WHAT IS A LIVING WAGE?
What is a living wage?
A living wage reflects what earners need to bring home based on the actual costs of living in a specific community. Living wages are rooted in the belief that individuals and families should not just survive, but be able to live in dignity, and participate in their community. The living wage is defined as the hourly wage a worker needs to earn to cover their basic expenses and participate in the community.
What is the difference between a minimum wage and living wage?
The minimum wage is the legislated minimum set by the provincial government. Thousands of families making the current minimum wage in Alberta are still living below the poverty line and are unable to lift themselves out of poverty. A living wage calls on governments, employers, and community members to ensure that workers can make ends meet in their communities and that parents can earn what they need to support their families.
Some key differences:
- The minimum wage is the same across the province. Living wage reflects what people need to earn to cover the actual costs of living in their community.
- The minimum wage is mandatory for many occupations. The living wage is a voluntary commitment of employers to go beyond the minimum standard and pay enough for employees to cover their expenses and participate in community.
- For years the minimum wage has been too low to lift even someone working full-time above the poverty line. The living wage is based on the principle that if you work full-time for a full year, you should earn enough to make ends meet and participate in your community.
When was the most recent change to the Alberta minimum wage?
The last time minimum wage was changed was on October 1, 2018 when minimum wage was raised from $13.60/hour to $15/hour. On June 26, 2019, the Albertan government implemented a new minimum wage of $13/hour for students under 18.
In comparison to Alberta, BC raised minimum wage to $15.75 on June 1, 2022 and Ontario raised minimum wage to $15.50 on October 1, 2022. All provinces and territories, except for Alberta, have increased minimum wage in 2021 or 2022.
If businesses are expected to increase wages, won’t they have to lay people off?
Studies show that businesses usually absorb cost increases related to living wage policies through a combination of price and productivity increases, reduced turnover and redistribution of staff. When B.C. raised its minimum wage more than $2 per hour in a relatively short amount of time, there was a very small (1.6%) reduction in the employment rate for youth between the ages of 15 and 24 and we can’t be sure that this 1.6% reduction was entirely due to the change in minimum wage or if there were other factors.
There are a lot of examples around the world of cities raising wages in a meaningful way, including Vancouver, Seattle and London in the UK. In these jurisdictions, increases in wages for the lowest paid in society actually resulted in increased spending power and reduced inequality.
Why has there been such a big jump from the 2021 Living Wage to the 2022 Living Wage numbers?
Some communities saw a bigger increase in their living wage rate between 2021 and 2022 than previous years for the following reasons:
- There has been record inflation rates, which means the prices of goods and services have increased more than usual.
- The living wage rates in 2021 and previously have usually been based on the income needs of a family of four; in 2022 we broadened it to be based on three household types: (1) a family of four, (2) a lone-parent family with one young child, and (3) a single individual living alone. The income needs for a lone-parent family and a single individual living alone can often be higher than for a family of four with two working adults, so this would push the living wage higher compared to previous years.
- We made some additions to be more consistent with how Ontario and BC calculate their living wages. For example, we’ve added an amount for life and critical illness insurance and increased mobile services to include 5GB of data on a 4G network.
When does the new living wage get announced and when does it have to be implemented?
We announce the living wage during Living Wage Week. The 2022/2023 living wage numbers were announced on Monday, November 14, 2022. Employers are encouraged to implement new numbers as soon as possible.
Typically we require certified employers to adjust the minimum hourly wage within 6 months following the announcement, but because this year’s rate increase was higher than in past years, employers will have one year to adopt the new living wage in order to remain accredited .
What is the minimum wage in 2022 in Alberta?
The minimum wage set by the provincial government is typically lower than the living wage.
$15.00 per hour
$13.00 per hour for workers under the age of 18
How was the living wage calculated?
The living wage is based on the income needs of the following three household types:
(1) a two-parent family with two young children,
(2) a lone-parent family with one young child,
and (3) a single individual living alone.
It is a weighted average based on how many of each household type there are in Alberta. It considers the hourly rate of pay needed for a household to maintain a modest standard of living, once government transfers have been added to the family’s income and taxes have been subtracted. The methodology assumes that each adult is working full-time hours and includes more than the basics of food, clothing and shelter –the calculator also takes into account unexpected costs, small investments in education, child care, and participating in the community. Learn more about why we took this approach and How Living Wages Are Calculated.
Small businesses have been struggling. Won’t increasing wages add extra stress?
Businesses have faced unprecedented challenges over the past two years. The intention of releasing new living wages for 2022 is not to add further stress to these companies, but to shed some light on what it actually costs to live in Alberta.
According to the 2016 federal census more than 60% of people living in low income have a job. A 2021 article found that “Employment is obviously a significant determinant in whether somebody experiences poverty. Employment in and of itself, however, is not enough to mitigate conditions of poverty. This is primarily because employment in Canada does not guarantee a living wage. Prior to COVID-19, 50–70 percent of Canadians living in poverty were employed, often hold- ing multiple jobs (Jackson, 2018; Lefroncois, 2015). Alberta has one of the highest rates of working poverty in Canada (Edmonton Social Planning Council, 2017).” A 2022 study on food bank usage reported that 14.1% of food bank clients reported employment as their main source of income. This clearly demonstrates that wages in some industries are not in line with the local cost of living. Calculating and publishing the living wage helps inform businesses as well as policy makers at the local level.
Read more about the benefits of paying a living wage in A Case for A Living Wage: Business Lens.
Businesses may also see an opportunity with paying a living wage. Increased wages enable workers to spend in their communities, and this supports the local economy.
I'm an employer and I can't afford to raise my payroll this much. What can I do?
Businesses have faced unprecedented challenges over the past two years. The intention of releasing living wages is not to add further stress to these companies, but to shed some light on what it actually costs to live in Alberta. Calculating and publishing living wages helps inform businesses as well as policy makers about local affordability measures and how they compare to other cities and provinces. Equipped with this information, businesses can advocate for measures like utility rate caps, insurance premium caps as well as action on affordable housing and food.
What is the certification process?
To begin the certification process, first fill out the Living Wage Employer Application Form. If all staff aren’t currently paid a living wage, employers must provide a Living Wage Implementation Plan as part of their application.
Once the application is reviewed and we have confirmed that conditions are being met for becoming a Living Wage Employer, both the employer and Alberta Living Wage Network will sign the license agreement. Employer fees are waived for the first year. An annual employer fee will be paid at the first-year anniversary of the date of recognition and will be due each subsequent year on that anniversary.
The license agreement is a legal document that outlines the obligations and responsibilities the Alberta Living Wage Network has to the Living Wage Employer, and what those employers agree to do in order to maintain recognition.
How much does it cost to become certified?
The cost varies by size and sector, starting at $50/year for the non-profit and private sector with fewer than 10 employees. For full details of the cost please refer to the Alberta Living Wage Employer Guide.
Employer fees are waived for the first year of certification.
How do organizations benefit from paying living wages?
There are several reasons that employers pay living wages across the province and in Canada, these include happier workers, less turnover, and fewer missed work days. Many also consistently report that they feel it’s the right thing to do.
Research has found that living wage employers also cut costs when it comes to hiring and training new employees. A Harvard Business Review article compared the turnover rate at Costco (paid a living wage) and Walmart’s Sam’s Club (didn’t pay a living wage), where the turnover rates were 17% and 44% respectively. The cost of replacing a worker was 1.5 to 2.5 times the worker’s salary, meaning Sam’s Club would see an annual cost of $612 million compared to Costco’s $244 million.
There are many businesses and organizations that see the value of paying a living wage. Many of them are vocal advocates for paying a living wage and the value of decent work as well. The Alberta Living Wage Network certifies employers representing a variety of sectors including retail, finance, manufacturing, tourism, health care and media.
How long will it take to become certified?
It will vary according to the size of your organization and the types of contracts you have. Some employers can complete their application form straight away and we will aim to process their certification as quickly as possible. Larger companies may take up to 6 months to become certified.
Does the Alberta Living Wage Network audit employers?
Alberta Living Wage Network does not carry out audits of certified employers as the certification is a signed agreement of their commitment to the Living Wage.
If an employer is found to have not fulfilled the criteria within their living wage declaration, the Coordinator will work with the employer to determine a path towards compliance with their declaration, and, if necessary, review the status of the employer.
If an employee believes their employer is not paying a living wage, they are encouraged to get in touch with the Coordinator through the Employer Reporting Form. This communication is confidential.
WHO IS THE LIVING WAGE FOR?
Who does the Living Wage apply to?
A certified Living Wage Employer must pay all active full-time, part-time and contract employees a living wage for their area. Employers also must insert a living wage clause in all new contracts with external service providers.
If employers offer benefits, does this impact the living wage?
Employers may offset the living wage rate by providing benefits that affect basic needs, such as health care plans. Paid days off above the legislated minimum are also credited toward their effective pay.
What about interns, trainees, co-op and practicum placements?
Employers are allowed to have a small number of trainees, students in practicum or co-op placements, or interns that are paid below the living wage, as long as they don’t represent a core part of the total staff makeup (no more than 10% for most employers; in the case of small not- for-profits where the total staff complement is five workers, no more than 20%). Staff that are on probation are not counted as part of the living wage determination process but once their probation period is over, they must receive a living wage.
Notwithstanding the 10% exemption for trainees, interns, co-op, and practicum positions, living wage employers are encouraged to pay a living wage, or close to the living wage, to these employees as they are able.
Most low wage people are kids living with their parents; shouldn’t they be paid less because they have fewer expenses?
It’s important to note that most people that earn between $13 (minimum wage for people under the age of 18) and $19 (typical Alberta living wage) are not kids living at home. Approximately 45% have children and 59% are over the age of 25, according to the most recent StatsCan Labour Force Survey – September 2020 to August 2021.
HOW IS THE LIVING WAGE CALCULATED?
Why are three family types used to calculate the living wage? What about people in different living situations?
Each person’s living situation is unique, and the living wage rate isn’t meant to be an exact representation of each individual’s circumstances.
The living wage is an indicator for community affordability and livability based on the best data available for each community. Previous calculations were based on the Canadian Living Wage Framework, which specifies using a family of four in the calculations. We’ve expanded this to include lone parent and single individual households to reflect multiple situations where people may have access to different government benefits and taxes and would be affected differently by policy changes (e.g., improving child care affordability will affect each household type differently).
Also, calculating and publishing different numbers for different family types could be confusing and could create conditions where employers are asking employees about family situations for different wage structures.
We use a weighted average because wages should not be based on family composition or lifestyle, so we are combining the numbers into just one rate per community that employers need to pay to be eligible for living wage certification.
Inflation keeps going up, won’t raising wages continue raising inflation?
This 2017 Bank of Canada staff analytical note looked at what would happen if provinces went ahead with their scheduled minimum wage increases (e.g., Alberta was scheduled to increase minimum wage from $12.20 to $13.50 in October 2017 and then to $15 in October 2018). They found that the scheduled minimum wage increases would contribute to inflation by roughly 0.1 percentage points in 2018. This means that when the lowest paid workers get a raise, it has a very small effect on the prices of goods and services.
If wages go up, won’t I be paying more for goods and services?
Costs rise all the time without workers receiving a pay increase. Living wage policies cover only a small percentage of the labour force. When Seattle committed to raise their minimum wage to $15 per hour, researchers started studying consumer prices for goods. They found that the increase in minimum wage had no impact on the prices of goods and that costs went up by the same amount in Seattle as they did in surrounding communities that didn’t see a raise to their minimum wage. Check out the University of Washington Minimum Wage Study for more information.
Living Wage Alberta
c/o Edmonton Social Planning Council
10544 – 106 Street NW, Suite 200
Edmonton, Alberta T5H 2X6