Time for a raise for the working poor

Poverty stunts economic growth, hits women and youth hardest.

Even in hard times fairness is not a lot to ask. The success of efforts to increase the general minimum wage in Ontario (from $10.25 per hour to $11 this June) could signal a new day for decency in what has been for too long a dog-eat-dog economy.

In Hamilton, a coalition of community groups including the Social Planning and Research Council and the Hamilton Roundtable for Poverty Reduction, say a living wage is $14.95. Full-time city workers already pass that benchmark. Last fall, the city started to study the adoption of a living wage for contractors and part-time workers. With 30,000 of our neighbours numbered among the working poor, it is past time.

The need to take action against low-wage work is not simply a local preoccupation. There is a growing realization that poverty stunts economic growth in times of weak consumer demand by driving up crippling social costs such as health care. Most open economies with a similar political history are experiencing the same sea-change given the enduring nature of the cheap labour challenge.

Converts to a rise in the minimum wage even include Conservative treasurer George Osborne of the United Kingdom. No wonder. Most poor households are working without getting ahead in a growing economy.

Look at 2010 Organization for Economic Co-operation and Development (OECD) per capita expenditures on health care — 9.5 per cent on average, compared to 11.4 per cent in Canada and 17.6 per cent in the United States. The difference is poverty — the No. 1 cause of illness, disease and premature death, according to the World Health Organization.

The poverty rate across the OECD is about 11 per cent. In Canada poverty has infected almost 12 per cent of residents. In the U.S. poverty has swamped more than 17 per cent of the population.

Let’s do the math. Everything else being equal, if poverty were reduced from 12 to 11 per cent in Canada, we might see a reduction in per capita health-care costs equal to 26.5 per cent or $1,177 US. Based on a current population of 35 million that could yield a public savings of $41,195,000,000 per year.

While the Ontario Medical Association estimates 20 per cent of total health costs are driven by poverty, that figure may lowball the potential benefits of ending low-income. There is evidence from European research, based on the Genuine Prosperity Index (GPI) approach that the level of health-care costs tied to eradicating poverty is more like 40 per cent. Moreover, recent Wellesley Institute research suggests that the payoffs for poverty reduction may be front-end loaded. In other words, most of the savings in poverty reduction may be early on with diminishing returns as the low-income population shrinks further.

One-fifth of workers in Canada are low-paid, according to official statistics. The same is true in the U.K. In the U.S., low-wage employment has engulfed a quarter of the workforce, according to the OECD.

About two-thirds of low-wage workers are women in the U.S., U.K. and Canada. However recent declines in union coverage mean close to 30 per cent of U.S. and U.K. women workers are low-wage, compared to Canada where a relatively steady unionization rate has held the level of women working for low wages to 20 per cent, according to the OECD.

More than half of North American low-wage workers are young. In the U.K., young workers are almost twice as likely to be low-paid as the general workforce. With our future riding on how we treat the most vulnerable among us it is not surprising the appetite for fair pay is sharpening. Between 1997 and 2012 the union share of young workers in Canada grew 53 per cent, driven by a union coverage increase from 13.1 to 16 per cent among workers aged 15 to 24.

The grim alternative is increasingly clear. Young households are struggling to make ends meet. Boomerang kids are commonplace.

If low pay is the issue, fair pay is the obvious answer. As a pay-equity specialist for Canada’s largest union, my work puts millions of dollars into thousands of marginalized members’ pockets every year without a hint of backlash. Although confronting a sometimes hostile political climate I still find broad support for union work on behalf of a living wage.

Let’s build on the popular and progressive success unions show by cutting gender wage discrimination in half among members. Paying jobs what they are worth — by restoring the minimum wage, reducing barriers to participation in the labour movement and pay equity laws — is not only fair but smart economics.

Tom Baker is a job evaluation representative for CUPE.