Briefing notes on the Living Wage

Why a Living Wage and Why Now?

Many families are struggling to make ends meet. They are doing all the right things. They are working
hard but just aren’t being paid enough to cover their expenses. In November 2011 voters across the
Lower Mainland and BC will go to the polls to elect new Municipal Councils and School Board
representatives. These families will be looking for solutions from prospective candidates. One concrete
solution any candidate running for election should consider supporting is the implementation of a Living
Wage Policy.

Why should Municipal Government and School Boards be worried about this issue?

 High living expenses and low wages mean that tens of thousands of working families are living in
poverty in BC. For seven years running, our province has had the highest child poverty rate in
Canada. Child poverty in BC is very much a low-wage story; the vast majority of BC’s poor
children live in families with working parents. (First Call Poverty Report Card 2010 ) A growing
economy with employment opportunities should not translate into parents working as many
jobs as possible and still being at risk of falling into poverty.

 Parents in low-wage jobs are trying to bring up children with one hand tied behind their back.
Families who work for low wages face impossible choices — buy food or heat the house, feed
the children or pay the rent. The result can be spiralling debt, constant anxiety & long-term
health problems. Canadian researchers have reported that family income plays a significant role
in influencing child development. Of 27 factors identified as having an impact on child
development, up to 80% were seen to improve as family income increases. (Report on the State
of Public Health in Canada 2009, Chief Public Health Officer.)

 Municipal Government is paying a large price for the low-wage sector. When children live in
poverty, or when parents are compelled to work multiple jobs to stay afloat and end up with
little time with their children, all of society pays the price, and not least the municipal
governments and school boards that must consequently pay in additional services and policing
costs. Directly or indirectly, high school non-completion has enormous fiscal implications in
terms of expenditures on health, social services and programs, education, employment,
criminality and lower economic productivity. “Currently, approximately 20% of Canadians aged
20 years and over have never completed high school.“ For Canada as a whole, the aggregate
tangible and intangible losses are calculated to be $24,400 per annum per early school leaver, or
$43 billion for the country as a whole. (Lessons in Learning, Canadian Council on Learning.
February 4, 2009. )
How can paying a Living Wage change this situation?

 Living Wages are a simple and just solution. Paying a living wage would allow families with
children to escape poverty and severe financial stress, ensure healthy childhood development,
and permit families to participate in the social, civic and cultural lives of our communities.

 Local Government has a responsibility to play a leadership role. We look to our local
governments to help raise the bar –– to set a higher standard. If enough local governments
become living wage employers, they will create a market for those local service contractors who
in turn pay the living wage.

 And Living Wages are good for business. Better pay translates directly into a healthier local
economy. Low-income families spend almost all their money close to home. And businesses
that have adopted the living wage report higher productivity and reduced staff turnover.

What do we mean by a Living Wage?

In contrast to a provincially legislated minimum wage that is designed to bring individuals up to the
poverty line, the living wage is a social and economic benchmark whose primary purpose is to enable
working families to pay their expenses and lift them out of poverty. It is calculated based on what it
costs to live in a specific community, so living wage amounts will vary across the province as living
expenses vary. In summary a living wage is the hourly rate of pay that enables wage earners living in a
household to:

 Feed, clothe & provide shelter for their family

 Promote healthy child development

 Participate in activities that are an ordinary part of life in the community

 Avoid the chronic stress of living in poverty

The living wage is high enough that families can weather a temporary crisis without falling into poverty,
but very modest compared to community standards. So it does not include;

 Saving for retirement

 Owning a home

 Debt servicing

 Saving for children’s future education

In developing this calculation methodology the Living Wage for Families Campaign worked with the
Human Early Learning Partnership (HELP) at UBC, independent social policy consultants, Victoria Social
Planning Council, the United Way of the Lower Mainland, First Call: Child and Youth Advocacy Coalition,
the Canadian Centre for Policy Alternatives and the Hospital Employees Union. The methodology was
reviewed by the First Call Living Wage Roundtable, low income parents, as well as a Vancity-organized
employer focus group.

How is a Living Wage calculated?

This hourly Living Wage rate is calculated based on the living expenses of a family of four with two
children aged 4 and 7, with both parents working full-time (35 hours/week each). In BC 85% of families
are headed by couples and 62% have two or more children. The model family is not meant to be
representative of all working families; rather the living wage measure associated with it should be
treated as a baseline on the principle that wages should enable working people to choose to have
children. Furthermore, the living wage is based on basic working conditions, 70 hours of work per week
between two people, and already incorporates government transfers (e.g. the Canadian Child Tax
Benefit) and deductions (e.g. taxes, E.I. and CPP premiums.)

And while the actual living wage calculation is focused on couple

families with young children, the intent is to ensure that the wage is
adequate for single parents, and also that it provides an adequate
income throughout the life cycle so that young adults will not be
discouraged from having children and older workers will have the
means to support aging parents.

The expenses included in the living wage calculation include food,

clothing and footwear, shelter and transportation based on the
Market Basket Measure (MBM), an index of expenses developed by
the Human Resources and Social Development Canada to provide a
perspective on low income. Additional expenses include child care,
provincial Medical Services Plan (MSP) premiums, non MSP-covered
health expenses, limited education amounts for parents, and a
contingency amount to provide a two-week cushion in the event of
job loss, illness, etc. Based on this methodology The Living Wage rate
for Metro Vancouver is $18.17 per hour. For more details on how the
living wage is calculated please go to www.livingwageforfamilies.ca.

What is a living wage policy/bylaw?

Living wage policies/bylaws stipulate that all directly-employed city staff, as well staff contracted by the
city to work on service contracts in areas such as security, building services, food services, should be
paid a locally calculated living wage. Some Living Wage policies /bylaws pertain to the non-profit sector,
while others exempt this sector.

A living wage policy is different from the minimum wage which is set provincially. A Living Wage
policy/bylaw is set by the local municipality and only applies to businesses that contract with the city. It
is also different from municipal “fair wage” policies/bylaws that have sometimes been set for specific
occupations and trades (usually in the construction sectors).
In Canada there is increasing support for a Living Wage as a way to address the issue of child and family
poverty. New Westminster in BC recently became the first municipality in Canada to pass a Living Wage
Policy, with other municipalities across the country, including Esquimalt in Vancouver Island, considering
following suit. Various communities around BC have started calculating what a Living Wage is for their
community and forming broad-based coalitions of faith, community, labour, immigrant and business
groups to advocate for the adoption of Living Wage Bylaws.

More than 140 municipal living wage policies/bylaws have been passed in the US since 1994, including in
many big cities such as New York, Chicago, Boston, Detroit, Cleveland, Los Angeles, San Francisco,
Oakland, San Jose and Miami. In fact, close to one half of the US urban population now live in cities
covered by some kind of municipal living wage policies/bylaws.

The Greater London Authority in Britain also has a Living Wage policy/bylaw. The summer Olympics in
London in 2012 will be the first Living Wage Olympics, where all workers working on the event will be
paid a living wage!

While Living Wage policies/bylaws have been passed by many cities, they generally apply to a small but
not insignificant portion of low-wage workers in a city, in the range of 3-5%. However, they also set a
local benchmark which other employers can follow. Some universities and hospitals, for example, have
resolved to respect municipal wage ordinances.

Sounds great, but does it make economic sense?

Myth: Increasing wages will hurt business.

Fact: Paying living wages is good for business. Having a well-paid and motivated work force is the most
important investment any employer can make. Wage increases for low wage earners are spent locally,
usually in small businesses. Thus a living wage policy is good for the local economy. Small businesses
draw their customers from the local community. Higher incomes allow families to purchase more goods
and services in their neighbourhoods. As a recent Goldman Sachs report ‘Are the rich all that matters
for spending?’ confirms, increasing the income of those on lower wages has a proportionately larger
stimulating effect on the economy than increasing the income of those earning more.

Also higher pay results in increased productivity by making jobs more desirable to both get and to keep,
thereby reducing recruitment, and training costs associated with high turnover. Passing living wage
policies and identifying private sector employers as living wage employers creates a market for products
and services produced by workers paid a living wage. Moreover, being identified as a living wage
employer is an effective marketing strategy for businesses eager to respond to changing consumer
habits that are increasingly prioritizing the ethical sourcing and production of goods and services.

Myth: It will cost the city a lot of money and taxes will have to be raised.

Fact: Studies have shown that most municipalities’ contract costs increased by less than 0.1 percent of
the overall local budget in the years after a living wage law was adopted. New Westminster undertook a
study before deciding to pass the living wage policy. This study estimated the costs of the new bylaw as
one quarter of 1% of the city’s budget. Studies of living wage bylaws in the US show that public costs can
actually be reduced due to living wage bylaws- for example; the Los Angles living wage bylaw resulted in
a 50.4% reduction in the amount of government subsidies received by affected workers and their
families.

Myth: Companies will go elsewhere if the city has a living wage policy.

Fact: The quality of life and the ability to attract a knowledgeable workforce are the main considerations
for companies when they decide where to locate. Strong communities and good health, education and
public services attract good employers.

Also many companies that can relocate pay far in excess of the living wage. Many low-wage businesses
are actually "support" businesses like restaurants, cleaning companies and retail outlets with little ability
and wish to relocate.

Myth: Companies hire fewer people because they are forced to increase labour costs.

Fact: In a competitive contracting market businesses are usually able to absorb these increased wage
costs through some combination of price and productivity increases, reduced turnover or redistribution
within the firm. In fact companies receive a healthy return for these increased investments in wages; as
Ian Tew, Head of Workplace in KPMG, London, UK, a living wage employer, has publicly stated:

“I have about 700 in-house and outsourced staff in our UK offices, many of whom are directly serving
our clients. So, their calibre, motivation and loyalty are extremely important to us. Paying the living
wage and improving other benefits, like holidays, sick pay and insurance have contributed significantly
to our success. Here’s how:

 Turnover amongst our cleaning staff has more than halved.

 Morale has been raised.

 Despite improved sick pay potential abuse has not materialized.

 Productivity has improved; attitudes are more flexible and positive.

 Service has improved: our help desk gets far fewer complaints.”

Myth: Tax credits and better educational opportunities are better ways to help the low-wage workers.

Fact: Income supplements, accessible education and other supports for families are important parts of
creating healthy communities. But employers must do their part and pay a decent wage for hard-earned
work; otherwise the taxpayer is left to subsidize their wage bill.

Myth: If wages increase, the cost of everything else will go up.

Fact: Costs rise all the time without workers receiving a pay increase. Wages are just one of many
factors that make up the cost of an item. Even in labour intensive sectors such as restaurants, increases
in the minimum wage had a tiny impact on prices with no loss in business.
It’s alright asking the public sector to pass a Living Wage policy, but what about the private sector?

The Living Wage for Families Campaign has developed a Living Wage Employer Recognition Programme
that certifies employers that have committed to pay all their staff (both direct and indirect) a Living
Wage. If they pay non-mandatory benefits to your employees, the Living Wage hourly rate will be
reduced to take account of this. Non-mandatory benefits include employer contributions that help
reduce an expense item that make up the living wage calculation such as extended health/dental care,
MSP premiums, child care expenses, transport expenses, professional education development,
enhanced vacation and sick leave, etc. They do not include payments that an employer is mandated by
law to provide such as Employment Insurance and Canada Pension Plan contributions.

We have developed a software tool in partnership with the software company SAP/Business Objects to
help employers calculate how their benefit package affects their ability to pay a living wage- see
http://livingwageforfamilies.ca/calculator.

This program has exceptions for staff on probation and student placements. A number of employers
have already signed up, and a number of others are in the process of signing up. We hope to publicly
launch this program in the summer of 2011.

The effects of low wage work on children - Melanie’s story.

Melanie is a sociable l0 year old girl who loves school; she has many friends both at school and in the
low-rent apartment complex where she lives with her mom. Mel’s mother works long hours at two low
paying jobs in order to provide the basic necessities. In the past, life was easier for this single mom and
her daughter; for 10 years she worked for a hospital and was well paid and worked a regular 40 hour
week. She and Mel had time to do fun things together. However, that job was ‘contracted out’ and she
had to look for new work.

This has brought big changes into their lives - they had to move to lower cost housing and Mom now
works two low wage jobs, often 50 hours a week, to provide for their basic necessities. Mom is always
tired and doesn’t have the time, money or energy to do some of the things they used to enjoy doing
together.

One day Mel brings home a letter from school announcing that the school has made arrangements for
three free swimming lessons for everyone in Grade 5. The children are excited, and when Melanie tells
her mom that she needs a swimsuit for Monday her mother tells her that she can’t do it by Monday as
she won’t be paid until later in the week and she can’t even get to Value Village to look for a second
hand one because she has to work some extra hours. Mel is angry and tearful and tells her mother that
she will be the only one who won’t be going and that she will look stupid if she can’t go. Mom reacts
angrily, telling Mel she doesn’t understand how hard it is for her to say she can’t afford things and the
evening ends in tears, anger and guilt.

On swimming day Mel tells her mother that she is sick and can’t go to school. Mom knows what is
happening but has to rush out to work and tells Mel to stay indoors all day and she will try and get home
early. After a couple of hours Mel is bored and angry and she decides to walk to the mall on her own –
something she is not allowed to do.
She wanders around looking at swimsuits and the thought goes through her mind that she could
probably take one and no one would notice. However, she decides against that and just mooches
around trying on clothes. Her mother phones home to see how she is, and when no one answers the
phone after two or three calls, Mom is frantic and calls a neighbour to ask her to check up on Mel. The
neighbour goes over to their apartment and finds that Mel isn’t at home. Mom rushes home, missing
two hours of work, to find Mel arriving back from the mall, and another angry scene erupts.

Next day Mom makes sure that Mel goes to school and Mel tells the other children that she is sick and
isn’t allowed to swim. She tells them that she doesn’t like swimming anyway so she is pleased she
doesn’t have to go with them. Mel spends the time they are at swimming in the secretary’s office doing
some school work.

When everyone arrives back full of enthusiasm for their swimming lessons, she feigns indifference and
walks away. After a number of events like this, and a couple of birthday parties she can’t attend because
she can’t afford a present, Mel progressively excludes herself from her group of friends, feels angry and
her school work starts to suffer. Her mother doesn’t know what is happening to her once happy,
sociable daughter and feels anxious and helpless and a failure as a parent.

202-1193 Kingsway, Vancouver BC, V5V 3C9

Tel: 604 873 8437 Fax: 604 874 9898

info@livingwagefamilies.ca www.livingwageforfamilies.ca