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'Working for nothing': Canada joins global minimum wage debate

Grace Iyabosa, seen with her daughter Pride, does overnight shift work in an Ottawa hospital for $10.25 per hour.

Dave Chan/The Globe and Mail

Grace Iyabosa sits with hospital patients through the long nights, close at hand in case they need help.

The single mom works eight- or 12-hour shifts in Ottawa, on call, which means she often has to scramble to find child care for her two kids, ages seven and 11. She earns minimum wage of $10.25 an hour. After paying for food, babysitting and more than $600 for rent, there is nothing left at the end of the month.

"I don't want to be at home.

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I don't want to be on welfare. I want to be a good role model for my kids.

"But it's like I'm working for nothing," said Ms. Iyabosa, 41.

She is one of many low-wage workers in Canada who are working hard but not getting ahead.

More than a million people across the country worked for minimum wages or less last year, the fourth year in a row that number has been above the one million mark, according to Statistics Canada data. Since 2000, their numbers have nearly doubled.

The debate about the lot of low-wage workers is a global one. American fast-food workers have gone on strike to demand higher pay.

British politicians are pressing for minimum-wage hikes. The Swiss are considering a mandatory basic income for everyone while Cambodian garment workers are calling for better wages.

At last week's World Economic Forum in Davos, Switzerland, leaders listed income inequality – and social tensions it causes – as the top risk facing the global economy in the coming decade.

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In Canada, public attention is growing on various policy responses, from raising minimum wages to introducing living-wage legislation or testing, again, the idea of a basic income supplement. Proponents of a higher minimum wage say it will strengthen local economies, while some in the business community warn such a move would hurt employment.

On Monday, a panel studying Ontario's minimum wage is to release its recommendations, with the province expected to announce an increase shortly, as well as a mechanism to automatically increase the minimum wage in future.

Last year, the share of the Canadian work force toiling for minimum wage or less was 6.7 per cent, down from a year earlier but a higher portion than before the recession. In the decade to 2008, the share was less than 5.2 per cent.

Minimum wage was about 25 per cent higher in the mid-1970s than it is today when the cost of living is factored in, said Rafael Gomez, labour economist and associate professor of industrial relations at the University of Toronto.

The number of low-wage workers has swelled since the 1990s for several reasons: a drop in private-sector unionization, free trade and globalization that increased the supply of labour, and technology that is displacing low-end jobs. Government restraint and the growth of traditionally low-paying jobs such as retail are also playing a role.

Mr. Gomez said that the consequence of low wages is that society has "a missing middle, a huge explosion of pay at the top" and many more low-wage workers. He said measures such as gradual minimum-wage hikes or basic income policy would help counterbalance the effect of declining unionization without destroying the economy.

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And Canada's job market is becoming more polarized as "wages in high-paying industries are rising faster than low– and mid-paying industries – probably reflecting supply factor," said Benjamin Tal, deputy chief economist at CIBC World Markets. Sluggish wage growth at the bottom, partly due to a lack of bargaining power, "suggests that the income gap will continue to widen."

Low-wage jobs – positions that pay 20 per cent or more below the average – constitute about 28 per cent of paid, full-time employment, Mr. Tal noted, adding that this demographic will struggle to increase savings, particularly for retirement, and be more vulnerable to higher interest rates.

Relatively benign inflation has cushioned some of the weak wage growth. But although official inflation rates have stayed low in the past few years, many people aren't feeling it because food and shelter costs, which make up a greater share of a low-income person's budget, have climbed.

Opinions differ on what to do. A jump in minimum wage would kill jobs, says the Canadian Federation of Independent Business. It estimates that every 10-per-cent hike in minimum wages could trigger up to 321,000 job losses nationally, put cost pressures on smaller businesses and disproportionately hurt students and temporary workers. The group favours more tax exemptions on low-income workers and a boost to government investment in training for skilled trades, moves it says would give workers a higher disposable income, better prepare them for the work force and be less onerous for business.

A hike in Ontario's minimum wage to $14 from $10.25 "would have a disastrous impact on the provincial economy," said Plamen Petkov, vice-president for the CFIB's Ontario branch.

The Ontario Chamber of Commerce supports regular increases to the minimum wage but says any hikes should be predictable and based on clear criteria. It recommends the minimum wage be tied to inflation measures.

For Nancy Stern, president of Marco Corp., a Brantford, Ont.-based logistics services firm, a sudden hike to the province's minimum-wage rate would harm business because the company already competes with lower-cost U.S. rivals.

"When the minimum wage goes up, it affects all wages whether you are at minimum wage or not. Everyone expects a pay raise," said Ms. Stern, whose company employs more than 400 people with most of its costs in labour. She would prefer a process "that is predictable, stable, that's transparent. If you know it will be increasing on a regular and known basis, you can work with that and build that into your plan."

There are workplace health issues at play here, too. Low-wage workers are frequent visitors to Gary Bloch's practice. He works as a family physician at St. Michael's Hospital in Toronto and sees a swath of health problems stemming from low-paid, precarious work – from higher cases of chronic diseases such as diabetes and cancer to a greater prevalence of workplace injuries, along with the inability to pay for medications.

"I'm hearing more stories of desperation and people just not being able to scrape by," he said. "These are people who are working like crazy to support their families, full time, and they just cannot get by. They're going to food banks to bolster their food intake at the end of every month."

It isn't only those on welfare who are flocking to food banks. About one in eight, or 12 per cent, of people who used them last year got most of their income from employment, according to Food Banks Canada.

Dr. Bloch is one of a group of physicians and nurses that this month called for Ontario's minimum wage to rise to $14, which would be the first increase in four years. "Workers who get paid better tend to work better," he said. "They tend to be more productive, they're more likely to stick with their jobs, they're more likely to be satisfied and take less sick days."

Savings aren't an option for Lambert Villaroel, a line cook at one of University of Toronto's campuses. His emergency fund amounts to some coins in a plastic water jug. Lately, it has been empty, save for a few pennies. He makes $12.50 an hour, a smidge above minimum wage. Sometimes he doesn't have money for a subway token, forcing him to walk to work. Rent has risen twice lately.

At 62, "I'm dipping into savings and I can not replace it," he said. "A job should keep you out of poverty, not keep you in poverty."

Mr. Villaroel is not alone. Ontario and Prince Edward Island have the country's highest share of workers in minimum-wage jobs, at about 9 per cent.

In Hamilton, Ont., David Galvin has zero savings at the end of each month. He has a degree from the University of Guelph in computer sciences but now works as a security guard, earning $11 an hour.

Living on a $767 paycheque means he can't afford a car, instead using public transit that is often slow or unreliable. It has meant no vacation in years, sharing a modest apartment and no money set aside for retirement or as a cushion if he falls ill. Like most low-income earners, much of Mr. Galvin's budget goes to food and shelter. "It is stressful to be worried about money all the time," he said.

A wage increase would allow Mr. Galvin to buy a car and save a little for retirement. It would let Mr. Villaroel save for a down payment on a house, and help Ms. Iyabosa, a volunteer with Acorn Ottawa which advocates for low-income families, buy better-quality food and clothing for her kids.

"If I don't work, I would be depressed," she said. "But with $10.25, I can't even pay my bills."

Editor's Note: A Monday version of this online article cited a University of Toronto professor as saying minimum wage in Canada is now a third of what it was in 1970 when the cost of living is factored in. Prof. Rafael Gomez would like to correct that estimate to say minimum wage was about 25 per cent higher in the mid-1970s than it is today in real terms.

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About the Author

Tavia Grant has worked at The Globe and Mail since early 2005, covering topics from employment and currency markets to trade, microfinance and Latin American economies. She previously worked for Bloomberg News in Toronto and Zurich, writing on mining, stocks, currencies and secret Swiss bank accounts. More

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