Opinion

Working Below the Poverty Line

Big pay raise for BC bureaucrats highlights yawning income gap.

By Iglika Ivanova, 19 Aug 2008, TheTyee.ca

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B.C.'s working poor live far below Canada's poverty line

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The recent steep pay hikes for B.C.'s senior bureaucrats triggered quite a controversy. Handing out raises in the 20 to 43 per cent range at the top end does seem a bit rich coming from a government that refuses to increase the minimum wage even by a few cents.

BC's minimum wage has been stuck at $8 per hour since 2001. That’s $16,640 a year.

Statistics Canada defines the "poverty line" (or low-income cut off) for a single person living in a major city in 2007 as $21,666 (before tax).

The stark contrast between the huge pay raises of top government bureaucrats and B.C.'s minimum wage illustrates the growing polarization of income in Canada. Over the past fifteen years, we have witnessed an increased concentration of income at the top, while wages and earnings have stagnated in the middle and fallen at the bottom.

A recent Statistics Canada report shows that while B.C. managers saw an average increase of 15 per cent in their hourly wages between 1997 and 2007, the proportion of jobs paying less than $10 per hour has barely budged.

Hourly wages remain stagnant

One would expect that years of low unemployment and strong economic growth would improve the economic well being of those at the lower tiers of the labour market. Wouldn't employers need to offer higher wages and better working conditions in order to attract and retain people in our tight labour market?

That's the conventional economic thinking, but it's not working out in practice. We only need to look to BC Stats' latest numbers to find out that in traditionally low paid occupations, such as trade and accommodation and food services, the average hourly wage rates have increased by a meagre 1 per cent between 1998 and 2007 (when inflation is taken into account).

As the labour market becomes less equal, the need for government action becomes more urgent. There are different policies that can help reduce inequality. A good starting point would be to increase the minimum wage to a level that ensures that no full-time, full-year worker lives in poverty.

B.C.'s minimum wage has been frozen at $8 for a staggering seven years. Taking inflation into account, it is worth 11 per cent less today than it was in 2001.

Back then, B.C. had the highest minimum wage in Canada. However, other provinces have since moved on. In fact, B.C. is the only Canadian province that did not increase its minimum wage this past spring. As a result, we have slipped down the rankings to having one of the lowest minimum wages of the country, on par with the Atlantic Provinces.

A number of provinces have committed to further increases over the next several years, including some of our fellow bottom-ranked provinces. For example, Newfoundland has announced plans to reach a $10 minimum wage by 2010.

$10 the limit for 300,000 B.C. workers

Critics claim that minimum wage policies have a limited effect because few people actually work for the minimum wage. It is true that only 4.6 per cent of B.C.'s paid employees earned minimum wage in 2006 according to BC Stats. However, a recent Statistics Canada study shows that more than 16 per cent of B.C. employees -- more than 300,000 people -- worked for less than $10 per hour in 2007. Increasing the minimum wage to $10 per hour would benefit this much larger group of workers who desperately need a raise.

That said, policy decisions are seldom clear-cut, and it is important to consider the potential problems with a minimum wage increase as well.

Some critics consider the minimum wage a "blunt instrument" to fight poverty, arguing that minimum wage workers are mainly teenagers or youth, many of whom are not poor because they live at home with their parents. Let's look at the numbers.

In 2006, BC Stats analysis reveals that the majority of minimum wage workers were indeed between the ages of 15 and 24, although a substantial minority of 42 per cent were 25 or older.

Similarly, among the much larger number of workers who earn less than $10 per hour, about 45 per cent were 25 or older (latest data is for 2003 and at the national level, but the figures for B.C. should be very similar).

Clearly, a large number of people are trying to live on and support their families on low wages and would benefit from an increase in the minimum wage. Women and recent immigrants are disproportionately affected.

While increasing minimum wages might conceivably benefit some teenagers who are not technically poor, this is but a small price to pay for ensuring that those who are trying to support themselves through full-time, full-year work can escape poverty. Further, higher earnings for youth are not a bad thing, especially given the large hikes in BC post secondary tuition fees over the past decade.

Employers hurt by B.C.'s delay?

The main argument used to stifle calls for a minimum wage increases, however, is that it might cause low wage jobs to be cut because some employers would not be able to afford it.

While the research findings on this question are certainly not unanimous and individual studies can be endlessly cited on one side of the debate or the other, mainstream economists' opinion has shifted towards the conclusion that "modest increases" in minimum wages do not kill jobs. In fact, a joint statement issued in 2006 by over 650 US economists, including 5 Nobel laureates, stated that "a modest increase in the minimum wage would improve the well-being of low-wage workers and would not have the adverse effects that critics have claimed."

The key here is the size of the increase. Some studies point to negative employment effects, but when these studies are reviewed carefully, it turns out that modest job losses are found in response to fairly large increases in minimum wages.

Such sharp one-time hikes are only necessary if the government leaves minimum wages unchanged for long periods -- as B.C. has done.

These sorts of business-disrupting adjustments can be easily avoided by indexing minimum wages to inflation. Employers would benefit from the increased certainty. With scheduled annual adjustments they would know what to expect and could plan for the upcoming increases in their wage bill.

I'm not opposed to paying for top talent. And I certainly want our ministers to be advised only by the best and brightest. But I also want BC to be a province with little or no child poverty, where there are no "working poor" and the fruits of economic growth are shared more equitably among our fellow citizens.

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Iglika Ivanova is an economist and researcher with the Canadian Centre for Policy Alternatives in Vancouver.

22 Comments:

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  • freebear

    3 years ago

    Income Gap, Ideological Appointments

    The BC Government sees itself as a corporation (I prefer representatives and intervenors of the common good myself!), and like a number of corporations they reward the upper echelon with money.

    Of course many of the people that generate the wealth (the tax payer) never see such pay increases!

    If we need more money to attract more qualified people; what does that say about the previous, or current deputy ministers qualifications?

    If they accepted the job offer previously for less money, were they not as skilled then and now all of a sudden they are and deserve a 40% pay raise?

    Remember, the Deputy Ministers and Assistant Deputy Ministers are appointed by the government and so if you do not fit their ideology, you will not likely ever be appointed.

    So is it about getting more qualified people or about better yes men/woman who pursue the ideological agenda?

    If you thought Gateway was a mistake, would you still be the Deputy Minister?

  • Stump

    3 years ago

    Where's the competition?

    Funny how a competitive bid system isn't used to fill these roles. Geez, at least then there'd be the pretense they weren't all gobbling knob and feathering the nests of friends.

    I'll take second-string yes-people at bargain prices over first-string sycophants that cost top dollar any day.

  • morechatter

    3 years ago

    Gov Not Afraid to Raise own ? wages

    Why the raise? Rumour is Campbell was so grateful for all the support especially under scrutiny about activities surrounding unregistered lobbyist he just couldn't help himself. No problem as deputy minister says whats the big deal I don't see a problem here they are such nice men. And of course who is she as far as credibility goes as isn't shes one of those trustworthy Liberals in it for the people but its looking more like the cash. Well she must be someone real credible cause just look at how much she is making now. And of course lets not forget how the Liberals have done their level best to ensure those facing real hardships because of their inability to make a living on 8 bucks an hour continue to do just that, suffer without food and proper lodging. They certainly are a priceless lot in how well they are able to dehumanize the masses allowing much human suffering.

  • freebear

    3 years ago

    Low Income - No Internet-No Tyee?

    I suppose we won't see a post from someone low income on here because they can not afford a computer!

    In the Comox Valley they created a homelessness commission (with $34,000.00 budget as I understand it) and now they are asking themselves whether to pay the Chair of the commission $15,000.00 out of the $34,000.00!

    Sheeesh!!!!

    It used to be called public service!

    I guess we better raise the Premier's salary to a million bucks a year because the current one ain't worth a dime, and hopefully we soon be out of a job-chasing the really big bucks in the private sector!

  • freebear

    3 years ago

    Spell Check!

    and hopefully will soon be out of a job-chasing the big bucks in the private sector!

  • Birch

    3 years ago

    Trickle down or Trickled on? Or simply tricked?

    It's consistently amazing how a voting public can be gulled into electing politicians who turn around and screw them.

    Consider "trickle down theory", the notion that as economic growth proceeds, even though the wealthy gain far more than wage-earners, generalized growth will trickle income gains down to the poor, as well. Where have the income gains been for the poor for the past seven years? Nowhere. Instead they get trickled on by economic spin doctors and venal employers, who must chuckle behind their hands, even while publicly weeping about "high taxes" and "looming recession."

    Please, let's not get tricked again!!!

  • RickW

    3 years ago

    Ain't it Amazing......

    Quote:
    As the labour market becomes less equal, the need for government action becomes more urgent.

    ...how we turn to the very people CAUSING these life-threatening discrepancies, to repair them?

    Ed Deak (Fiat Lux) says the average attention span has been "clocked" at 17 seconds. Do we have to constantly prove him right.........?

  • no1important

    3 years ago

    If business owners can't pay

    If business owners can't pay a person 12 bucks an hour minimum they should not be in business.

    We really need a better way to re distribute wealth in this country so it is more even and fairer.

  • c otter

    3 years ago

    Big pay raise . Do as I say, not as I do

    This action by the government, along with the closing of long term care beds on Vancouver Island in favor of for profit facilities (among other things) has cost them my vote next election.

  • ME2

    3 years ago

    The insensitivity of neocon economics

    If I want a hamburger, am I going to stop eating them since the burger now costs two bits more because the owner has to pay his cook $10/hr instead of $8? Hardly.

    And if EVERY burger stand has to pay $10/hr, how does that put any one of them at a competitive disadvantage?

    Every time I have pay sales tax on a bowl of soup or a hamburger, I'm reminded of how totally insensitive our governments are, not only to the small entrepreneur, but even moreso to those people for whom a $10 meal is a necessity, not a luxury.

    If restaurant meals are to be taxed, lay it on those who don't think anything of paying $20 for dessert, let alone a meal.

    $12 for a minimum wage, no1important? You're dreaming in technicolour, the whole economy would be ruined, besides driving all Gordo's friends into the poorhouse.

  • dorothy

    3 years ago

    It's you!

    "And if EVERY burger stand has to pay $10/hr, how does that put any one of them at a competitive disadvantage?"

    It's not the other burger stands they com-pete with, but your own kitchen. When my family was on the poor end, we dreamed of going out to eat as something that would make us feel like 'real people'. Now, when a restaurant meal is within our reach, we most often make the decision to have a party at home and enjoy the even better quality the same money will buy us if we deliver the work.

    The ten dollar minimum wage may drive out the marginal customers and encourage them to do for themselves, and we cannot have that; that is business opportunity missed. We maintain this strange line-dancing pattern of relying on people living down in the dirt, or the next thing to it, so those who manage just a bit better can buy a little bit of luxury cheaply. It is all politics. it's about never getting everybody mad at the government at the same time. The only thing politicos are led by is their chance of clinging to their place at the trough, no matter what that takes. There is no respect for the rest of us, we are just the hapless substrate as far as they are concerned. Getting real leadership is something we only know from the rearview mirror. Amen.

    We need a new religion, one that promotes an instinct for truth.

  • Frank

    3 years ago

    A rose by any other name still stinks

    So according to Liberal math a rise in the price of gas and home heating by 7% over 3 years won't hurt the poor or business at all but a rise of even 10% in the pay of the poor will drive many business owners out of business?

    If the Liberals were to call an increase in the wages of the poor a "carbon tax" would that mean Jock Finlayson would write to the Sun on behalf of businesses in BC and say he supports it?

  • freebear

    3 years ago

    Nice One Frank!

    I like Frank's zinger!

  • Stump

    3 years ago

    quotable quotes

    Quote:
    We need a new religion, one that promotes an instinct for truth.

    "Man will never be free until the last king is strangled with the entrails of the last priest.

    - Auguste Diderot

    The churches and palaces will both surely burn one day far in the future. The question is only which ones will be first.

  • Bailey

    3 years ago

    Sweet of you

    And I do agree with your premise that the poor are more expensive poor than it would be to pay them decent living wages.

    Far more.

    But I would really like to hear you defend your last paragraph suggestion that the BC Cabinet are

    Quote:
    the best and brightest

    or even

    Quote:
    top talent

    Please remember that these guys gave THEMSELVES these salaries. No market influenced them. They had the power, that's all. 40% in their first session, if I recall correctly, though to be fair, they did respond to public outrage by accepting a 25% cut later.

    That would be 25% of the 40%, I would bet. Then several large raises since then, as we see. Meanwhile corruption cases, ministers en masse finding their families suddenly need them more than they thought, minister's families presiding over the collapse of the salmon population while being forgiven penalties of many thousands of dollars, lots and lots of stupid moves that would mitigate against calling these people bright, or talented at all.

  • Fii

    3 years ago

    Complete baloney

    "The main argument used to stifle calls for a minimum wage increases, however, is that it might cause low wage jobs to be cut because some employers would not be able to afford it."

    First of all, all servers in this city are being paid their wage by YOU, the patron of the restaurant/bar/lounge etc. Our whole tipping culture is a huge scam that allows employers to pay low wages and puts the pressure on the customer to top it up. Servers in other countries, such as Australia, earn a decent wage and tipping doesn't exist. Does this mean all those employers have to shut their doors? No.

    Second, with the amount of under the table goings-on going on in this fair city of ours, most employers are getting next to slave labour anyway, and avoiding having to follow the laws re: overtime pay, sick days, holiday pay/days off etc. I'm referring to the huge number of new immigrants, ESL students, foreigners on work visas, etc, who don't know their rights and sometimes (heard it from the horse's mouth) work FOR FREE for a few days, as a sort of training, and are probably then being paid $6 under the table.

    The argument for increasing the minimum wage is directed at PROFESSIONALS who start jobs at $12/hr because, hey, it's above minimum wage so it must be good. $15? Even better. In reality this is crap pay in a city like Vancouver and everyone knows it, but if you raise the minimum to what it really should be, this would become glaringly obvious and you'd have to give EVERYONE a raise, not just the parasites at the top.

    This city is a dream for employers/owners in the low-wage job industry.

  • Budd Campbell

    3 years ago

    EXPLOITING FOREIGN WORKERS

    Fii:
    This city is a dream for employers/owners in the low-wage job industry.

    You're absolutely right Fii, but it's not just Vancouver, though this is a hotbed for this kind of thing. Exploiting temporary foreign workers is a nationwide scam, and carried on under both Grit and Tory governments alike.

    The worst part of it is that the federal government will approve the hiring of a foreign worker based on comparing what that employers says they are offering to market conditions, to ensure that the foreign workers aren't pulling down Canadian wages and working conditions. But once that foreign worker is here, there is zero enforcement. If the employer offered $15 and pays $8, that's too bad for the worker, but the federal government isn't interested at all.

  • ME2

    3 years ago

    Why me, Dorothy?

    Have you any idea Dorothy, how many low income people eat at McDonalds because they have no cooking facilities? Do you think they and/or others may have also have valid reasons which might fit your ethical criteria and excuse their "laziness"?

    Should employers be required to supply kitchen facilities for lunching workers?

    How many button down suits do you see eating a hamburger at McDonalds?

  • demotto

    3 years ago

    It`s tme

    It`s time we the only source of energy in the economy start paying with the only real value there is. That value is our promise to pay. We can pay with a Bill of Exchange or Promissory Note as they are money as defined in the Financial Administrations Act "money" includes negotiable instruments;
    "negotiable instrument"
    «effet de commerce »

    "negotiable instrument" includes any cheque, draft, traveller’s cheque, bill of exchange, postal note, money order, postal remittance and any other similar instrument;
    The word includes means to lock in exclude all others.
    The Bill of Exchange Act permits us to pay for all consumer purchases with the Bill of Exchange. This is in place as the only value is our signature on our promise to pay, As there is no value in Canada Bank Notes as they are debt instruments against the Bank of Canada the only way we can pay is by our signature which creates the value as we are the only energy available in the economy. Start exercising your rights folks. The remedy is there for us to use let`s use it instead of merryly going along believing we have to pay bans a fee for the use of our credit.

  • demotto

    3 years ago

    edit

    pay banks a fee

  • Stump

    3 years ago

    kitchen facilities

    Quote:
    Should employers be required to supply kitchen facilities for lunching workers?

    I don't think it's unreasonable to provide a microwave oven and an eating area for employees, esp. if you are limited to one half-hour lunch breaks.

    I once worked as a ditch-digger for a small contractor who provided the crew with the makings of sandwiches and cold drinks for lunch, plus was good enough to pay our coffee truck bill twice a day. No one abused the privileges and he retained excellent workers who were happy to work hard for him. Win/win.

  • alive

    3 years ago

    filth is everywhere

    It has been a "tradition" for smaller machine and repair shops to close up the place at quitting time, and get the workers out of the premises dirty and greasy as they may happen to be.
    The spectacle is really a farce, seeing people in working overalls, greasy boots etc. climb into an expensive vehicle to drive home to wash up!
    Providing decent facilities cost money and why bother if there are people waiting for an opportunity to work for you?
    Perhaps our main problem is that only too many workers are not organized?

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