Minimum wage vs. poverty

Percentage of Islanders living in what StatsCan considers ‘low income’ actually increased slightly

Looking just for a moment only at statistics: If I told you that the rate at which we pay our lowest wage workers had almost doubled over the past 15 years, you’d probably think that was great and they are now much better off than before.

It is an objective fact that minimum wage on P.E.I. has more than doubled economic growth and growth in the cost of living for more than a decade.

(P.E.I.’s minimum wage will remain the highest in Atlantic Canada when it increases by 70 cents to $12.25 per hour on April 1, 2019, the provincial government announced Friday).

But if I were to ask you if you felt that people were better off, based on what I hear in opinion pieces and coffee shops, I’m guessing you’d probably say no.

So why is it with all the growth we’ve seen in minimum wage you don’t feel like people are better off? I’m guessing it’s because what you see is also backed up by fact: poverty rates have not declined with an increase in minimum wage. In fact, since the first push to a $10 minimum wage was made and with all the increases since then, the percentage of Islanders living in what Statistics Canada considers “low income” has actually increased slightly.

Poverty is a far more complex issue than simply where we set our wage floor.

We all have different needs and challenges. Minimum wage does nothing to improve the lives of those with barriers to employment or who are unable to find a job.

It also does not target those living in poverty as many minimum wage earners do not live in lowincome households, often being either young people still living at home with parents or those earning tips in addition to their wage. Rather than a labour policy, minimum wage has been rebranded as a poverty reduction tool, a task at which it is woefully ineffective.

Taxes also play a role as they are a big determinant of what individuals actually take home at the end of the work week. Our personal income tax system has not come close to keeping pace with minimum wage changes. Going back those same 15 years, a full-time minimum wage earner was able to keep more than half of their earnings before they paid provincial income tax.

Now, even with recent increases to the basic personal amount, that same full-time minimum wage earner keeps approximately one-third before paying provincial taxes and picking up any amount of overtime could easily push them into our second tax bracket.

But there are also market forces at play. While wages, even those beyond minimum wage, have been increasing, labour productivity (economic output per worker) has not kept nearly the same pace.

Simply put, more money may be going out the door to pay wages but there isn’t the same increase in stuff being produced. This is where small business owners start to feel the pinch.

While minimum wage debates often portray business owners as characters more at home in a Charles Dickens’ novel, this serves to generate more heat than light. In more than a decade of working with small business owners, I’ve seen ordinary, hard-work Islanders who are trying to stay afloat for themselves and their employees.

As with any of us, when one bill goes up, they either need to figure out how to make more money or figure out where to cut back. Yet another increase to minimum wage that is three times the rate of inflation and roughly twice that of economic growth means that many will have to make adjustments somewhere.

And this new hike doesn’t come in isolation as those same businesses will also need to figure out how to absorb increases to Canada Pension Plan premiums planned for the next five years and it remains unclear if they will benefit from any offsetting measures for the increased fuel taxes which are also coming.

So, in short, is poverty on the Island real? Absolutely.

But after many years of aggressive minimum wage hikes, is there less of it? No. And tackling poverty by using the same ineffective tool over and over again isn’t likely to yield a different result.