What is a living wage?
A living wage reflects what earners in a family 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 that a two income, two child family must make to provide for themselves, their families, and reach basic financial security.
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 employers to ensure that workers are paid a fair wage within their community, and that reflect the true costs of living in a community 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.
Minimum Wage 2020
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 calculated on the income needs of a two-income family with two young children. It considers the hourly rate of pay needed for a household to meet its basic needs once government transfers have been added to the family’s income and taxes have been subtracted. The methodology assumes that both income earners are working full-time hours of employment. Indicators include more than the basics of food, clothing and shelter, the calculator also takes into account unexpected costs, small investments in education, and home costs.
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.
Why is a family of four used as the baseline? What about single people? Shouldn’t they have a lower living wage?
We use the family of four as a baseline for a few reasons. A family of four is the most common economic profile in Alberta and the Alberta Living Wage Network uses a family of four to ensure consistency with the Canadian Living Wage Framework — national consistency allows living wage estimates to be meaningfully compared between different communities. Calculating and publishing different numbers for different family types could create conditions where employers are asking employees about family situation for different wage structures. However, our calculations indicate that single individuals can often have higher living wages as they don’t receive scale benefits related to housing, transportation and healthcare and also don’t receive government supports receive government supports intended for families with children.
If you are interested in learning what the living wage is for a single person in your community, email firstname.lastname@example.org.
Small businesses have been struggling. Won’t increasing wages add extra stress?
Business have faced unprecedented challenges from the pandemic and related restrictions. The intention of releasing new living wages for 2021 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. 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.
Businesses may also see the opportunity. Increased wages enable workers to spend in their communities, and this supports the local economy.
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/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.
Most low wage people are students, 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 $21 (typical Alberta living wage) are not students living at home. Approximately 40% have children, 67% are over the age of 25 and close to 80% are not students according to StatsCan data from 2019.
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/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.
How do organizations benefit from paying living wages?
There are several reasons that employers report for paying 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.
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.