The Current - What raising minimum wage can and can't do

Episode Date: October 1, 2025

The minimum wage is going up in some provinces today — for the second time this year in some cases. What does this actually mean for poverty in Canada? And is this meant to tackle the cost of living crisis?

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Hello, I'm Matt Galloway, and this is the current podcast. How are you supposed to survive in this economy? And people want to move ahead. Like, people don't just want to come into their day-to-day minimum wage job and, like, never get ahead in life, not be able to buy a place. Like, it's almost impossible for people to buy a home right now, right? Tara Vart Romadee owns a small, independent clothing store in Toronto. she's trying to make ends meet herself and pay her employees. As of today, she's going to have to pay them a little bit more.

The minimum wage is going up in five provinces, Ontario, P.E.I, Nova Scotia, Manitoba, and Saskatchewan. In Ontario, employers will have to pay a minimum wage of $17.60 an hour. That's up 40 cents. And for this student, living in Toronto, any increase helps. I definitely find that I live paycheck to paycheck, working minimum wage. and when I am working full-time, when I'm not in school, it was like I'm going paycheck to paycheck. And really the only way that I can survive is by my parents helping me here and there.

I don't know if it's going to make a huge difference, that small percent, but I mean, I'm happy about it. I'm excited for it, for sure. Is raising the minimum wage the best way to help struggling workers in a cost of living crisis? In a moment we will hear about other possible solutions. But first, I'm joined by Craig Pickthorne. He is Director of Communications for the Ontario Living Ways

network, part of a network of advocates that track the living wage rate across this country is in our Ottawa studio. Craig, good morning. Good morning, Matt. Good to be back. Good to have you here. As I mentioned, minimum wage going up in five provinces across this country today, the increase going from 20 cents to a $1.30. What is this going to mean broadly for workers in minimum wage jobs in Canada? Well, it's going to mean just about the same as it did before, which is that there's simply no place in the country where you can work a full-time minimum wage job and still be able to make ends meet. We calculate living wage rates across the country, various groups do and our friends in BC and Alberta and elsewhere. And there's no living wage rate that's

even close to a minimum wage even after the increase that happens today. If you make a minimum wage, even with the increase, where are you at relative to the poverty line? So let's go, for example, in the GTA, your, you know, our calculation there is $26 that's due to get updated, by the way. That's what you need. That's what the poverty line is, is at $26. Sorry, the, the, I'm sort of mangling your question, Matt, but our calculated living wage rate is $26, which means that you're $8.40 short if you're working a minimum wage job at that, in that location, for example. And is that kind of relative across, I mean, the greater Toronto area is an expensive. place to live. So as Vancouver, so is Halifax. I mean, most places across this country,

you are nowhere close to a living wage if you're on a minimum wage. Correct. And, you know, it goes up to $11 in Newfoundland Labrador as well. So there's just no place in the country, Matt, that you can pay all your bills at the end of the week. You can work a 40-hour week, just like everyone else. And when a weekend comes up, if you work at minimum wage job, you don't have enough to cover all your bills. You and your organization have been pushing for. for a living wage for some time. And what does that look like? How do you go about making the case for a living wage?

Well, first and foremost, we make sure we do the calculation in an open and transparent and reliable way that's consistent year after year so that we can make a proper comparison and then we can actually show, hey, this is the difference between a living wage and a minimum wage, and it's always a pretty wide gap, of course. And, you know, the other part of that is, is that there's a whole chorus of business owners that are certified living wage across the country.

And they are, you know, recognizing that, and I'll steal some words from my friend Jim Stanford, that they're recognizing that labor is not just a cost to suppress, but rather it is something that is part, that workers are part of the business's success. Your friend Jim Stanford will join us just a few moments to talk further about this. In some corners, a living wage, how you define a living wage, would be almost double what the minimum wage is in some of these provinces. How realistic is something like that, do you think? How realistic is that the provinces will adopt our methodology and put us out of business and just adopt a living wage, I suppose. We're realistic, and no, that's not on the horizon, of course. But like I said, there is a whole course of employers that are voluntary. voluntarily paying a living wage, and they're telling us about the benefits about lower turnover,

lower training and recruitment costs, better standing in the community. We have a credit union with 90 branches here in Ontario, Meridian Credit Union. There's a decal on each one of the doors of those credit unions that say we're a certified living wage employer, and there's no better way for a business to communicate their values than to do that. There are other small businesses who would say, listen, we're also facing the pinch of a cost of living. crisis and that if you raise the minimum wage, that will impact our bottom line and our ability perhaps to keep employees, perhaps to hire on more employees. Take a listen once again to Tarva Aramadi, the small business owner in Toronto who says that an increase of a minimum

wage is already a stretch. The economy isn't doing well, business isn't doing well. You're bleeding money constantly, right? So then the thought of bringing on more help and for not making sales and we can't afford to do all of those other things. Do you understand that? Do you understand where she's coming from? Absolutely, and especially with small businesses. I think people are sympathetic. They want to support their small businesses.

But here's a fact. The majority of businesses that are employing people at minimum wage are not small businesses. They're large national corporations. Those are the people that are relying upon low-wage work. And those folks you believe can afford. to pay more? Well, I won't speak to that because we don't really deal with those kinds of employers just

yet, but we do know that in our communities, if a small business is able to pay a living wage, they do experience some benefits beyond just keeping the payroll low. They experience, like I said, a better standing in the community, lower turnover. They just, those are just some of the benefits that are certified living wage employers report, including many small businesses, small coffee shops or cafes or clothing stores, just like the one that Tara has. When you take a look at just before I let you go, the urgency of the moment, I said that this is a cost of living crisis.

It's a phrase that used over and over again. But what does that add to the urgency of the conversation we're having right now on the 1st of October as the minimum wage has gone up in five provinces? Yeah, if you're working a minimum wage job in, say, Victoria, you're going to be short by $312 a week, every week that you work. You're short by that much. That means you have to enter the gig economy. You have to have multiple incomes, a second job, and so forth. And we know what that does to communities and social cohesion. Craig, good to speak with you again. Thank you very much. Thank you, Matt. Craig Pickthorne is the director of the communications for the Ontario

Living Wage Network. He was in our Ottawa studio. The spirit of innovation is deeply ingrained in Canada. And Google is helping Canadians innovate in ways both big and small, from mapping accessible spaces so the disabled community can explore with confidence to unlocking billions in domestic tourism revenue. Thousands of Canadian companies are innovating with Google AI. Innovation is Canada's story. Let's tell it together. Find out more at g.co slash Canadian innovation. Viking. Committed to exploring the world in comfort. Journey through the heart of Europe on a Viking long ship

with thoughtful service and cultural enrichment, on board and on shore. Learn more at viking.com. He mentioned Jim Stanford. Jim Stanford's an economist, director of the Center for Future Work. He's in our Vancouver studio. Jim, good morning to you. Good morning, Matt.

What do you make of what you just heard from Craig Pickthorne? Does increasing the minimum wage actually help low wage workers? Oh, it absolutely does. A dollar for dollar. So these increases that we're seeing today in five provinces, not enough. And Craig has made that case quite convincingly. If you actually look at the cost of living for a very modest standard of living in most places in Canada, the minimum wage doesn't come close.

So it's not enough, but it's sure better than not increasing it. So we're headed in the right direction. We should go further and faster. When governments do this, when they increase the minimum wage, is the goal to address that cost of a living crisis, do you think? Well, I mean, the minimum wage is not an anti-inflation policy. So, you know, you're not addressing the direct issues related to housing costs, for example, or energy costs, food costs, all the necessities that have become more expensive in recent years. All you're doing is helping people cope with it, especially people at the lower end of the income ladder. So for the lower wage workers in the labor market, people at the minimum wage and people slightly above the minimum wage.

There's a thing, Matt, that we call the trickle up. effect with minimum wages, which is certainly if you're on the minimum wage, you get that full increase. But typically if you're working one or two or three dollars above the minimum wage, you're still going to get an increase pretty much close to what the minimum wage was because those employers are paying a little bit above the minimum wage for a reason. So, you know, a significant share of the labor market will get a raise and that will help, no doubt about it.

It doesn't solve the cost of living crisis itself, but it will help some of those most affected by it, deal with it a little bit better. If it's not solving the cost of living crisis and someone who's working minimum wage in Victoria, as Craig was saying, is $300 and some dollars short a week. What's the point of this? What are governments doing, do you think? Well, the minimum wage is one tool in the toolbox, frankly, one way to help people at the lower end of the labor market get by.

And it's a very important one. In fact, it's become more important in recent years in Canada and internationally. And it's been proven to be very effective in lifting the floor of the labor market and giving people a bit more of a chance of earning decent incomes. But there's many other things that have to be done. There are other ways to lift wages in addition to the minimum wage through things like collective bargaining, for example, or voluntary pay standards of the sort that Craig was discussing with his certified living wage employers. And then the government obviously has to do things to try and bring down the cost of essentials, particularly. for low-income people.

Affordable housing, obviously, would be at the top of the list. But even things like public services, think about transit fairs, think about daycare, think about other education and tuition costs. Many minimum wage workers are young people and they're also trying to go to school. So those are ways to bring down the cost of living at the same time as you're trying to bring up wages. So the minimum wage is not a magic bullet, but it is a very critical and very effective tool in trying to help lower wage people. people get by. What sympathy do you have for those small business owners who say, listen, we are paying

higher rates, whether it's mortgage rates or electricity rates, we are trying to keep the lights on too. And an extra 40 cent increase is a stretch for us. Well, again, first of all, keep in mind that a huge share of minimum wage workers work for huge corporations, supermarkets and fast food chains and so on. So it shouldn't be identified as purely a small business issue. Also, there are economic benefits to employers from a minimum wage. It's a way to increase the wage, but in a way that doesn't affect your competitive position versus other companies in your line of work. So, you know, we've heard a lot, Matt, over the years from employers, including small business representatives, complaining about a labor shortage, saying, I can't find enough

workers to do the job. Well, here's a way to help solve that labor shortage, increase the wages. That will attract more people. And by the way, if it's done this way, with the minimum wage that's across the whole economy, your competitive position isn't affected because the other store down the street also has to pay the higher minimum wage. Research has shown there's good benefits for retention of staff, good benefits for productivity. So, you know, I've never heard employers stand up and say, today is a good day to raise wages. I'm really happy about this. So, you know, we hear these complaints every year when the minimum wage goes up, but The sky doesn't fall, and these businesses carry on, and a higher minimum wage makes things just a little bit fairer.

Is there a risk that those big businesses, that you say that the majority of people who are hiring folks on minimum wage, that they don't bring more people on, they're not philanthropies, they're focused on the bottom line and their shareholders returns as well. Is there a risk that they don't bring more people on? Maybe they don't cut jobs, but they don't bring people on because they have to pay people more. No, I don't think so. The main determinant of whether a business hires someone is how many people are buying its product. And just making workers cheaper doesn't mean they're going to hire more of you just to kind of hang around and look good. Their demand for labor depends on the demand for their products. And this is one of the ways that higher minimum wages actually pays off.

It does put more spending power in the pockets of people whose wages have increased, whether directly or indirectly, via those trickle up effects. and that boosts retail spending. And by the way, it's small businesses that need that retail spending. So, you know, there was a traditional argument, Matt, that higher minimum wages just caused unemployment. That's kind of a classic supply and demand way of thinking. But over the last 20 years or so, there's been a huge change in how economists understand the minimum wage, some really pioneering work, including by a Canadian economist, David Card, who won the Nobel Prize in 2021 for his research on. minimum wages. And they showed that the employment effects of higher minimum wages, if it's done

gradually over time, are negligible. In fact, in some cases, it's positive. On a net basis, you can actually create more jobs. A couple of minutes left. You mentioned that a minimum wage is not a silver bullet. One thing that people have often called a silver bullet in past is the idea of a universal basic income, that it would raise the floor so that people would be, if not at, certainly a lot closer to a living wage. Is now the time to really think about that? Well, basic income can come in different shapes and forms. You could have one that applied comprehensively to everyone across the board, or you could do it by trying to fix some of the holes in programs that we already have,

like employment insurance, for example, where a large number of unemployed people can't qualify. So I'm all in favor of giving people more income security, and it is another of those ways to try and lift wages. If you have something to fall back on, then you don't feel that you have to take the first lousy, job offer that comes along. You can think about something that fits your circumstances and your skills and something that's more attractive and that does help to put pressure on wages. We saw that, remember in the pandemic with the Serb benefits, it wasn't a basic income per se, but it did give people something to live on in a terrible time. And immediately you had employers complaining

about it saying, you know, I'm going to have to pay more. Otherwise people will just stay home and collect Serb. So that effect of a basic income is certainly there. And I do think we should be strengthening our income security measures, especially employment insurance, a disability benefit, and so on. All of those things would help as well. You feel more urgency just briefly for that right now, given, again, the times that we're living in? Well, I mean, right now Canada's economy is grappling, of course, with all the side effects of Donald Trump's trade war. And we have seen unemployment increase. So, you know, frankly, this is a good time to put more money into people's pockets.

I can assure you. Minimum wage workers spend every dollar they get. So all of these increases, modest as they are, are going to translate into higher consumer spending. And this is a very good thing. It's good to talk to you, as always, Jim, thank you very much. Thank you, Matt. Jim Stanford, an economist, and the director of the Center for Future Work, he was in our Vancouver studio. You've been listening to the current podcast. My name is Matt Galloway. Thanks for listening. I'll talk to you soon. For more CBC Podcasts, go to cbc.ca slash podcasts.