final perverse effect commonly attributed to minimum wage increases is inflation. Opponents state that minimum wage increases are ultimately self-defeating, since the firms that rely on low-cost labour merely raise their prices to re-coup the lost profits from consumers. This practice causes inflation, which ultimately erodes any gains workers received from the original pay increase. Not only is the evidence for these assertions mixed, but studies that purportedly confirm the statement only find very modest effects. The Financial Accountability Office of Ontario and the Bank of Canada have studied the effects of minimum wage increases in recent years, and both found only modest upward pressure on inflation. In fact, the latter study predicted an increase of only 0.1% per year.[13]
While the circumstances examined above only entailed modest increases to the minimum wage, the Economic Policy Institute in the United States reached similar conclusions regarding proposals to raise the federal minimum wage from $7.25 to $15 per hour between 2022 and 2027. They calculated an annual increase to inflation of 0.1% as a result. Notably, inflation remains low, even in this rapid-increase scenario where the minimum wage doubles over just five years.[14] To put that figure into perspective, inflation peaked in Newfoundland and Labrador at 8.2% in June 2022.[15] Inflation caused by modest increases to the minimum wage would therefore be equivalent to 1/82 of that amount.
There are many reasons why increases to the minimum wage would not necessarily add to inflationary pressures. Many other factors affect the rate of profit and therefore pricing decisions, such as fluctuating input costs, tax and interest rates, consumer demand, and the intensity of competition with rival firms. In the normal course of business, all these influences fluctuate considerably, so it is therefore conceivable that an increase to the minimum wage might be cancelled out by other factors, like cheaper inputs or increased sales revenue. In addition, minimum wage increases only apply to a fraction of the total workforce, and the percentage of employees earning it varies greatly between companies. As a result, most businesses will not feel significant pressure on their profit margins and will likely refrain from raising the price of their goods or services substantially.
I hope that the information provided above helps guide you in your work. I also ask once again that you recommend an increase to a liveable minimum wage over a period of a few years, and that it be indexed to inflation thereafter.
Sincerely,
Jim Dinn
Leader, NL NDP
M.H.A., St. John’s Centre
[1] Sarah Antle, “This Therapist Can’t Afford Her Dream Job – And Gave It up so She Could Pay Rent,” CBC News, November 13th, 2023, retrieved from https://www.cbc.ca/news/canada/newfoundland-labrador/arsenault-dreams-versus-reality-1.7023398; and Sarah Antle, “‘You Hear Your Body Scream for Rest,’ Say Overworked Canadians Struggling to Beat Inflation,” CBC News, November 27th, 2023, retrieved from https://www.cbc.ca/news/canada/newfoundland-labrador/days-planned-to-the-minute-cost-of-living-1.7037331.
[2] Christine Saulnier, “A Living Wage for St. John’s, Newfoundland and Labrador,” Canadian Centre for Policy Alternatives, May 2019, retrieved from https://policyalternatives.ca/sites/default/files/uploads/publications/Nova%20Scotia%20Office/2019/05/Living%20wage%20for%20St%20Johns.pdf.
[3] Christine Saulnier and Russell Williams, “Newfoundland and Labrador’s 2023 Living Wages: Seeking a Better Deal for Low-Wage Workers,” Canadian Centre for Policy Alternatives, December 2023, retrieved from https://policyalternatives.ca/sites/default/files/uploads/publications/Nova%20Scotia%20Office/2023/12/NLLivingWage2023Final.pdf.
[4] “Federal Minimum Wage: Issue Paper,” Government of Canada, January 2019, retrieved from https://www.canada.ca/content/dam/esdc-edsc/documents/services/reports/SPAWID-SPLR-IssuePaper-MinWage-FINAL-EN.pdf.
[5] George Akerlof, “Labor Contracts as Partial Gift Exchange,” The Quarterly Journal of Economics, 97 (no. 4) 1982, 543-569; and Arindrajit Dube, T. William Lester, and Michael Reich, “Minimum Wage Shocks, Employment Flows, and Labour Market Frictions,” Institute for Research on Labor and Employment, UC Berkeley, 2012, retrieved from https://escholarship.org/uc/item/76p927ks.
[6] “A Basic Income for Newfoundland and Labrador: Opportunities, Options, and Analysis,” Basic Income NL, 2021, 6; and Doug Hall and David Cooper, “How Raising the Federal Minimum Wage Would Help Working Families and Give the Economy a Boost,” Issue Brief – Economic Policy Institute, Issue 341: August 2012.
[7] Saulnier and Williams, 2023, 10.
[8] Christine Saulnier and Charles Plante, “The Cost of Poverty in the Atlantic Provinces,” Canadian Centre for Policy Alternatives, April 2021, retrieved from https://policyalternatives.ca/sites/default/files/uploads/publications/Nova%20Scotia%20Office/2021/04/CostofpovertyinAtlanticprovincesCCPA.pdf; and “How Much Poverty Costs in Each Atlantic Province Is Detailed in a New Report,” Canadian Centre for Policy Alternatives, April 7th, 2021, retrieved from https://policyalternatives.ca/newsroom/news-releases/how-much-poverty-costs-each-atlantic-province-detailed-new-report#:~:text=The%20report%20provides%20the%20total,%241.4%20billion%20in%20New%20Brunswick.
[9] Kapo Wong, Alan H. S. Chan, and S. C. Ngan, “The Effect of Long Working Hours and Overtime on Occupational Health: A Meta-Analysis of Evidence from 1998 to 2018,” International Journal of Environmental Research and Public Health 16 (no. 12) 2019, retrieved from https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6617405/#.
[10] Jesse Wursten and Michael Reich, “Small Businesses and the Minimum Wage,” IRLE Working Paper 102 (no. 23), 2023, retrieved from https://irle.berkeley.edu/publications/working-papers/small-businesses-and-the-minimum-wage.
[11] David Card and Alan Krueger, “Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania,” The American Economic Review, 84, no. 4 (1994), retrieved at https://davidcard.berkeley.edu/papers/njmin-aer.pdf.
[12] David Card and Alan Krueger, “Time-Series Minimum Wage Studies: A Meta-Analysis,” The American Economic Review, 85, no. 2 (1995): 238-243.
[13] “Assessing the Economic Impact of Ontario’s Proposed Minimum Wage Increase,” Financial Accountability Office of Ontario, 2017, retrieved from https://www.fao-on.org/web/default/files/commentaries/Minimum%20wage%20%20sept%2017/Minimum%20Wage%20EN.pdf; and Dany Brouillette, Calista Cheung, Daniel Gao, and Olivier Gervais, “The Impacts of Minimum Wage Increases on the Canadian Economy,” Bank of Canada, 2017, retrieved from https://www.bankofcanada.ca/wp-content/uploads/2017/12/san2017-26.pdf.
[14] Josh Bivens, “Inflation, Minimum Wages, and Profits: Protecting Low-Wage Workers from Inflation Means Raising the Minimum Wage,” Economic Policy Institute – Working Economics Blog, September 22nd, 2022, retrieved from https://www.epi.org/blog/inflation-minimum-wages-and-profits-protecting-low-wage-workers-from-inflation-means-raising-the-minimum-wage/.
[15] “Consumer Inflation Rate was 2.5% in January 2024,” Government of Newfoundland and Labrador, 2024, retrieved from https://www.gov.nl.ca/fin/economics/eb-cpi/#:~:text=The%20inflation%20rate%20for%20the,in%20comparison%20to%20January%202023.