The Politics of Wage-Setting in Ontario
The current debate in Ontario over raising the minimum wage offers insights into the politics of wage-setting in the neoliberal era, which is based on the notion that labour markets are gender neutral, colour blind, and that workers and employers meet each other on equal ground. According to this logic, capitalists do not exploit workers, the market decides what the worker will be paid. If workers want higher wages they must develop their human capital. Those workers with higher levels of skills, education, and training will fetch higher wages.
The so-called level playing field that many orthodox economists claim underpins neoliberal wage-relations serves three critical ideological functions. First, it encourages workers to believe that they are in the same boat as their employer and that outside forces such as government and organized labour will distort the interactions between workers and employers. Second, it encourages workers to cooperate with their employers to succeed in a competitive economy and increase profits, which will secure the workers’ future employment. Third, it obscures the reality that the labour market is distorted and segmented along gender, colour, newcomer, and disability lines and between good and bad jobs. That is, women, racialized groups, new immigrants, and those who are other-abled are more likely than (white) men to be paid low wages and trapped in precarious, part-time, dead-end jobs.A decent minimum wage can serve as an important instrument to counter some of these exclusionary effects and smooth out some of the imbalances in power between low-wage workers and employers. However, during the past year the government of Ontario has been locked in struggle with workers’ and anti-poverty groups, unions and business associations over increasing the minimum wage.On the one hand, a number of large business associations claim that raising the minimum wage will lead to job loss as employers shed unproductive workers and those who have insufficient human capital to warrant paying a wage above what the market might dictate. Put otherwise, it is the worker who loses when the wage floor is raised. The labour market must be left to do its job.
On the other hand, a number of grassroots workers’ organizations, unions, and anti-poverty groups claim that the minimum wage must rise by at least 37 per cent in order for low-wage workers to meet increases in the real cost of living. According to these social activists, business profits have reached unprecedented levels despite a global recession while workers’ wages at the bottom have eroded significantly. As a consequence, more than half a million low-wage workers in Ontario are sliding deeper into poverty. The labour market must be regulated and contested.
The Government’s Plan
On February 25, 2014 the government of Ontario introduced the Fair Minimum Wage Act (Bill 165) which, the Premier claims, offers a solution to this problem. According to the Premier, Bill 165 strikes a new balance between the needs of workers and employers. The Premier also argues that the Act modernizes the province’s approach to wage-setting. However, investigation of the proposed legislation reveals that there is nothing balanced or modern about the government’s plan. Not only does Bill 165 continue to allow employer’s interests to prevail over the basic material needs of low-wage workers, it looks past the realities of work in the neoliberal era; namely, profit-making depends on systemic oppression of women, racialized groups, and those with complex mental and physical needs. It is an approach that centres on standard employment relationships and outdated participation norms.
|Table 1: General Minimum Wage Rates in Ontario (1990-2014)|
On January 30, 2014, Ontario Premier and leader of the Liberal Party, Kathleen Wynne announced that the province’s general minimum wage
will rise by 75 cents per hour from the present rate of $10.25 to $11.00 on June 1, 2014 to take effect on October 1, 2014 with future increases to be tied to the rate of inflation and four months prior notice to the business community. The minimum wage for students under the age of 18 will rise by 70 cents from $9.60 to $10.30 while the minimum wage for liquor servers will rise by 65 cents from $8.90 to $9.55. Minimum wage rates for all other categories of workers, including migrant labour, farm and agriculture workers, wilderness guides, live-in care givers, those on foreign skilled or temporary worker visas, visiting students, and social assistance recipients who do community participation under the Ontario Works Act (1997) are excluded from these proposed increases.
The government developed its plan based on recommendations provided by an Advisory Panel on the Minimum Wage struck in June 2013. The Advisory Panel was chaired by the director of the province’s largest business school and comprised of a senior board member at the Retail Council of Canada, President and CEO of the Tourism Industry Association of Ontario, a liaison to the Ontario Federation of Labour, a recent high school graduate, and a social worker. Noticeably absent from the panel were low-wage workers most impacted by wage-setting policies, including: women, racialized groups, newcomers, Aboriginals, redundant and disabled workers, workers transitioning from welfare to work, and income support recipients.
The Advisory Panel was tasked with advising the government on the best approach to setting the minimum wage in the future. That is, the Advisory Panel should recommend a mechanism for minimum wage revisions that would be arms-length from the government and not subject to short term electoral processes. To this end, a series of regional public consultations were conducted between September and November 2013 with the goal of determining the economic conditions of the province, the cost of living, characteristics of low-wage workers and work, and the impact of previous wage increases on business productivity. In addition, the Advisory Panel met with two task groups established by the Ministry Labour: The Vulnerable Worker’s Task Group and Small Business Task Group.
The Advisory Panel reached a consensus around four recommendations: 1) minimum wages should be revised annually according to the Ontario Consumer Price Index (rate of inflation); 2) wage increases should occur on April 1 with four months’ prior notice of any change provided to employers; 3) the government should ensure that an impartial full review of the social and economic impacts of minimum wage rates and revisions is conducted every five years; and, 4) the government should establish an ongoing research program to collect data relevant to minimum wage issues. The Advisory Panel did not recommend a specific level at which the minimum rate should be set nor did it recommend tying the minimum wage to a low income measure such as the Low Income Cut-Off (LICO) or Low Income Measure (LIM). The refusal to link the wage floor to a poverty measurement was especially surprising given that the Advisory Panel was established, in part, because of the government’s 2008 Poverty Reduction Strategy.
|Table 2: General Minimum Wage Rates in Canada (2014)*|
Nonetheless, Wynne claims that the government’s approach to wage-setting strikes a balance between the needs of the business community and the needs
of low-wage workers. Further, Wynne boasts that the level of proposed increases, along with other wage increments since the Liberals took office in 2003, represent the most significant improvement in the province’s minimum wage rates over the past 25 years and will put Ontario at the top of minimum wage scales in Canada. Most importantly, according to the self-proclaimed ‘Social Justice Premier,’ the government’s plan will lift many workers above the poverty line – “someone working 35 hours a week, 50 weeks a year at this wage would make $19,250 while 40 hours a week, 50 weeks a year would be $22,000. The Ontario low-income measure was $20,633 in 2011.”
The government’s plan assumes full-time, full-year equitable employment and comprehensive work-related benefits. This fails to take into account the realities of work in the 21st century and the impact that an unregulated labour market has on the limited resources of low-wage workers. As designed, the Fair Minimum Wage Act will not lift many workers at the bottom out of poverty neither will it eliminate or reduce economic disparities between mainstream workers (usually white adult males) and marginalized workers (mostly women and racialized groups).
The government’s approach to modernizing wage-setting in Ontario contains two major design flaws. First, it assumes standard employment relationships and outdated participation norms, especially with regard to family norms, gender and racialized groups. Second, it is driven by the law of one price – an organizing principle that assumes workers in a competitive market with similar skills employed in similar jobs receive the same wage.
Standard Employment Relationships and Outdated Participation Norms
The government has designed the Fair Minimum Wage Act on the basis of employment relationships that emerged in the post-Second World War era. At that time, regular employment was defined as full-time, continuous, based on standardized working time (nine-to-five), usually with one employer that included extensive social benefits (e.g. health, dental and vision care, pensions, paid vacation and sick days, paid public holidays and overtime, paid maternity and parental leave, training, education and skills-building, paid leave for personal emergencies such as funerals etc.) and protection from unfair dismissal. This employment relationship was premised on the (white) adult male-breadwinner/female caregiver family norm.
During the last quarter of the 20th century there has been a shift away from stable, life-long employment premised on a predictable life cycle that followed the pattern of school-work-retirement and toward insecure, part-time, temporary, casual, seasonal work involving irregular hours, multiple employers, and a variety of jobs over the life of a worker based on an erratic pattern of movement in and out of work, education, re-skilling, and retirement. Very few low-wage workers qualify as ‘standard workers’ in the traditional (post-war) sense. In addition, for the majority of low-wage workers, the social wage (statutory entitlements) has disappeared.
Over the last twenty-five years the rate of precarious (part-time, temporary, casual) work in Canada has nearly doubled. These jobs typically pay minimum wages (about 33 per cent of part-time employees earn minimum wages compared with 9 per cent of full-time employees), provide no pensions or social benefits, no union protection, no regular wage increments, and have eliminated overtime and paid public holidays. As an example, in the first quarter of 2013, only 12,700 jobs were created in Ontario. This was followed by several quarters of job losses. All jobs created were in part-time positions while full-time work declined by 34,400 positions. Further, part-time work and job growth tends to be concentrated in service industry jobs, food services and accommodation jobs and temporary agency work. Low-wage work in these sectors is labour intensive, regular periods of rest are not guaranteed, work breaks are for the most part unpaid, work time is unpredictable and ranges over a 24 hour work cycle, and the average work week ranges between 12 and 28 hours of paid work. Precarious workers must be available on short notice and, typically, have two or more jobs.
The gender and racial structuring of the labour supply has also changed significantly across this period. Women’s participation rates have increased dramatically (71 per cent of adult women participate in the paid labour force) and family norms have changed. Increases in female-headed, lone-parent households and extra-marital births have presented new challenges for many women trying to balance work and family responsibilities. Low-wage work and lack of social entitlements such as subsidized child care, transportation, and housing, as well as extended health care is a major problem facing lone-mothers.
Racialized groups, newcomers, Aboriginal persons, persons with disabilities, older adults and youth are disproportionately represented among low-wage, precarious workers. For example, 40 per cent of disabled workers continue to fare poorly in finding work and in securing wages above the poverty line. The incidence of low-wage work is three times higher among disabled Aboriginal workers than able-bodied non-Aboriginal workers. Low-wage employment among Aboriginal workers is more than double the general adult worker population. More than 35 per cent of newcomers work for low wages and wage poverty persists, on average, for more than five years after arrival in Ontario. Since the recession of 2008, there has been a continuous increase in youth unemployment and low-wage poverty. More than 25 per cent of young people between the ages of 16 and 24 years of age are trapped in minimum wage jobs, the employment prospects for disabled youth and youth from racialized groups is even worse.
The standard employment relationship no longer exists. And, despite the increase and persistence of labour market segregation along the lines of gender, race, disability, family, and citizenship status and segmentation between good and bad jobs over the past twenty-five years, the organizing principle for the government’s Plan centres on the law of one price.
The Law of One Price
In simple terms, the law of one price states that the labour market operates efficiently and fairly and that workers with similar skill levels, employed in similar jobs receive the same wage. The reality of significant wage gaps between female and male earnings and earnings of racialized and non-racialized workers, suggests that mainstream economic models of a competitive, efficient labour market does not exist. In other words, the law of one price is absent in the functioning of contemporary labour markets.
For example, racialized workers earn only 81.4 cents for every dollar paid to non-racialized workers. The pay gap widens for women. Not only are women almost three times as likely to be low paid as compared to men (by a multiple of 2.9), women earn on average 77 per cent of the income of male workers. Racialized women have it worst. They earn 55.6 per cent of the income of white males. Racialized women immigrants earn only 48.7 cents for every dollar paid to non-racialized immigrant males.
Given that racialized and foreign-born groups now comprise over 40 per cent of Toronto’s population, and estimates are that by 2031, racialized groups will make-up a third of the country’s total population there exists a potential for a vast increase in the number of low-wage workers in the province and across the country. The overarching results will be that earnings among women and racialized groups, especially racialized women, will continue to trail those of non-racialized men and millions of workers will fall into poverty despite working full-time, full-year. This raises the question: who really wins in the government’s approach to buying and selling labour-power?
Winners and Losers in the Minimum Wage Debate
Because the Wynne government’s plan does not tackle the realities of work in the 21st century and fails to apply substantive policy correctives to a labour market that distorts wage-relations and discriminates against women and racialized groups, the boundary between winners and losers is very clear. The winners are employers and those political parties representing the interests of business. The losers are women, racialized groups (especially racialized women) and those communities where low-wage workers are concentrated.
Winners: As the Leader of the Official Opposition, the Conservative Party’s Tim Hudak rejected the government’s proposed wage-setting scheme on the basis that the 75 cent per hour increase would be too much for business to handle leading to reduced hours for shift workers, layoffs and widespread job losses, many business leaders and associations have increased pressure on the government to keep wages low. Despite evidence to the contrary and that these businesses continued to accrue billions of dollars in profits during the deepest part of the ‘Great Recession,’ the Canadian Restaurant and Food Services Association and the Retail Council of Canada (e.g. McDonalds, Tim Hortons, Toys ‘R’ Us) among others, benefit most from paying their workers low wages. Specifically, these businesses are the beneficiaries of government welfare-to-work transition programs.
For example, many businesses in the retail, food and service sectors employ thousands of workers transitioning off the province’s welfare rolls and into full-time work. While the employer pays transitional workers the prevailing minimum wage, the provincial government provides additional supports (similar to the post-war social wage) for up to two years in order to stabilize the welfare leaver’s attachment to the labour market. These transitional supports include: food, clothing, child care and transportation subsidies, extended social housing supports and health care benefits, literacy upgrading, training and skills-building. Why should employers pay a decent wage that both sustains the worker and
strengthens labour market attachment when the tax payer will do it for them?
Losers: Women, racialized groups, families, and communities are losers in this debate. The impact of low wages on the health, well-being, and autonomy of women, especially lone-mothers and racialized women, is well-documented. Pregnant women may not have the resources necessary to take sufficient time to fully recover from child birth. Precarious work can cause these workers significant stress due to job insecurity, pressures from holding multiple jobs, irregular hours of work, access to safe transportation, and increased risk of illness and injury due to long hours of work, fatigue and poor nutrition.
While incomes among some top CEOs have increased by more than 250 per cent over the past few decades, the minimum hourly wage for low-wage workers has a current value (measured in 1970 dollars) of $1.56. The top 20 per cent of economic families now accounts for more than half of all of Canada’s income, the bottom 20 per cent accounts for less than 1 per cent. In Ontario, declining real incomes, in terms of the after-tax median income, of City of Toronto families has dropped by $6,100 between 1990 and 2005.
Over the past twenty-five years, low income earners have become concentrated in poor neighbourhoods in large urban centres. In Toronto, for example, the poorest residents are concentrated in a circle around the prosperous urban core beginning at Jane and Finch, down through the former City of York to the Parkdale community, across to Alexander Park, Regent Park, Moss Park, [Ed.: see “Poor People’s History of East Downtown Toronto”] and into parts of Scarborough. By 2005, over 54 per cent of the city’s poor families were concentrated in these neighbourhoods. The proportion of low-income neighbourhoods in Toronto increased from 19 per cent in 1970 to 53 per cent in 2005. The average income earned by individuals in these poor communities in 2005 was $26,900 per year compared with $88,400 per year earned by individuals living in wealthier surrounding neighbourhoods.
The impact of low-wages, precarious part-time work, job loss and wage erosion on communities has, likewise, been well studied. The social effects include: increase in evictions and homelessness for non-payment of rent, increase in personal insolvencies, increase in personal debt, increase in number of payday loans, as well as increase in family breakdown, child neglect, intimate partner violence, mental illness, drug and alcohol abuse, vandalism, crime, truancy and delinquency.
This Liberal government has raised the minimum wage more times than any other government over the last twenty-five years. However, inflation and recession have stripped away any gains. A strategy is needed that will recession-proof wages and provide a real fix for income inequality and labour market segmentation. We need to change the focus of the debate.
Refocusing the Debate: What Alternatives?
The argument that I have made here is that the government’s claim to have designed a solution that balances the needs of business and the needs of low-wage workers and that modernizes wage-setting is misleading. The government’s focus on limited intervention in the market sidesteps the real issue: the labour market is segmented and segregated. Low-wage workers, especially women and racialized groups, are trapped in a life of poverty and are powerless to change their circumstances. An alternative approach and focus is necessary.
The most obvious place to look for an alternative course of action – the New Democratic Party (NDP) – has remained silent on the issue until very recently. NDP leader Andrea Horwath, who currently holds the balance of power in the Liberal minority government, announced a plan on February 25, 2014, that would see the minimum wage rise to $11.00 per hour on June 1, 2014, followed by an increase to $11.50 on June 1, 2015 and to $12.00 per hour on June 1, 2016. Like the Liberal Plan, the Social Democratic Plan would also tie future rises to the rate of inflation and provide employers four months’ notice before increase takes effect. Unlike Wynne’s Plan, Horwath’s Plan proposes to tie wage rises to lowering business taxes. This sets a worrisome precedent for employer’s expectation around future wage increments. The Social Democratic alternative offers no relief from low-wage poverty and fails to address issues of sexism, racism and economic exclusion.
Developing an alternative that focuses on improving precarious, part-time work and corrects systemic sexism and racism is complicated by the number of campaigns and proposed wage increments competing for the government’s attention. For example, Raise the Minimum Wage campaign, organized and led by the Workers’ Action Centre (WAC), is driven by a social determinants of health rationale that proposes a $14.00 hourly rate as the minimum for workers to sustain their health. According to this group, the minimum wage should be set to 10 per cent above the poverty line, assume a 35 hour work week and be updated yearly based on the cost of living. There are a number of local living wage groups challenging WAC’s position. Many living wage campaigns are pressing the government for a base rate of $16.90 per hour which, according to these groups, is the minimum necessary to cover the cost of living in large urban centres. In addition, several other anti-poverty campaigns such as Put Food in the Budget and Raise the Rates, aimed at increasing social assistance benefits, are tying their grievances to the issue of low wages.
“A progressive approach … will require greater solidarity, compromise, and consensus-building across community sectors and campaigns.”
A progressive approach that will modernize wage-setting in Ontario and that will lift low-wage workers above the poverty line, eliminate distortions, discrimination and poor working conditions will require a coherent and coordinated approach that focuses on: the right to employment, a sliding scale of wages and hours, and extensive wage bargaining. It will also require greater solidarity, compromise, and consensus-building across community sectors and campaigns.
The place to begin is with shifting the balance of power between workers and employers. Laws must be reformed to make unionization easier and to strengthen and enforce employment standards. The only protection against wage erosion and wage-based poverty is universal collective bargaining on a sliding scale of wages and hours. This ensures an automatic rise in wages in relation to an increase in the price of consumer goods. During recessions and production slowdown, all workers must have the right to modify their hours of work without penalty. This means that all available work hours should be divided equally among workers. The average wage of every worker remains the same as it was under the full working week.
All workers are entitled to the right to meaningful employment. Given that workers must sell their labour-power in order to survive, the only serious right a worker has to avoid exploitation is the right to a good job. It is the mutual responsibility of governments and employers to create jobs where the work week is well-defined and the conditions of work do not lead to the demoralization and ruin of the worker.
The evidence is clear. A decent minimum wage is necessary to lift low-wage workers out of poverty. The minimum wage must be set at a level that guarantees that anyone working full-time, full-year does not live in poverty. This means a wage of not less than $15.00 per hour for all categories of workers. This rate is a reasonable compromise between the $14.00 per hour demanded by many grassroots organizations and $16.90 per hour which is an average living wage in the province.
A Fair Minimum Wage Act must include a strategy that corrects historical wrongs against Aboriginal workers and systemic discrimination against women and racialized workers (especially racialized women), newcomers and disabled persons. This means that equity legislation must be strengthened, fully implemented and monitored. It also means that long-term investments in education, literacy, training and skills-building, accessible worksites, language training and recognition of foreign credentials must be part of the strategy. All pregnant workers and adoptive parents must be covered by generous maternity and parental benefits with the option to extend parental leave. Further, free and universal child care and transportation, supports for housing, nutritional food, and mobility supports are necessary to bring women, racialized and disabled workers’ wages and opportunities into line with their (white) male counterparts.
While establishing a decent minimum wage is not radical, without it, under the conditions of neoliberalism, low-wage workers will continue to live in constant fear of poverty and threat of destitution unless the labour market is regulated. The government’s Plan fails to do this and Opposition leaders refuse to raise the issue. This means that workers’ groups, anti-poverty organizations, and unions must continue to challenge the government by means of struggle and solidarity until the rights of workers prevail over those of profit-making. •