Online Bulletin no.22
A substantial increase in the minimum wage:
A real way to combat poverty
For several months, many voices in Québec have been calling for a $15 an hour minimum wage in the near future. This movement is in line with the movement in the U.S. that has been ongoing for a few years. For Québec, the Institut de recherche et d’informations socioéconomiques (IRIS) has determined that a living wage[1] would be somewhat higher than $15, on average. Some businesses have already moved ahead and now provide that level of income to their employees. The idea is gaining support, and the movement already begun does not seem to be running out of steam. We must ask ourselves why a rich society like Québec can tolerate a situation in which some of its workers, even those working full-time, may not have an income high enough for them to get out of poverty.
However, there are other voices claiming that increasing the minimum age too rapidly would have negative effects on the economy, in terms of competitiveness, job losses and business closures.
This issue of our Online Bulletin looks at the position taken over the years by the Comité on the question of the minimum wage. The Comité considers that the minimum wage is still a poverty-fightingmeasure that complements the other socio-fiscal measures adopted by the government. Of course, employers are more directly affected than other stakeholders since an increase in the minimum wage forces them to increase the wages they pay to their employees.
A recurring measure in the Comité’s thinking
Increasing the minimum wage is a recurring topic in various documents prepared by the Comité, which has made a formal recommendation in two Advisory Opinions: the one on income improvement targets[2]and the one on job quality[3].Mainly in the latter, the Comité points out that access to quality jobs with a wage that makes it possible to get out of poverty must be a priority. The Comité believes that a decent wage must allow a person to satisfy his or her basic needs and get out of poverty, but also to participate fully in society. The current minimum wage does not meet that standard.
The Comité also points out in the Advisory Opinionthat the majority of minimum-wage workers are young people and women. It is often said that the majority of those workers are students. In fact, more than half of them are not studying, either full-time or part-time.
Furthermore, many of them are part-time workers, of whom a majority (60%) work 29 hours or less each week. The Comitéfurther points out that the minimum wage needs to be indexed annually to ensure the sustainability needed to cover basic needs.
Other Advisory Opinions briefly consider the minimum-wage question, including the Advisory Opinion on tax reforms,[4]which points out that when incomes are higher, there is no need to bolster low incomes with supplements or credits and increasing the minimum wage is an essential measure for improving the situation of low-income workers. Increasing the minimum wage raises benefits paid under income support measures and increases wages that are only slightly above the minimum wage. Moreover, an increase in the minimum wage can lead to an increase in contributions to social protections such as public pension plans, employment insurance and the Québec Parental Insurance Plan. Such increases are not provided by the last-resort financial assistance program or an increase in credits and premiums implemented by tax measures to bolster income insufficiencies. A measure to increase the minimum wage of people living in poverty is a step in the right direction.
Finally, we must mention the Advisory Opinion on citizen participation,[5]in which the Comité indicates that by increasing the minimum wage, people would have sufficient resources to exercise their right to participate fully in society, making such an increase the foundation for recognizing participation by everyone.
A major recommendation of the Comité linked directly to the scale of the minimum wage
In its Advisory Opinion on income improvement targets,[6]theComitérecommended that a person who works 16 hours a week at the minimum wage have an income representing 100% of the Market Basket Measure (MBM). In that case, the minimum wage would directly affect reaching an income target that without totally bringing people out of poverty, would ensure an income sufficient to meet basic needs. Currently, a person must work 30 hours a week to have an income that reaches 100% of the MBM. Thus,increasing the minimum wage would reduce the number of work hours needed to a level nearer the number of hours determined by the Comité and nearer to the definition of part-time work.
Past fears shown to be unfounded
Raising the minimum wage often raises fears that business competitiveness will be damaged and that there will be a negative effecton employment levels.The main objection of those opposed to a large and rapid increasein the minimum wage is related to expected effects on job offers. However, the highest increases in the minimum wage in the recent past have not led to any reduction in the number of jobs. For example, between 2005 and 2010, the Institut de la statistique du Québecobserved an increase in the number of jobs at or just above the minimum wage, although the minimum wage went up by more than $1.75 during that period. The same result can be identified in areas outside Québec. Thus, the data show little or no loss of jobs or reduction in hours worked.
The arguments for increasing the minimum wage are based on improved wealth sharing in order to have a more egalitarian society and improved social justice. Those in favour of an increase in the minimum wage see economic advantages, including increased productivity and motivation. The entire society and economy would benefit from a large increase in the minimum wage, which would bring about increased consumption by households, many of which would immediately return their income increases to the general economy.
Some of the enrichment would go to contributions, ensuring social protections that would be beneficial and available to all workers and could be returned to them in the form of parental leaves, various other benefits and retirement pensions,all of which would contribute to the stability arising from a higher income throughout their lives.
Probable gains for public finances
Another part of the additional income would find its way into government coffers. That is a reality for all workers when their income exceeds a certain threshold. That income would allow the government to maintain the social services that it provides to the entire community.
A recent IRIS study[7]shows that increasing the minimum wage to $15 an hour would generate gains of around $1.2 billion to $1.7 billion for the federal and provincial governments, taking into account reduced social transfers and the increase in tax receipts (income and sales taxes). Those gains would make it possible for the government to implement targeted policies for groups in the general population that would be affected by the negative effects caused by such increases.
Anchored in the spirit of theAct to prevent poverty and social exclusion
To improve access to work and to give value to work, the Act to prevent poverty and social exclusion invites the government, its partners in the labour market and community organizations to act in concert, particularly to improve the quality of jobs so that working people can have an income that will allow them to have a decent standard of living, taking into account the overall income of Québec workers. Thus,increasing the minimum wage becomes a means to achieve one of the five orientations of theNational Strategy to Combat Poverty and Social Exclusion. It should be noted that an article published by Statistics Canada in 2014[8]for Canada as a whole shows that in 2013, in constant dollars, the minimum wage was similar to the level observed in the late 1970s, although the GDP has more than doubled since that time. It would, therefore, be possible to take into account in a better way the growth of our collective wealth so as to make higher increases in the minimum wage.
Conclusion
The minimum wage has been increased substantially in some years only to return to lower increases in succeeding years. The increase announced for May 2017 is $0.50. At that time, the minimum wage will be 47% of the average wage. The government has let it be known that it intends to gradually raise the minimum wage to $12.45 (50% of the average wage) by 2020, if the economic situation allows. Raising the minimum wage to that level is an objective that could have been reached more rapidly and would have been a clear signal of the will to reach $15 in a less distant future.
1
[1]. A wage that allows a full-time employee to earn enough money to meet his or her basic needs and those of his or her dependants, participate in the cultural, political and economic aspects of daily life, as well as providing a room to manoeuvre with a view to changing his or her socioeconomic situation.From Philippe HURTEAU and Minh NGUYEN, Les conditions d’un salaire viable au Québec en 2016? Note socioéconomique, [n.p.], IRIS, April 2016, 7pages. (French only)
[2]. COMITÉ CONSULTATIF DE LUTTE CONTRE LA PAUVRETÉ ET L’EXCLUSION SOCIALE, Improving Individual and Family Incomes…Opting for a Better Future, Québec, Comité consultatif de lutte contre la pauvreté et l’exclusion sociale, 2009, 47pages.
[3]. COMITÉ CONSULTATIF DE LUTTE CONTRE LA PAUVRETÉ ET L’EXCLUSION SOCIALE, Pour assurer le droit à un travail décent: améliorer la qualité des emplois, Québec, Comité consultatif de lutte contre la pauvreté et l’exclusion sociale, 2013, 57pages. (Full version in French only). An English summary is available under the titleImproving the quality of jobs to secure the right to decent work.
[4]. COMITÉ CONSULTATIF DE LUTTE CONTRE LA PAUVRETÉ ET L’EXCLUSION SOCIALE, Réformer la fiscalité pour tendre vers un Québec sans pauvreté, Québec, Ministère du Travail, de l’Emploi et de la Solidarité sociale, 2016, 47pages. (French only)
[5]. COMITÉ CONSULTATIF DE LUTTE CONTRE LA PAUVRETÉ ET L’EXCLUSION SOCIALE, Au-delà de l’emploi, reconnaître la participation citoyenne et le droit à la dignité, Québec, Ministère du Travail, de l’Emploi et de la Solidarité sociale, 2015, 51pages. (French only).
[6]. COMITÉ CONSULTATIF DE LUTTE CONTRE LA PAUVRETÉ ET L’EXCLUSION SOCIALE, Improving Individual and Family Incomes…Opting for a Better Future, Québec, Comité consultatif de lutte contre la pauvreté et l’exclusion sociale, 2009, 47 pages.
[7]. MathieuDUFOUR and Pierre-AntoineHARVEY, Salaire minimum et revenus gouvernementaux, Note socioéconomique, [n.p.], IRIS, April2017, 13pages. (French only)
[8]. EricFECTEAU and DianeGALARNEAU, The Ups and Downs of Minimum Wage, [n.p.], Statistics Canada, July 2014, 13pages.