It ensures they earn enough to meet basic needs to allow them to participate in the community. A living wage is not legislated, but is undertaken voluntarily by progressive employers. It covers the basic needs of their employees, including food, shelter, utilities, some personal care items, basic transportation, child care, non-OHIP medical needs such as prescription drugs and physiotherapy, and basic dental coverage. Importantly, these basic needs also include participation in occasional social activities.
Based on these needs, the Social Planning and Research Council of Hamilton, working with the Hamilton Roundtable on Poverty Reduction and economist Hugh Mackenzie, calculated a living wage for Hamilton at $14.95 an hour, based on 37.5 hours a week of work. Three family sizes were included for the calculation: a single person living on her or his own; one parent providing for a three-year-old child; and two parents with two children, ages 10 and 14.
The Living Wage does not cover things like owning a home (the calculation is based on renting), saving for retirement or children’s education, or for paying down household debt. At $14.95 an hour, a living wage would provide a conservative, no frills, frugal but adequate basic standard of living in Hamilton. If employers pay extended health care, prescriptions, dental and other benefits, the hourly wage would be proportionately less.
The living wage is higher than Ontario’s $10.25 hourly minimum wage because the minimum wage is too low to pay for the basic needs of workers and their families. This low minimum wage often forces people to choose between paying the rent, heating their home or buying school supplies. That’s one reason why over 18,400 people in Hamilton, including more than 8,500 children, rely on food banks. One in every four families who use Hamilton food banks report their children go hungry at least once a week.
Today, there are 30,000 people in Hamilton living below the poverty line even though they have jobs. They’re “working poor,” with jobs that pay too little to keep them out of poverty. About half of Hamilton’s poor are families with children, and in half of these families, at least one person works full time. This is where the living wage comes in. It helps boost working poor people and their families out of poverty.
Living wage policies have been in place since the mid 1990s and are now in some 140 municipalities and counties in the U.S., including Boston, Chicago, San Francisco, Los Angeles and New York. In London, U.K., more than 115 firms have committed to pay a living wage. In British Columbia, the New Westminster city council adopted a living wage policy this year for all municipal and contracted service staff. Esquimalt, B.C., has also adopted a Living Wage policy. If Hamilton adopted a Living Wage, we wouldn’t be the first municipality in Canada, but we’d be the first big city in Canada to have such a policy.
Although living wage policies vary in terms of the wage and who is covered, there is clear evidence from these policies in the U.S. and elsewhere of the benefits and costs of a living wage.
For example, the costs of New Westminster’s living wage policy are estimated to be less than a quarter of 1 per cent of the city budget. A survey of 20 cities with living wage policies in the U.S. found costs tend to be less than one-tenth of 1 per cent of city budgets. Since the costs of a living wage are usually only a small part of the total costs of doing business, the cost impact is usually modest or negligible. Several studies conclude that where living wage policies are applied to city contracts, the costs of the contracts did not rise much, and sometimes declined. Contract bidding remained competitive or improved. Living wages can also lead to more efficient provision of public services.
In contrast, the cost of low wages is high. Low pay means less money circulating in the community to buy goods and services from local businesses and to pay taxes for social services. Low pay means stressed-out parents taking on multiple low-paying jobs and more hours of work to make ends meet. To do this, they sacrifice time with their children and opportunities to take part in community activities. Children in poverty tend not do as well in school or socially. After they grow up, they suffer more job insecurity, unemployment and health problems.
Low wages and poverty also mean higher health care costs. More educational services, food banks, housing programs, and other public services are needed. Policing costs can go up. All of those costs have a much higher, long-term impact on municipal budgets. They can also deter businesses from investing in the local economy.
Low wages contribute to a self-reinforcing downward cycle, as employers are pressured to compete based on lower wages rather than better products and services.
Overall, the available studies conclude that there have been no or only small employment losses due to living wage policies. In Boston and Los Angeles, for example, the living wage policies have had no impact on the level of employment. Studies of living wage policies in San Francisco and elsewhere concluded that employment increased.
A Canadian study found little impact one way or the other.
Employers also benefit. According to multiple studies, benefits to employers who adopt a living wage can include lower employee turnover, less absenteeism, and lower recruitment and training costs. In Britain, the international accounting firm KPMG, for example, cut its turnover rates in half and reduced its training costs after adopting a living wage policy. Employers can also benefit from improved “brand” images, higher employee morale, and increased productivity. As an added benefit, Hamilton employers who voluntarily adopt living wage policies would receive public recognition.
Emphasizing the links between living wages and health and business performance, the Conference Board of Canada is calling on governments to make the business case for a living wage and to serve as a role model for other employers. Growing numbers of employers in the U.S., U.K., Canada and elsewhere see the benefits of a living wage policy.
A living wage policy for Hamilton makes economic sense. It’s also the right thing to do.
Don Wells is a member of the McMaster Community Poverty Initiative, a partnership of community groups and McMaster staff, students and faculty who are working together to reduce poverty in Hamilton. He is part of the Living Wage Working Group and teaches Labour Studies and Political Science at McMaster University.