Social Determinants: $11 an hour simply not enough

As health care providers news of the increase in minimum wage is important – as we stated in 2013, poverty is the second leading cause of death in this country.

While we have to applaud the government for finally promising to index the minimum wage to the cost of living – the legislation to do so has yet to be introduced – the reality is the adjusted rate simply didn’t go far enough. Even at $11 an hour, the wage is still 16 per cent below the poverty level for an individual who works full-time. And in Ontario there are a lot of people in that boat – the rate doubling since 2003 to 9 per cent of jobs in the province.

Kathleen Wynne told the CBC this morning that she was balancing the demands of anti-poverty groups with those of business, who warned that $14 an hour would lead to a loss of jobs. She said the government can use other means to help Ontarians get out of poverty, including the child benefit.

No doubt the business elites would be happy to have others pay the freight so that they can continue to pay workers a very low rate of pay while reaping significant rates of return for their shareholders. A low minimum wage essentially means we are willing to subsidize very profitable corporations so they can continue paying workers well below their true value. That includes increased health care costs.

More than a third of all minimum wage earners are working in the fast food industry. So how are these corporations doing?

In their 2012 annual report, Tim Horton’s boasted a 24.4 per cent return on invested capital – double the 12 per cent return in the industry. That was partially dampened by a costly corporate reorganization. In the same year the restaurant chain was able to open 159 new restaurants in Canada (plus more in the U.S.) and had revenues of about $3 billion. Tim’s was so flush with cash they were able to buy back $250 million of their own shares.

Eight out of every 10 McDonald’s restaurants are franchises. On their international corporate website they make it clear you have to be fairly wealthy to even get into the game. To purchase a restaurant you need at least $500,000 of your own money – or what they call non-borrowed resources. You have to put 25 per cent down to purchase an existing restaurant and be able to pay off the rest within seven years. Growth in shareholder earnings in 2012 was a healthy 5 per cent. The average annual rate of return for investors is 15.7 per cent – which compares favorable to the S&P 500 average of 10.9 per cent. In 2012 McDonald’s paid out $2.9 billion in dividends globally.

At $14 an hour – the rate advocates had been demanding — does anybody believe that these corporations would start cutting jobs and threaten their own earnings?

In fact, if you look at parts of the country where labour shortages exist, such at Fort McMurray Alberta, it’s hard to find a food service job posted below $13 an hour. Most are $15 an hour or more. Yet clearly these companies would not be there if there wasn’t profit in the picture.

While reaction to the $11 an hour minimum wage was predictable from ideologically bent ranters like the Canadian Federation of Independent Business, we have to give credit to individuals like Dave Bryans, CEO of the Ontario Convenience Store Association who not only supported the wage hike, but told the Toronto Star that “small business adjusts very quickly… I don’t see this being a major factor.” Bryan also said that the wage hike should not lead to higher prices for consumers. (To be fair, Bryan also predicted stores would have closed at $14 an hour.)

The $11 an hour barely covers the rate of inflation since the minimum wage was last adjusted in 2010. What the $11 an hour does do is exceed the situation minimum wage earners found themselves in four years ago by a few cents. That’s hardly a bold move to lift Ontarians out of poverty.

The adjustment between 2008-2010 represented a 28 per cent increase in the minimum wage following an eight-year freeze, yet the sky didn’t exactly fall.

The bigger impact on jobs in Ontario was the collapse of the global economy thanks to the irresponsible behaviour of the financial services industry.

Sorting out the impact will be difficult to do given this is also happening at a time when traditional low-wage retail jobs are being impacted by consumer’s shifting to more on-line sales. Best Buy, in announcing 950 job cuts in Canada, noted that their on-line sales have risen by more than 50 per cent. Retailers like Sears are also having to contend with an influx of other American retailers into Canada such as the fiercely anti-union Target department stores.

While most Ontarians appear to support the idea of improving the minimum wag (a CTV poll placed the level of support for a $14 an hour minimum wage at 72 per cent), Premier Wynne has had little political pressure from the Queen’s Park opposition. The Tories are happy to leave the minimum wage frozen, essentially widening the inequality gap. The NDP have been surprisingly silent on the issue, a point Wynne herself made in this morning’s interview with CBC radio.

The Liberals promise another review after five years.

 

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