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Alberta's NDP Say It's Time For A Living Wage. Here's What Might Happen

Alberta (yes, Alberta) just elected a party that promised to hike minimum wage by 50 per cent.

There’s little doubt the new Alberta NDP government is going to look very different from its Progressive Conservative predecessor. And the NDP’s pledge to raise the hourly minimum wage to $15 may be the boldest way it could set itself apart from 44 years of PC governments.

Alberta NDP Leader Rachel Notley’s platform included a plan to raise the province’s minimum wage from $10.20 an hour, among the lowest in the country. The New Democrats want a 50 per cent increase, bringing it to $15 by 2018, which would make its minimum wage the highest in the country by far.

Notley has reasoned that if Albertans need $15 an hour to have a decent life above the poverty line, then employers should pay that. For an employee working 40 hours a week year-round, that amounts to $31,200 annually.

“It is simply unacceptable that in a province as prosperous as ours that hard-working Albertans cannot make ends meet,” Notley said on the campaign trail.

In Canada, the cost of living has outstripped wage growth in recent years, while consumer debt-to-income ratios are at an all-time high. Many anti-poverty groups have been calling for a “living wage” — a pay level that allows workers to cover basic needs.

Alberta’s support for a party pledging to boost the minimum wage is the latest indication that the notion of a living wage is gaining traction across the country, said Don Wells, a professor of labour studies at McMaster University in Hamilton, Ont.

“I think what you probably will see is this contributing to increasing interest in other provinces to raise their minimum wages as well,” he said.

“It’s an important win in Alberta for the message it sends across Canada, but I also think it’s part of a larger wave of concern around low-wage work.”

Raising the minimum wage could have a wave of positive effects in communities, including greater family stability and cohesion as well as greater community participation, he said.

Wells said there is a strong living wage movement in Hamilton, pointing out that McMaster, the municipal board of education and the chamber of commerce all pay a minimum of $15 an hour — higher than Ontario’s current minimum wage of $11. Hamilton’s city council is also examining a proposal to become a living wage employer, following in the footsteps of New Westminster B.C. where all workers are paid a minimum of $20 an hour. The current minimum wage in B.C. is $10.25.

Does Raising Minimum Wage Hurt The Economy?

If Alberta were to boost its minimum wage to $15, it would be a historic raise at the provincial level. The proposal has already been met with opposition from business groups that say it would mean employers would have to raise prices and cut costs elsewhere, such as hiring fewer employees, or pack their bags and head elsewhere. Some experts have also suggested that more workers would lose their jobs as businesses opt to invest in machines and technology to do the jobs instead of paying employees more.

The Canadian Federation of Independent Businesses has warned the proposal would put small businesses in peril.

Notley has said about 200,000 Albertans, about half of them over the age of 25, earn less than $12 an hour and would see an immediate benefit.

Still, just 1.3 per cent of Alberta’s workers earn minimum wage, the lowest of any province. And nationally, 60 per cent of minimum wage workers are under the age of 25, and the same percentage live with their parents or another family member.

The policy changes will affect such a small percentage of people that they will not have any positive effect, said Ron Kneebone, director of economics and social policy research at the University of Calgary’s School of Public Policy.

Most of the people on minimum wage in Alberta are teenagers who live with their parents, Kneebone said, adding that he believes they have more to lose than gain by a minimum wage hike because employers might cut jobs to offset the higher labour costs.

“There will be people who will lose their job, so when you think about this as an anti-poverty scheme, it kind of stinks because it really impoverishes some people who used to be working.”

“Not very many, but there will be people who lose their jobs,” he said, adding job losses would most likely be among teenagers working in restaurants or in day labour jobs such as landscaping.

Research on the impact of raising minimum wages has been inconclusive, with some studies showing it leads to job losses and others showing job gains. None of the studies have suggested dramatic increases or decreases in employment levels, meaning the employment impact is basically “a wash” said Rafael Gomez, a professor of employment relations at the University of Toronto.

He believes the positive economic effects of raising the minimum wage far outweigh the negatives.

It’s true that businesses will likely see their profits suffer as labour costs eat into a greater percentage of revenue, he said. However, he noted that big businesses can likely afford it.

The percentage of revenue allocated to cover labour costs has been declining in the past 30 years, he said, adding that we live in an era of peak profits, many companies are sitting on huge amounts of cash rather than reinvesting it.

As long as the wage increase is not too dramatic and too fast, businesses will have time to adjust, Gomez said. Notley has said she plans to raise the wage over three years, with a hike to $12 in the first year.

He believes boosting the minimum wage could actually be good for small local businesses.

“You shouldn’t think of minimum wage raises as the panacea that will lift people right out of poverty,” Gomez said. “What they will do is put more money into the hands of consumers who spend it and that’s good for the economy.”

Low-wage workers tend to spend a larger percentage of their incomes on local consumption than higher income individuals who are more likely to hoard cash in savings or spend abroad.

“They’re not putting it in an offshore account in Barbados, they’re spending it in the the store on the corner and on gas.”

Minimum wage increases could also lead to a kind of trickle-up economics, Gomez said.

“Even if you’re not making minimum wage, you benefit if you’re someone in the middle to lower end of the spectrum,” he said.

Companies will feel compelled to boost pay for low-level managers to maintain a pay differential between workers and managers, as well as wage incentives for employees to climb the ladder, he said. For example, if a low-level manager makes about 10 per cent more than the lowest paid employees, her salary would likely be adjusted so her earnings reflect her pay grade above her subordinates.

Minimum Wage Not The Only Way To Address Poverty

However, both Kneebone and Gomez believe there may be better tools than minimum wage increases to reduce poverty, including social assistance increases and guaranteed annual incomes.

“We should really be focusing on poverty reduction measures that are effective,” Kneebone said.

“Most people are in poverty because they cannot get work or they can only get part-time work, and minimum wage doesn’t fix either of those things.”

But many labour groups are pushing for a $15 an hour wage. The B.C. Federation of Labour launched its “Fight for $15” campaign in November to pressure the province for a more dramatic minimum wage increase. It believes the developments in Alberta will set a positive example for B.C.

The federal NDP has also been rallying around a $15 hourly minimum wage for some one million federal employees, using its Official Opposition Day last year to table a motion to implement that amount over five years. They have said it will be part of their platform leading up to the fall election.

An OECD report released Wednesday on minimum wages across the world placed Canada 21st of 28 countries studied in terms of before-tax minimum wage levels — only seven countries paid worse.

Canada placed in the middle of the pack in terms of weekly working hours needed for a minimum wage workers to rise above the poverty line. The OECD also found, perhaps surprisingly, that Canada has a greater number of workers earning at or below the minimum than the U.S.

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