Edmonton Social Planning Council - Minimum Wage Policy Review Presentation

Minimum Wage Policy Review Presentation

In a June 15, 2010 presentation to the Alberta Legislature's Standing Committee on the Economy, the ESPC asked that the minimum wage be increased to at least $10.00 per hour immediately, and then adjusted annually to reflect changes in average weekly earnings.

Thank you for the opportunity to present to the Standing Committee on the Economy’s Minimum Wage Policy Review. My name is John Kolkman. I am appearing today on behalf of the Edmonton Social Planning Council, a social research organization that focuses on poverty and low income issues.

First, a bit of background. Linking the minimum wage to the average weekly earnings of Albertans was one of the reforms brought in by the Alberta government in June 2007. The linking of the minimum wage to average weekly earnings was deemed sufficiently important that Premier Ed Stelmach himself announced the policy.

A June 14, 2007 government news release called the new minimum wage policy “a key action under Premier Stelmach’s plan to manage growth pressures and improve Albertans’ quality of life.” The government was widely applauded for making this change by groups such as ourselves. In this context, the decision in February by the Minister of Employment and Immigration to impose a minimum wage freeze - with no prior public consultation - was disappointing.

The fact MLAs decided to forgo their annual increases this fiscal year and last is not really relevant, considering that MLA pay was boosted by over 35% in 2008. A small portion of this 35% wage hike resulted from a 4.5% increase on April 1, 2008 under the average weekly earnings index formula. The much larger portion of the increase resulted from a decision the following month to top up the salaries of MLAs sitting on standing committees. This includes the committee conducting the review of minimum wage policy that I am appearing before today. Comparable percentage increases were made to the Premier, opposition leaders and Cabinet Ministers pay. If only minimum wage earners were so fortunate.

The provincial government’s most recent profile of minimum wage earners covering the time period April 2009 to March 2010 finds that a relatively small number of Alberta employees (20,630 or 1.4% of all employees) actually earned minimum wage.   The argument is sometimes made that since so few Albertans work for minimum wage, it’s not a big deal as to whether it is increased or not. However, this overlooks a much larger number of Albertans (112,200 according to the most recently available Statistics Canada data) that earned $10.00 per hour or less.

During the years when there were annual increases to the minimum wage, there was no corresponding increase in the percentage of Alberta workers earning minimum wage. This suggests both that the annual increases were affordable for employers, and that other low wage workers earning just above minimum wage received corresponding increases to keep them above. In this way, a higher minimum wage sets a floor below other low wage earners.

There is a widespread perception that almost all minimum wage earners are either high school students living with their parents, or people working in jobs where they can earn tips.   Neither is true. The Alberta Minimum Wage Profile found that over half (52%) are older adults 25 years or older. The profile also found that only one in eight minimum wage earners (12.7%) worked in an occupation like food and beverage servers where they might earn or share tips.   Almost one-half of minimum wage earners (46.2%) worked full-time rather than part-time, and over three-quarters (75.2%) worked in permanent rather than temporary jobs.

What is an appropriate base level for the minimum hourly wage? A starting point for setting a fair minimum wage should be that no Albertan working full-time for a full-year should have to live in poverty. Currently a full-time minimum wage earner working 35 hours per week for 52 weeks a year earns an income thousands of dollars below any of the accepted poverty measures. For example, a single adult working full-time and full-year and living in Edmonton or Calgary would need to earn $12.20 per hour in order to live above the poverty line using the Low Income Cut-off Before-Tax measure. And this calculation is based on 2008 – not 2010 - data.

A $12.20 per hour minimum wage is not likely to be politically acceptable. Such a large increase might cause difficulties for employers as we exit the current recession.   Nevertheless, as a bare minimum, Alberta’s minimum wage should immediately be increased to $10.00 per hour with regular yearly increases thereafter.

Is there a better mechanism for making adjustments to the minimum wage than changes in the average weekly earnings index? A possible alternative might be to use the Consumer Price Index instead like the Yukon does. However, the ESPC believes that is better to use an index that tracks changes in wages for setting the minimum wage rather than an index that tracks changes in prices like the CPI.

If a wage index is used, the average weekly earnings index is definitely the best one. That’s because the average weekly earnings index tracks changes in wage levels of all employees regardless of whether they are paid hourly, weekly, bi-weekly or monthly. I presume this is why MLAs chose the average weekly earnings index to make changes to their salaries.

Tying annual minimum wage adjustments to average weekly earnings is a way of taking the politics out of the debate over what is a fair and reasonable minimum wage. It avoids situations where a substantial hike is made to the minimum wage shortly before a provincial election, only to freeze it for long periods thereafter. Tying the minimum wage to changes in the average weekly earnings of Alberta workers leads to more manageable annual increases using an agreed upon formula that is fair and predictable to both employers and employees.

Whatever decisions are made about Alberta’s minimum wage, inaction should not be an option. Despite being Canada’s wealthiest province, Alberta is once again sliding toward the bottom when it comes to its minimum wage. Out of the 13 provinces and territories, Alberta currently has the fourth lowest minimum wage. By October 2010 Alberta’s current $8.80 minimum wage will fall to second lowest, with only British Columbia having a lower minimum wage.

In conclusion, the Edmonton Social Planning Council makes two recommendations. One, that Alberta’s minimum wage be increased to at least $10.00 per hour no later than September 1, 2010. Two, that linking the minimum wage to the Alberta average weekly earnings index be reinstated effective April 1, 2011.

Thanks again for the opportunity to make this presentation. I welcome your questions.