Making work pay Presentation to Minimum Wage Review Panel September 28, 2012 By Lana Payne, President NL Federation of Labour
Thanks to Panel Opening remarks The sky didn t fall in as some predicted when government took action to restore part of the purchasing power of the minimum wage in 2000s. Last decade most prosperous in our economic history. Unprecedented economic growth and GDP which has more than doubled. Indeed, opposite occurred. The raises were necessary to ensure those at the bottom did not get totally left behind. Also incentive to draw/attract people into the labour market necessary given demand for workers. As provincial government noted in 2010: helped to build a stronger economy. Helped to share economic wealth.
Overview Minimum wage increases in last decade stunning success Strong and Positive impact on both incomes, employment (especially women and youth), narrowing female/male wage disparity and economy Ensured lower-waged workers not left behind in growing, prosperous economy Reasons for the government s policy decision still valid today as were in July 2010, when announced increase to $10
What government said in 2010 This increase is another way the government is improving the quality of life of Newfoundlanders and Labradorians and making our province more competitive with respect to attracting talent. Increasing the minimum wage helps individuals and families achieve increased self-reliance and contributes to a stronger provincial economy. Susan Sullivan, Minister HRLE, 2010 The same reasons apply today in terms of protecting the minimum wage/incomes from further erosion; attracting people into the labour market.
GDP 2000 - $13.9 B 2011 - $33 B NL economy Wages and salaries as share of GDP 2000 - $5.4 B 2011 - $9.78 B Lowest median income in country: $25,620 (2010) Lowest share of GDP going towards wages and salaries of any province, including other resource rich provinces like Alberta and Sask.
Catching up History of minimum wage in NL Infrequent and minor increases (eg. 25 cents between 1991-1996), allowing wage and purchasing power of those earning it to erode substantially. By 2006, minimum wage in real dollars was worth less than it was in 1976. Increases in the 2000s helped get wage to point where someone working full-time would be at/just above/just below poverty line.
More catching up! Economist Jim Stanford: recent recovery of minimum wages across Canada has merely served to recoup half of the real purchasing power lost in the earlier two decades. Output and productivity have grown substantially in this timeframe. If minimum wages had grown since 1976 as fast as labour productivity, minimum wages would today be $16 an hour.
What those opposed to higher minimum wages say Higher minimum wages will kill jobs for lower-skilled, reduce hours. Higher minimum wages hurt those they are intended to help youth and women, lower-skilled. The job is done! Freeze minimum wages. Don t worry about it. Wages will go up anyway let marketplace determine wages.
Jobs/Employment Between 2000-2011 employment grew by 26,600 jobs (despite huge employment losses in fishing and forestry, and global financial crisis and recession of 2008-2009) Employment increased from 198,800 225,400 (almost half of these gains came since 2005, same time NL government took serious action to restore min wage and also despite worst recession hit the world since 1930s.)
Youth (15-24yr-olds) Data from LabourForce Historical Survey Employed youth: 2000 27,300 2011 28,200 Youth participation rates 2000 47.4% 2011 58.4% Unemployment rate: 2000 25.4% 2011 20.9%
What do numbers mean? Despite minimum wage hikes over last decade: more youth working, more hours, substantial increase in youth participation rates and drop in youth unemployment. (context world recession in middle of all this.) Employment and participation rates improving despite smaller population of 15-24 year-olds. Labour Market economists would likely expect that as size of population declines, we d also see a decline in number employed in that age category. Not so here! Instead, more employed youth despite smaller population base to draw from, higher participation rates.
Older workers (55+) Increases in the minimum wage have helped in the activation of workers 55 and over. Employed older workers: 2000-15,800 2011-40,900 (providing nearly three times the amount of hours of work as in 2000.) Even when one holds steady for the demographic shift, there has been an incredible increase in the percentage of 55+ citizens working attracted to enter or stay in labour market because of better wages.
Housing as factor Housing, energy, food biggest contributors to CPI Housing in NL has been skyrocketing Between 2000-2011 housing costs increased 158% and 165% province/st. John s Rental costs have also increased substantially, 37.5% and 40% - most dramatically since 2007.
Low-Paid, Lower skilled Sectors Sales and service occupations lowest paid of all sectors analyzed by LFS Hospitality, retail, home care, food services, etc. Employment grew in sector by 10.2% since 2000, growth of over 5,000 new jobs 50,900 vs 56,100. If minimum wage increases killed jobs it would be in this sector Increased purchasing power of low-paid workers
Women 2006 30% of labour market worked for $10 an hour or less (40% of women workers did) double the national average. NL was truly a low-wage economy. 2000-2011, we see how important minimum wage increases were to wage growth for women workers. Those earning not just legal minimum, but under $12 an hour (low pay) in 200 vs 2011: Men: 2000-36.3% 2011 15.4% Women: 2000 57.6% 2011 27.7%
Women Biggest impact for women in female-dominated sales and service occupations (lowest paid jobs in our economy) 2000 avg hrly rate of pay was $7.43 2011 avg hrly rate of pay was $12.63 Women still make up majority of workers in this sector, but saw greater wage growth 70% between 2000-2011, compared to 42% for men. Overall, in 2000, the average hourly wage differential between women and men was 23.5%, 2011 it was 14.4% Panel has to ask itself would women have experienced this kind of wage growth were it not for the minimum wage hikes. Most likely would be experiencing even wider wage disparity.
Low-Wages/UnEmployment One of the arguments used to keep wages low is that this somehow helps reduce youth unemployment and conversely raising the wage results in young people losing jobs. In other words, raising the wage hurts those it is supposed to help. Huh? As already shown not the case in NL. But low wages do not guarantee full employment, or low unemployment. In fact, NL experience says higher wages = more employment. Low wages = low demand. Low demand = higher unemployment. Cheaper labour, in and of itself, never guarantees that more workers will be hired. Why do employers hire workers? To work: that is to produce something. 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, macro and well as micro, including whether working families have the purchasing power to buy back the stuff they produce. It could certainly be argued (given help-wanted signs, etc.) that province s employers are unable to even meet current demand in our economy.
The economic pie Workers share of economic pie not what it used to be in Canada and in NL. Corporate profits share of NL GDP huge (nearly double national average of 13% in 2000s) 25% Workers share of GDP 38% compared to national average of 51% which is also a historic low.
No Two-Tier How will this help recruit workers? Potential for abuse Alberta case Minimum wage is the training wage. Need to reward longerterm employees. Consider healthy recruitment and retention strategies. Tips. Not wages, can t be depended on. (Never tell the CEO to take cut in pay because of his bonus.) Arguing for two-tiered wages because other provinces have it, but not competing for business with other provinces, but are competing for labour Political fallout!
Freeze minimum wage?? Some say job is done. Freeze minimum wage. Or wages will rise based on marketplace. Job is not done. If we do not take right approach we will be back to where we started. Ken Battle, Caledon Institute: History shows us that what goes up can later go down when it comes to minimum wage rates. To preserve the value of minimum wages, governments should arrive at a definition of what constitutes adequate rates and methods of indexing them.
Taxes Provincial government already subsidizes low wage employers through tax system Low Income Tax Reduction (targets low paid costs $11.6 million) Employer proposal benefits CEOs too and would cost $80 million
Indexation Recommendations Other examples: CPP, OAS Social Assistance. Rationale for doing so, protect lower income Immediate increase of 34 cents an hour to cover off 2011 CPI. Options: Tie to CPI (Wage increase Jan every year) Tie to basic CPI items Tie to average increase in hourly wages (6.6% in 2011)
Conclusions All citizens deserved to paid decent wage for the work they do (even if their husbands make good wages too) In growing economy like NL, working people deserve to share in the prosperity. Lower-waged workers spend money directly back into local economy contributing to local demand, stronger economy. If minimum wage hikes were so bad for workers and the economy, we would have seen this during the latest round of increases. Indeed metrics point to positive benefits. Rising tide should lift all boats and economic well-being of lowpaid workers can not be left to the daft touch of the invisible hand. Share the prosperity.