Newfoundland and Labrador Federation of Labour

Transcription

1 Newfoundland and Labrador Federation of Labour Indexing Minimum Wage in Newfoundland and Labrador - February 2017

2 Table of Contents Introduction... 1 The Problem With Growing Inequality... 2 The Demographics Of Minimum Wage Worker In NL... 4 The Importance of Minimum Wage... 6 Dispelling Minimum Wage Myths... 8 Increasing The Minimum Wage Will Cause People To Lose Their Jobs and Hurt Businesses... 9 Higher Minimum Wages Hurt The Economy Conclusion Recommendations Appendices Minimum Wage Data for Canada Profile of Low Wage Earners in NL, Annual Average Profile of Minimum Wage Earners in NL, Annual Average

3 Introduction The Newfoundland and Labrador Federation of Labour (NLFL) represents 25 affiliated unions, 500 union locals and 65,000 working women and men in every sector of our economy, in every community in our Province. Our role at the NLFL is in the political arena. While our affiliates deal with collective bargaining and other issues with their employers, the NLFL addresses the broader social, economic, and environmental public policy issues that impact our members, their families, and the communities where they work and live. For 80 years, the NLFL has worked to advance the rights of all working people. We advocate for them on issues such as occupational health and safety and workers compensation, retirement security, pay equity, childcare, improved labour standards as well as worker and human rights. The Federation also advocates for a strong public sector, improved public services as well as public policy and laws that support our principles of social and economic justice including the overall wellbeing and welfare of all citizens. Our advocacy work involves engaging government at all levels about public policy, legislative and budgetary options that bring fairness and greater equality to all. We welcome the opportunity to bring forward the NLFL s position on the need for a legislated fair minimum wage one that addresses the increasingly widening income gap that exists in Newfoundland and Labrador (NL), the growing number of workers who fall below the poverty line, especially young workers, women, and other vulnerable workers. These workers are over-represented in the bottom of our labour market. A progressive, legislated minimum wage policy can begin to close this growing gap. 1

4 The Problem With Growing Inequality Inequality has been characterized as the great challenge for society and public policy for current and future generations. The NLFL is concerned that NL is returning to a low wage economy and unprecedented levels of inequality. The number of workers earning minimum wage has increased since 2014 from 11,900 to 12,800 workers, an increase of almost 10%, to just over 6% of our total labour force. A whopping 66% of these are women, half of them are young workers, most work full-time and two-thirds of all minimum wage jobs are permanent. (The Canadian average of minimum wage workers nationally is approximately 6.9% of the labour force or some 1.25 million people earning the minimum wage nationally, 60% are women, while making up 50% of the Canadian labour force). 1 The sectors leading the country in job growth are those sectors where minimum wages and precarious work dominate. NL is no different than Canada where the retail trade and the food and accommodation sectors have the largest proportion of workers paid at minimum wage, which is just over 70%. Some of the most profitable companies in these sectors are also some of the largest in their respective sectors, both in size and profitability. These are the conditions and numbers that contribute to increased and growing income inequality. No one can dispute that workers share of the economic pie has been shrinking both in Canada and in NL, despite working more hours, and being better educated. In fact research shows that wages, including minimum wage, have been stagnate in Canada since the mid-seventies and this loss of potential income growth amounts to more than $80 billion per year from our national economy. A recent report from the Canadian Centre of Policy Alternatives (CCPA) states: Between 1910 and 1977, inflation-adjusted hourly earnings rose from 100 to 429 more than quadrupling in just two-thirds of a century. This 1 Suprovich, Gwen, (2015). The Minimum Wage in Canada (Canadian Labour Congress) 2

5 period roughly corresponds with the growth of the middle class in Canada and accompanying creation of a shared prosperity. However, the growth of hourly earnings stagnated after 1977, rising a meagre 3 percent in inflation-adjusted terms in the generation since. Minimum wages have fared worse according to statistics Canada. 2 The Statistics Canada Report regarding minimum wages states: the average minimum wage in Canada was $10.14 an hour last year (2013). And when you translate the 1975 equivalent into 2013 dollars, it was almost identical at $ This shows no growth in minimum wages in this country for the last 40 years. In NL we have seen incomes for the top 1% grow substantially over the past decade. In addition, the distribution of our gross domestic product (GDP) between corporate profits and wages is well below the Canadian average according to Statistics Canada. Without any measures to combat this growth of income inequality, the gap will only continue to widen. This is most Profits & Wage Shares - % of GDP, 2013: Canada Vs. NL 50% Wages Profits 40% 30% 20% 10% 0% Canada NL Canada NL Source CANSIM Table GDP, income-based, provincial and territorial, annual (dollars 1,000,000) problematic for low income earners as they see the purchasing power of their wages continually decline, not even keeping pace with inflation. Even since 2010, for minimum wage earners to have the same buying power today, the minimum wage in 2016 would have to have been $ With the two.25 cent increases recently announced by government, minimum wage workers would be earning a minimum wage of $11.79 today. 2 Brennan, Jordan, (2014). The Creation of a Shared Prosperity in Canada Unions, Corporations and Countervailing Power (Canadian Centre of Policy Alternatives) 3 Galarneau, Diane, Fecteau, Eric. (2014). The Ups And Downs Of Minimum Wage (Statistics Canada) Retrieved February

6 Even more startling is that in 2015, 32.6% of workers in NL currently earned less than $15 per hour. 60% of these low-wage workers were women over 20 years of age while only 15% were teenagers. NL currently has the lowest minimum wage in the country. We know only too well what is happening to our labour market and economy, and how our aging demographic, and negative population growth rate are forcing us to look very carefully at how we attract, recruit, train and retain tomorrow s work force. The minimum wage is critical to protecting and improving the incomes of workers who fall into the lowest paid income bracket in our society not just those employed at the legal minimum. It is also a key public policy tool in fighting income inequality and poverty. We can and have to do better for low-income earners. Perhaps we should be asking why as a society we are still even debating the benefits of indexing the minimum wage, and most especially in this economic climate, while other provincial jurisdictions are looking at how to incorporate a minimum wage closer to a living wage, such as Ontario, British Columbia and Alberta, as a means to stem the tide of growing inequality. The Demographics Of Minimum Wage Worker In NL Who is the minimum wage worker in our province - it is certainly not the young 20-year-old student living at home with parents, as some organizations tend to characterize these wage earners as. Data from the Statistics Canada and the NL Statistics Agency for 2015 say otherwise: In 2015, there were 12,800 minimum wage earners in Newfoundland and Labrador; Approximately 66% (8,500) were female, 34% (4,300) male; 4

7 50% were over the age of 24 years, almost 40% between the age of 25 and 54 years; 49.5% (6400) were between 15 and 24 years - with the majority over 19 years; 51% worked full time minimum wage jobs; Over 75% had a high school education or better, with 44.9% having some form of post secondary education; 66% of minimum wage workers were in permanent jobs while 51% were full time; and 78.8 per cent (10,100) of minimum wage earners were employed in the sales and service occupations, which includes retail and food services. When one looks at low wage (earning less than $15 per hour) data - the picture is even more concerning. It shows that we have too many workers in low and minimum wage jobs. In NL in 2015: 32.6 % (69,600) of all workers earned $15 an hour or less (in Canada that number is approximately 25%); 60% of low wage workers (those making $15 / hr. or less) were women over 20 years of age (compared to 50% in Canada). Only 15% were teenagers; Half of low wage workers were breadwinners - this means they were single, a single parent, or the sole earner in a couple; and More than two-thirds of low wageworkers were employed by medium to large businesses - meaning those with more than 20 employees. Even though women are equally represented in our labour force they are overrepresented in minimum wage jobs (66%) and low wage jobs (60%). This shows that a minimum wage worker is more likely to be female than male, more likely to be an adult and not a teenager, and there is a high probability they are employed for a very prosperous, multi-national corporation, as opposed to a small local 5

8 business. These same workers are most likely not afforded the protections of union membership, health or dental benefits, pensions, or sick leave, things that most of us take for granted. The Importance of Minimum Wage Minimum wage laws, as part of the provincial government s employment standards legislation, are critical for the thousands of working people in our province who do not have the protection of a union in their workplace. These workers rely on government to protect and uphold their best interests and their workplace rights. The minimum wage is also an important part of the public policy mix required to improve and enhance living standards, narrow the income gap, especially between women and men, tackle poverty, enhance equality in our society and to value work. Research shows higher wages for those in the lower and middle-income brackets are extremely critical for dealing with the widely acknowledged epidemic of inequality, a direct cause of low economic growth and productivity. Society pays a steep price for inequality through higher costs to health care, justice, more demands on social and community services, diminished educational outcomes, low GDP growth and economic instability. If lowerincome children are more likely to remain poor, we are all denied the economic contributions they could have made. The Organization for Economic Cooperation and Development (OECD), published a research report in 2015 In It Together: Why less Inequality Benefits All where they state: the gap between the rich and poor keeps widening. In the decades before the Great recession, economic growth benefitted disproportionately higher income groups while lower-income households were left behind. Since the crisis, disparities widened and in many OECD countries, inequality is today at its highest since data collection started. This long-run 6

9 increase in income inequality does not only raise social and political, but also economic concerns. Income inequality tends to drag down GDP growth, and it is the rising distance between, of the lower 40% from the rest of society, which accounts for this effect. 4 All citizens deserve to be paid a decent wage for the work they do. Low paid workers spend most, if not all, of their earned incomes in the local economies. Higher income earners, conversely, are more likely to spend higher portions of their incomes buying goods and services from other jurisdictions or make investments in other jurisdictions. In July 2010, when the minimum wage reached $10 an hour, it was noted that increasing the minimum wage meant improving the quality of life for many Newfoundlanders and Labradorians, and helped to make NL more competitive when attracting talent. The NLFL reiterated that important message in September 2012 to government s Minimum Wage Advisory Committee Minimum Wage Review, recommending that the minimum wage be automatically increased on an annual basis in line with annual rates of provincial inflation and or average wage and salary increases. Unfortunately, the recommendations of the Review Committee were not adopted. I. In 2013 the minimum wage should be adjusted to compensate for the loss in purchasing power experienced since 2010, but the public should be given six months notice of the change. II. Beginning in 2014 the minimum wage should be indexed on an annual basis using the CPI (Newfoundland and Labrador Canada, 2012). 5 We recognize the positive step the current government has made to raise the minimum wage by.50 cents over a 12 month period, and we appreciate the 4 OECD (2015), In It Together: Why Less Inequality Benefits All, OECD Publishing, Paris. DOI: 5 NL Minimum Wage Advisory Committee Observations and Findings (2012) (accessed February 17, 2017) 7

10 process to make a case for an annual increase based on the cost of living, or some equal formula that will allow minimum wages to keep pace with inflation. One thing is for certain without mandated increases, too many people will be left behind, and women and youth more than ever. Minimum wage increases help lessen income inequality, narrow the gender pay gap, combat poverty and create a better, more equal society. According to a recent International monetary Fund (IMF) report entitled Causes and Consequences of Income Inequality: A Global Perspective, the following conclusion on inequality and low wages states: Policies that focus on the poor and the middle class can mitigate inequality. Irrespective of the level of economic development, better access to education and health care and welltargeted social policies, while ensuring that labour market institutions do not excessively penalize the poor, can help raise the income share for the poor and the middle class. 6 Dispelling Minimum Wage Myths The debate over minimum wage has been fraught with opposing viewpoints. American macroeconomist Dean Baker, co-founder of the Center for Economic and Policy Research (CEPR), has noted that the impact of minimum wage on employment is one of the most heavily researched topics in economics. Generally, the arguments against raising the minimum wage are that the increases hurt those that they are intended to help. Arguments have been presented on how increasing the minimum wage hurts the economy, kills jobs, and hurts businesses. These myths have been proven wrong and the latest academic research points to the opposite as to the impacts of increased minimum wages. 6 Dabla-Norris, E., Kochhar, K., Suphaphiphat, N., Ricka, F. and Evridiki, T., (2015). Causes and consequences of income inequality: A global perspective. International Monetary Fund. Retrieved February 2016, from external/pubs/ft/sdn/2015/sdn1513.pdf 8

11 Increasing The Minimum Wage Will Cause People To Lose Their Jobs and Hurt Businesses There is some disagreement among economists (both in Canada and the United States) about the impact of increases in the minimum wage. While some research studies have linked minimum wage increases to declines in employment among lower-skilled workers, the weight of the evidence suggests that minimum wage increases do not kill jobs. In 2014, a letter sent to President Obama and Congressional Leaders from more than 600 economists, including 7 Nobel Prize winners stated, "In recent years there have been important developments in the academic literature on the effect of increases in the minimum wage on employment, with the weight of evidence now showing that increases in the minimum wage have had little or no negative effect on the employment of minimum-wage workers, even during times of weakness in the labor market. Research suggests that a minimum-wage increase could have a small stimulative effect on the economy as low-wage workers spend their additional earnings, raising demand and job growth, and providing some help on the jobs front." 7 As well, some pretty powerful and respected economists in Canada and internationally have lent their names to the positive impacts of minimum wage increases. If anything, the worst that can be said is that raises have minimal negative impacts. A large number of impressive Canadian economists had this to say about minimum wage in a letter in 2008: There is a common, but incorrect, assumption that higher minimum wages destroy low-wage jobs and increase unemployment among those they are most intended to help. Modern economic research has indicated, however, that the negative employment effects of minimum wages are negligible and can be overwhelmed by the positive impacts of minimum wages on labour force participation and consumer spending. 7 Economic Policy Institute (EPI) (2014) Over 600 Economists Sign Letter In Support of $10.10 Minimum Wage, (accessed February 12, 2017) 9

12 In other words, it is more likely that higher minimum wages are associated with enhanced employment and income opportunities for low-wage workers. 8 A report from the Canadian Centre for Policy Alternatives on the impacts of minimum wage also states: We find almost no evidence of any connection between a higher minimum wage and employment levels. Labour market performance in Canadian provinces appears to be driven overwhelmingly by demand conditions. Even in the few cases where the minimum wage seems to have an impact on labour market aggregates, it is almost as likely to be a positive effect as a negative effect. Fear of disemployment effects are overblown by those with a vested interest in keeping wages down. Canadian policy makers should feel confident to move ahead with boosting the minimum wage, hopefully toward a living wage level, 5 in a gradual and ongoing manner, with no fear that doing so will negatively shock employment levels. 9 Most provinces and territories in Canada increased their minimum wages during the recession of without attributable job loss. In fact, Ontario increased its minimum wage from $7.75 to $10.25 and added almost 150,000 jobs to the sales and service sector between 2006 and 2012, where minimum wages dominate. 10 In our own province, during the period 2000 to 2011, which saw the largest increase in minimum wage in our history, youth employment grew significantly. According to the Labour Force Historical Survey, the number of year-olds employed in 2000 was 27,300 and they worked 776,100 hours whereas in 2011 there were 28,200 youth workers providing 779,700 hours of work. Over the same time youth participation rates increased from 47.4 percent to 58.4 percent and the unemployment rate fell from 25.4 percent to 20.9 percent. All of this was in the context of declining overall unemployment rates 8 Statement By Ontario Economists And Labour Policy Experts On Minimum Wages And Income Security (2003) (accessed February 2003) 9 Brennan, Jordan and Stanford, Jim (2014) Dispelling Minimum Wage Mythology The Minimum Wage and the Impact on Jobs in Canada, (Canadian Centre for Policy Alternatives) 10 Hennessy, Trish and Stanford, Jim (2014) More Harm Than Good Austerity s Impact in Ontario, (Canadian Centre for Policy Alternatives) 10

13 from 16.6 percent to 12.7 percent in Even though the minimum wage increased from $5.50 in 2000 to $10.00 in 2010, an increase of over 80%. So despite the decline in the size of the population of year olds, they maintained and increased in terms of the number employed and increased their participation in the labour force during this period. The most recent and sophisticated academic research as well as the experiences of leading employers like Trader Joe s, Costco and thousands of small businesses, strongly suggests that higher minimum wages do not reduce overall employment. Not only do employers benefit from the savings that accrue from lower turnover rates and higher productivity; they also benefit from an increase in demand for the goods and services they offer. Higher Minimum Wages Hurt The Economy Higher minimum wages actually boost the economy, especially local economies. Raising the minimum wage puts more money in the pockets of consumers, who drive local demand by spending that money in the local economy. They can also pay more taxes, help sustain local business and help boost employment through that increased spending. Minimum wage earners are more likely to use any new income to purchase goods and services they have been doing without from the local economy. This directly contrasts high income earners who are more likely to save or invest additional income than inject it back into the local economy. Since over 50% of Canada s GDP is driven by consumer spending, increased minimum wages benefit the economy as a whole. Advancing a business model predicated on a minimum wage above the poverty line is also consistent with business interests. As labour economist Jim Stanford explains: Employment is a derived demand, dependent on sales of whatever good or service workers produce. Their employment depends mostly on whether there s enough demand for their output, so that their employers can profitably produce it. That, in turn, depends on a whole stable of economic variables, 11

14 macro as well as micro not least including whether working families have the purchasing power to buy back the stuff they produce. (Stanford 2011) Thus, by raising aggregate demand, a fair wage floor has the potential to actually stimulate the economy. As Stanford notes:... higher minimum wages generate broader economic benefits, spurring more labour force participation by marginalized groups and resulting in less turnover and more job stability in lowwage jobs. 11 Several business and employer organizations regularly argue that minimum age increases will only harm those who they are intended to help and will be detrimental to the economy. Such conclusions are out-dated and not in line with current established thinking from academics, economists, and international organizations such as the IMF, OECD and the United Nations. Stating that businesses will close, jobs will be lost, or that prices will skyrocket have been largely disproven. There are organizations that also put forth the position that the best way to assist low wage earners and the poor is not through increased wages but through the tax system. The problem with such an approach is that it does not introduce additional money into the economy; it simply redistributes existing money - from government revenues to households. Increasing wages actually cuts the pie up a little more fairly, and puts new money into the economy and in the hands of those who need it most. Finally we need to dispel the myth about who the minimum wage worker is and who employs them. In Canada, minimum wage workers are more likely to be employed by a large firm as opposed to a small business, more likely to be female and over the age of Stanford, Jim, Boost the wage, help the worker, 12

15 In the era of unprecedented corporate profit, some of Canada s largest companies continue to pay their employees minimum wage. These large corporations are using minimum wage laws to keep labour costs down while raking in record profits. A recent report found that Canadian corporations are hoarding more than $700 billion in unused funds, rather than using that money to re-invest in the economy to help create jobs or provide higher wages for their workers. 12 Many of these same corporations continue to demand that provincial governments keep corporate tax rates low for their own benefit. The Newfoundland and Labrador Employers Council (NLEC) and other like minded organizations argue that that small mom and pop shops will suffer from a minimum wage increase while in actual fact the majority of minimum wage workers are employed by large corporations, both here and across the country. Such a position actually lets large profitable multi-nationals take advantage of local workers. The truth is that this is a matter of public policy; we cannot cater to the lowest common denominator the few employers out there who need low minimum wages in order to operate. Leading mainstream economists and a majority of recent studies agree that raising the minimum wage boosts incomes for low-paid workers without reducing overall employment. Research clearly shows that higher and increasing minimum wages do not kill jobs, that they stimulate the economy, help combat inequality and poverty and help close the gender wage gap and are associated with more stable employment; all key issues in the NL economy. 12 What did Corporate Tax Cuts deliver? (2013) 13

16 Conclusion While indexing is a good start to recognizing the impact stagnant low wages have on working people, we need to ensure that we address the underlying and core issue - people that work low wage jobs should not have to or be forced to live in poverty. Higher and increasing levels of working poor only leads to higher inequality and further cements our journey down the road to a low wage economy. Increasing low wages and the minimum wage as part of the solution to help fight growing inequality, to reduce poverty, and to boost the economy, especially local economies, represents good economic and social policy. Furthermore, it is becoming more difficult to convince policy makers and civil society, in an era of unprecedented poverty and inequality, that keeping wages low is good for workers, communities and society. The arguments presented by some to keep wages low and working people in poverty just carry no weight any longer. There is a clear opportunity for leadership here on an economic and social front; we urge this government to embrace it. Recommendations 1. The NLFL recommends that minimum wage be indexed immediately to the CPI for NL on an annual basis, and that the increase be retroactive to include the previous year; 2. The NLFL recommends that Government adhere to the legislation governing minimum wage and that it incorporate a review process that is transparent, accountable and includes full public consultation; and 3. The NLFL recommends that Government develop a strategy that will see the minimum wage increased, over a reasonable and acceptable period of time, to a living wage that ensures that no one that works a full time (35 hours/week) minimum wage job will be below the poverty line. 14

17 Appendices Minimum Wage Data for Canada Jurisdiction Effective date Wage rate Oct 2017 Notes Nunavut 01-Apr-2016 $13.00 $13.00 Northwest Territories 01-Jun-2015 $12.50 $12.50 Alberta 01-Oct-2016 $12.20 $13.60 Latest increase was $1 - will go to $15 by ($13.60 Oct , $15 Oct ) - also got rid of reduced wage for liquor servers Ontario 01-Oct-2016 $11.40 $11.40 Increased by $0.15 Oct Yukon 01-Apr-2016 $11.07 $ CPI for Whitehorse Prince Edward Island 01-Oct-2016 $11.00 $11.00 On April 1 each year, this rate increases by an amount corresponding to the annual increase for the preceding year in the CPI for Whitehorse. Manitoba 01-Oct-2015 $11.00 $11.00 British Columbia 15-Sep-2016 $10.85 $11.25 Will go to $11.25 Sept. 15, 2017 Quebec 01-May-2016 $10.75 $10.75 Saskatchewan 01-Oct-2016 $10.72 $ CPI On Oct 1 of each year, rate increases based on the average of the % change in the CPI & % change in average hourly wage for SK during previous Yr. Nova Scotia 01-Apr-2016 $10.70 $ CPI On April 1 of each year, this rate is adjusted by the percentage change CPI New Brunswick 01-Apr-2016 $10.65 $ CPI Newfoundland and Labrador 01-Oct-2015 $10.50 $10.75 $10 in has increased.50 in 6 years - last increase was.25 in 2015 to get in to $10.50 In NS, SK and the Yukon, the annual increase is based on the change in the CPI - YK - Whitehorse NS, PE, SK and NL have legislated reviews 15

18 Profile of Low Wage Earners in NL, Annual Average

19 Profile of Minimum Wage Earners in NL, Annual Average 2015 Profile of Minimum Wage Earners in Newfoundland and Labrador, Annual Average 2015 Total Employees Employees Earning Minimum Wage or Less (000s) Total (000s) Incidence (%) Share (%) Total Gender Males Females Age Groups Education Less than high school graduate High school graduate Some post-secondary Post-secondary certificate or diploma University degree Industry Groups Forestry, fishing, mining, oil and gas Construction Manufacturing Trade, wholesale and retail Educational services Health care and social assistance Accommodation and food services Public administration All other industries* Occupation Type Management Business, finance and administration Natural and applied sciences and related Health Education, law and social, community and government services Art, culture, recreation and sport Sales and service Trades, transport and equipment operators and related Natural resources, agriculture and related Manufacturing and utilities Job Tenure Less than one year One to five years More than five years Job Permanence Permanent Not permanent/seasonal Not permanent/temporary, term or contract Not permanent/casual or other Full-time/Part-time Status Full-time Part-time *All other industries include: Agriculture; Utilities; Transportation and warehousing; Finance, insurance, real estate and leasing; Professional, scientific and technical services; Business, building and other support services; Information, culture and recreation; Other services. Notes: (1) Numbers may not sum to the total due to rounding. (2) Values of 0.0 represent estimates of less than 500, which are below the minimum criteria for release. (3) Self-employed and unpaid family workers are excluded. (4) The minimum wage was increased from $10.25 to $10.50 per hour as of October 1st, (5) LFS estimates are revised based on the 2011 Census population counts Source: Statistics Canada, Labour Force Survey (LFS); Newfoundland & Labrador Statistics Agency, Special Tabulations 17