Ontario’s minority Liberals recently unveiled a plan to hike the minimum wage to $11, in what would be the first increase to the hourly rate since a freeze was imposed four years ago.
New Democrat Leader Andrea Horwath proposed a counterplan on Tuesday, saying her party would initially raise the wage from $10.25 to $11, followed by a jump to $11.50 on June 1, 2015, and $12 one year later.
But outside of provincial legislation, should Toronto adopt a living wage where municipal workers, and those contracted by the city, are paid even more? Or is the argument for raising the minimum wage/setting a living one misguided?
In a Feb. 15 Star Big Ideas piece, Trish Hennessy, director of Ontario’s Canadian Centre for Policy Alternatives, argued that Toronto should adopt a resolution to pay all city employees $16.60 an hour.
“$16.60 an hour is by no means extravagant, but it would lift a Toronto worker above the poverty line,” Hennessy wrote, adding “any employer could voluntarily decide to pay a living wage. It can lower staff turnover costs, because a happy worker is a loyal one.”
The $16.60 figure goes above and beyond the $14 minimum wage proposed by many poverty advocates, as well as a report released Thursday intended to address youth unemployment and underemployment.
But many economists take issue with minimum/living wage arguments based on the poverty line, saying the connection between the working poor and the base hourly rate is not so straightforward.
“Most people who earn the minimum wage don’t work full-time hours,” said Mike Moffatt, a business, economics and public policy professor at Western University’s Ivey Business School. As a result, raising their wages doesn’t necessarily have a large impact.
Moffatt added that many people who earn minimum wage — such as teenagers living at home and saving for college, or semi-retired people maintaining a job as a hobby — should not be considered “working poor.”
In her Star article, Hennessy referenced Seattle Mayor Ed Murray’s plans for a $15 hourly wage for municipal employees. She also mentioned New Westminster, B.C., which became Canada’s first “living wage” city in 2011 at $19.62 an hour, nearly double the provincial rate.
Although Moffatt can see the benefits in such initiatives, he said a city cannot simply start budgeting more for wages without ramifications elsewhere.
“Either taxes have to go up, or less services have to be offered,” he said. “And in today’s political climate, we’re seeing it’s very difficult for municipal governments to significantly raise taxes.”
Seattle may be the exception, he said, if the population is willing to pay, but otherwise it’s reduced services: “There’s no free lunch here.”
For economist Stephen Gordon, the minimum-wage debate is a distraction, one effectively used by governments which cannot, or will not, create initiatives to directly address poverty.
“It doesn’t require raising taxes or making the case for using public money,” he said. “It doesn’t cost them anything, but it looks like they’ve done something.”
Gordon noted raising wages can help those who are poor, “but it’s a blunt instrument: some people get it but it’s not targeted very well.”
As for a City of Toronto living wage, Gordon argued “it’s extremely unlikely that these people are in poverty.”