B.C.'s minimum wage should not be a poverty wage
Iglika Ivanova, Special to the Sun
Originally Published in the Vancouver Sun: Thursday, July 31, 2008

Labour and social justice groups in British Columbia have long urged the provincial government to increase the minimum wage to a level that guarantees a path out of poverty for a single person working full-year, full-time.

Year after year, the government has turned them down with the argument that B.C. already enjoys the highest minimum wage in Canada and raising it further would be uncompetitive.

In 2001, when B.C.'s minimum wage was increased to $8, we could indeed lay claim to the highest minimum wage in Canada (with the glaring exception of the $6 "first job" wage). But B.C.'s minimum wage has been frozen for a staggering seven years, and other provinces have moved on.

Between March 31 and May 1 2008, minimum wage increases came into effect in all other nine provinces. As a result, B.C. slipped down the rankings to having one of the lowest minimums in the country, along with Newfoundland (also $8), P.E.I. and New Brunswick (both paying $7.75.)

That's not all. 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 just announced plans to reach a $10 minimum wage by 2010 and P.E.I.'s is scheduled to rise to $8 this year.

It is time to raise the minimum wage in B.C. Not just because the rest of Canada is doing it, but also because you can't live on $8 per hour -- especially in B.C.

A minimum-wage earner working 40 hours a week all year makes $16,640. This is considerably less than Statistics Canada's low-income cut-off (or "poverty line") for a single person in a major city -- $21,666 in 2007. It is less than the low-income cut-off for even the smallest urban area -- $16,968.

Clearly, paid work in today's labour market is not a guaranteed path out of poverty even for individuals with no children. If the market does not provide an adequate wage for full-time, full-year workers, then the government must intervene. Legislating a decent minimum wage can be an effective anti-poverty tool and it would be cheaper than providing direct income supports to the working poor.

To earn an annual income equivalent to the 2007 low-income cut-off for large cities ($21,666), a worker would have to make about $10.40 per hour. Adjusted for inflation, this is equivalent to the $10 minimum wage that labour and social advocacy groups called for in 2005.

Along with setting the minimum wage to a level that lifts individuals out of poverty, the government should index it to inflation. This would ensure that the real wages of the lowest-paid workers do not erode over time, as they often have in the past. For example, our $8 minimum wage is worth 11 per cent less today than when it was introduced in 2001.

This is not a novel idea. Yukon's government brought in annual inflation adjustments effective April 1, 2007. Alberta's minimum wage is also indexed, although it is adjusted based on the average increase in weekly wages over the past year instead of inflation rates.

Many critics claim that minimum wage policies have a limited effect because few people work for the minimum wage. Only 4.6 per cent of B.C.'s paid employees earned minimum wage in 2007, according to BC Stats. However, raising the minimum wage above $10 per hour would also benefit the much larger group of workers who currently earn less than $10.

More than 16 per cent of B.C. employees -- 300,000-plus people -- worked for less than $10 per hour in 2007. The proportion of B.C. jobs paying low wages has barely declined since 1997, despite a booming economy and record low unemployment. Increasing the minimum wage will not eliminate the problem of the working poor, but it is an important part of a comprehensive anti-poverty strategy.

It's time to take the politics out of the minimum wage and scrap the practice of sharp one-time increases followed by long periods of inaction. Let's set the minimum wage using clear criteria (such as setting at it a level which allows a single full-time worker with no dependents to escape poverty) and then index it to inflation to preserve its value over time.

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