How Minimum Wage Should Work

There is no excuse for any employer to pay any full time worker less than the realistic cost of living within reasonable proximity of their place of employment. Minimum wage needs to be reformed, not just as a dollar amount, but as a concept. And it should be enforced under criminal rather than civil law. To criminally underpay someone does not have to be a mere figure of speech.

This spring, the CEO of Dollar General, the largest dollar store chain in the United States operating nearly 20,000 stores, stated that “many of our customers report that [they] only have enough money for basic essentials, with some noting that they have had to sacrifice even on the necessities.” This race to the bottom is not sustainable. In their country, the federal minimum wage has been $7.25/hour for more than 16 years. In Canada it at least rises, but it is far from anything resembling a living wage.

Especially in the absence of a guaranteed minimum income or universal basic income, minimum wage itself needs to mean something.

Few people live to work; for the vast majority of workers, wages are earned in order to live. As a principle, any person working full time should be entitled to a reasonable quality of life, one that allows time for both themselves and for their families, regardless of the work performed, their age, their education, or any other irrelevant considerations, and whether or not tips are possible should not factor. If employers cannot afford to pay it, it is their business model that is not sustainable, not their employees who are the problem.

Nationwide, our minimum wage varies by province. The lowest minimums are in Alberta and Saskatchewan at $15/hour, with the highest in Nunavut at $19/hour.

Minimum Wage needs three floors. The first should be an income level reflecting the average poverty line in the whole country, below which nobody can be paid regardless of where they live or what they do. The poverty line has only recently been defined by Statistics Canada with a complex formula known as the Market Basket Measure (MBM), after years of avoiding the question altogether.

The second should be more granularly defined as the wage needed to sustain a standard family at the MBM-defined poverty line within the region of employment on a single income at 37.5 hours per week (though unpaid lunches is another whole topic that needs to be addressed), and it needs to be further refined to consider the actual cost of living within reasonable communing distance of the place of employment.

In that measure, the lowest poverty line in Alberta, which has the lowest minimum wage in the country, is in the rural parts of the province. The 2023 poverty line comes in at $50,062 per year. At the province’s $15 per hour minimum wage, an employee would have to work 89 weeks per year just to make that poverty line. In the city of Calgary, that number rises to 100.5 weeks per year.

With the current statutory minimum two weeks vacation — also a topic for another day — a couple both working full time 50 weeks per year for minimum wage in Calgary is not able to make enough to reach the poverty line, much less with only one working. On the basis of the data and this model, the lowest minimum wage in Calgary should be somewhere around $30.15/hour, over twice what it is today.

The physical location of the job should have an impact on the minimum wage that is applicable. Someone earning minimum wage should have a reasonable expectation of being able to commute to work within 30 minutes of their home, and thus the minimum wage should also consider actual costs of living within 30 minutes of the place of employment, including the cost of a vehicle if practical public transit does not exist within that range. If you expect your employees to work in the coffee shop in the atrium of an upscale office tower, it is your obligation to pay them enough to live near enough to do so.

There is nowhere left in Canada that you can survive on a single full time job making minimum wage, and yet those working in minimum wage jobs often have gruelling thankless jobs upon which everyone else depends, often with long commutes as they cannot afford to live close to their place of work. If a community is walkable, but those working in the businesses within that walkable community cannot also walk, it is not so much a walkable community as it is a resort.

Employers know this, and have no incentive or impetus to care. Several years ago, MacDonald’s released a much maligned tool to help their employees budget in the US. The budget sample they offered listed a “second job” earning nearly as much income as the MacDonald’s job, and it did not account for basics like heat and groceries.

The third floor should be a minimum wage that is relative to the highest total compensation package offered by the employer. The cap can be relatively high, maybe even something like 100:1. Does it sound like the top executive making 100 times the lowest paid employee is excessive? Consider that the highest paid CEO in Canada in 2022 earned over $150 million running a collection of fast food chains, the stereotypical minimum wage employer. That, for reference, is a 5000:1 ratio of top compensation to full time minimum wage, 50 times higher than that cap that already sounds unreasonably generous.

Under this model, that CEO would be more than welcome to make $150 million per year, provided none of his employees are paid less than 1% of that at full time equivalent wages — which would come out to be about $750/hour.

The law protects property owners, asset holders, employers, and the wealthy in general, but does a horrific job of protecting the working poor. Provincial and federal jurisdictions make it difficult to have a coordinated national minimum wage strategy as the vast majority of minimum wage earners are not federally regulated.

If a business cheats the minimum wage system, or knowingly and wilfully pays less than the cost of living within a reasonable commuting distance, this should become a matter of criminal law, regardless of the provincial minimum wage. It should also count as cheating to use hide employees through suppliers, subsidiaries, and subcontractors for the purpose of under-paying them. In so doing, we can work around provinces’ refusal to raise their minimum wages to the level of a living wage, and close legal loopholes like the contractor-relationship basis of the gig economy and the use of subcontractors more widely to hide the sub-liveable wages of those performing the work.

Working for a living should mean working for a life, regardless of what you do.