Mandatory Winter Tires and Poverty

Yes, perhaps an odd title for a posting, but bear with me. I was on my way back home from meeting downtown with Alberta Government colleagues who also work in the poverty reduction arena and I heard this call-in show about winter tires and more to the point about whether or not winter tires should be mandatory.

They are in Quebec now but even in some provinces without a mandatory requirement more than 80% of drivers have winter tires. Not so in Alberta where the percentage is just over 50%. Not sure about other low percentage provinces, but here is what went through my mind.

The folks that called in didn’t all agree, but I got the impression that most were for making it a legal requirement to have winter tires and my impression of the radio interviewer and guest was that they were biased toward mandatory winter tires. I get that. It makes sense, right, that all of us would require one another to do this. It’s safer. Winter tires stop a car better than all season tires.

I have never owned winter tires but could afford them if I chose to buy them or was required to, though being forced to dole out $1,000 for a new set of tires and then pay more for rims and the ongoing costs of changing and balancing each season – well, the “Albertan” in me just doesn’t want to be forced to do that.

But all of the above is not really why I wrote this post.

While I was listening to the radio show, it hit me that this radio engagement of citizens around winter tires was one more example of how a certain segment of the population is marginalized, not really considered, and in a sense relegated once again to second-class citizen. Continue reading

Signals of Coming Disruption

Big change doesn’t just click on. It occurs over time, starting out often as weak signals of the change to come. Sometimes it’s like the old frog in the boiling water story. Put the frog in when the water is cool and turn up the flame and eventually the frog realizes its plight, just too late to adjust, to escape.

For years, donor giving has been changing. Charities have become increasingly dependent on larger gifts from fewer donors. As the economy has served to increase the income and wealth gap between the small numbers of wealthy and the rest of everyone else, we have seen food bank use escalate and a growing number of workers living pay check to pay check. Job security is no longer a reasonable expectation for a growing number of people, much less the chance for advancement. Employee supported pensions are no longer the norm and health and dental benefits are harder to come by for low income workers and many who do not yet qualify as “low income” workforce members.

imagenoise_signalmlab2The adaptations charities have taken have been focused on how to grow revenues through different sources of revenues. Funders are looking at alternatives too, given their inability to fund all the good things that come their way. Crowdfunding, social enterprise, impact investing, social purpose businesses are among the more recent options in financing social good.

GDP growth has been slowing, 80% of Canadian incomes are not increasing or if they are, at far less a rate, the restructuring of the job market is creating more insecure and benefit-less employment. the ratio of workers to seniors is dramatically decreasing. Key drivers like oil prices are in turmoil. Consumer debt keeps increasing. The numbers of people making $15 or less are growing as businesses work harder to cut back on expenses in order to feed more profits to investors. Continue reading

Higher Minimum Wage: More Gain than Pain?

The debate about having a living wage has many voices. A colleague recently shared a public letter that a chef wrote to the Premier, expressing how a minimum wage of $15.00 per hour would jeopardize his plans to open a restaurant. He makes many excellent points and does so in clear and respectful language.

My colleague also suggested I remember that in Edmonton we have far more small businesses than large corporations and the former may be hard pressed to survive such a rise in the minimum wage. I am sure small businesses will be impacted, which very well may call for an innovative way to introduce a new way of delivering a minimum wage, perhaps in gradations, or by age of the employee.

But also as I wrote in my previous posting, I think there a point where the subsidies our governments provide directly to the poor (transfer payments, child subsidies), also are a type of subsidies for profitable businesses who keep wages below what they should be in order to boost profits for a minority of the population.

There are many, many articles in our newspapers and many statements put out by groups like the Chamber of Commerce that offer dire warnings about increasing the minimum wage. Lost jobs, higher consumer prices, bankrupt businesses, and smaller profits that will hurt the economy are among the warnings. These warnings are often attached to projected numbers of jobs lost, which often don’t seem to be based on any real research.

There is a growing number of research reports that indicate these warnings and fears are unfounded or at least far less severe as some make them out to be. For example the Canadian Centre for Policy Alternatives released Dispelling Minimum Wage MythologyHere are two excerpts:

There are other reasons why higher minimum wages will not generally translate directly into reduced employment,…First off, an increase in the minimum wage will translate only partially into an increase in the average wage, since minimum wage workers, and those better paid workers whose wages are still linked to the minimum make up only a portion of total employment.

A higher minimum wage is shown to be associated with higher labour productivity for several potential reasons, including greater loyalty and work effort by better compensated workers, more attention to performance standards by employers, and more investments by employers in innovation and technology instead of relying on cheap labour as their core business strategy. Another benefit of a higher minimum wage is documented reductions in labour turnover, which leads to lower recruitment, training, and retention costs for employers. All of these factors imply that any final increase in nominal unit labour costs facing employers will be much smaller than the initial increase in the statutory minimum.

The CCPA report is worth a read if you are serious about considering the potential pros and cons of higher minimum wages. Much of what is there can be applied to the Living Wage debate.

In 2013, The New Yorker published The Case for a Higher Minimum Wage. While their data is based on experience in the United States, here is an interesting quote from the story:

… [T]here is no obvious link between the minimum wage and the unemployment rate. During the nineteen sixties, when the minimum wage was raised sharply, unemployment rates were sharply lower than they were in the nineteen eighties, when the real value of the minimum wage fell dramatically. If you look across the states, some of which set a minimum wage above the federal minimum, you can’t see any sign of higher rates leading to higher unemployment. In Nevada, where the national minimum of $7.25 an hour applies, the jobless rate is 10.2 per cent. In Vermont, where the minimum wage is $8.60 an hour, the unemployment rate is 5.1 per cent. What these figures tell us is that other factors, such as the overall state of the economy and how local industries are doing, matter a lot more for employment than the level of the minimum wage does.

The article goes on to say that  “there are also a number of studies that show minimum-wage laws having no effect at all on employment, and even some studies showing a small positive effect.”

What to do about a minimum wage or a living wage is not an easy challenge. We want a strong economy, but one that benefits a minority in lopsided ways is not, I suggest, a sustainable economy. The more economically vulnerable people become the less able they are to be full-participating consumers. In other countries where the minority benefit far more than everyone else, we see increased polarization and intolerance, more prison sentences given to the poor and struggling, more health problems for the majority, and so on.

For those who “side” with the business argument against the minimum wage or a living wage because such programs will hurt business, how do you explain to the thousands and thousands of people earning less than they can live on how the economy benefits them as is?

More food for thought.

Guaranteed Minimum Annual Income in Alberta?

The Mayors of Edmonton and Calgary are talking about it (read). Many agree with them and I am one; it’s worth a good look. In fact, I suggest that a guaranteed annual income be considered as a foundational strategy to lift hundreds of thousands of people out of poverty. Whether or not it will work depends on a myriad of factors that I do hope we will aptly include in a comprehensive approach to poverty elimination.

I won’t pretend that I know what the answers are for what ails us. I have opinions, of course, some of which are based on experience and understanding of poverty’s causes and effects, but I do have a litany of questions – perhaps better called wicked questions — that I suggest our government, community, and business leaders should consider when contemplating how to end poverty or how a GAI might markedly improve things throughout our province.

How will the “minimum” be determined and by whom? Our tendency nation-wide up until now has been to set poverty lines (e.g. LICO) that many agree sets its low income lines far lower than reality would dictate. This means we have many who are actually living in poverty that we do not recognize to be poor.A low cut off keeps the numbers we report lower than they actually are. A Guaranteed Annual Income may work if minimum income is actually sufficient income to live a life.

What other changes are required that together with a GAI will leverage our collective ability to end poverty? How would the housing market and its economic impact on people be factored into a GAI? For example, as mentioned in my recent posting, The Twist on the Minimum Wage Debatethe cost of rental accommodations rose on average by 75% between 2000 and 2010. How would we adjust the GAI to reflect that huge increase in housing costs? Continue reading

Employment/Unemployment

We all feel better, more confident, when the unemployment rate in Canada is low and getting lower. More people working, more money being spent on consumer goods, less dependence on government programs – it all makes sense.

In addition to tracking the unemployment rate, we also track the participation rate, which is basically how many people of working age (typically ages 15 to 65). The higher the participation rate, the better for the economy.

Unfortunately, we tend to use simple data to explain and then understand complex things.

In a report issued by the Vanier Institute called “The Current State of Canadian Family Finances” (February 2011), the author reports:

The official unemployment rate peaked at 8.7% in August 2009 and then fell slowly to 7.6% in December 2010. This good news is tempered by the fact that the unemployment rate remains much higher than the 6.1% recorded before the recession. The number of unemployed now stands at over 1.4 million, up by 298,700 from two years earlier, or by 27%.
 
There is some good news in that paragraph of things headed in the right direction, but it is also the case that we aren’t out of the woods yet. Looking at annual variances is not enough. Unemployment is still an issue given how much higher it is when comparing two years. 
 
  That said, one simple number representing unemployment is misleading when you consider this:While increased jobs does impact the unemployment rate favorably, it is also true that many Canadians have given up on the labour force market and would no longer be counted in the unemployment rate. The chronically unemployed are excluded from official statistics, an important number to truly understand that strength of the labour force and economy. Statistics also exclude those who have had to leave the job market for family reasons and those who have returned to school to “re-tool” themselves. While neither of these latter groups are looking for work currently, the factors that led them to leave the job market should be tracked because those reasons will be impact the participation rate.

If people are leaving the job market because they cannot find child care or afford it, or because they have to take care of elderly parents or a family member with a disability, these are important factors  to track and understand. People who return to school to re-invent themselves is a good thing, but just how many are doing that and will those numbers help address future labour force needs?

While these measures are not being addressed consistently and rigoursly, we do have estimates that the unemployment rate as cited above is under-reported by approximately 250,000 people.

Add to this the growing number of workers who are working part-time jobs involuntarily and we have more cause for concern. As the Vanier report indicates:

[The unemployment rate] does not take into account the number of part-time workers who are only working part-time because they can’t find full-time work. Involuntary part-time workers are another key source of  “hidden unemployment.” Between 2008 and 2010, the number of part-time workers working part-time because they could not find full-time work rose by almost 210,000 – from 711,200 in 2008 to 920,000 in 2010. The rate of involuntary part-time work – involuntary part-time work as a share of all part-time work – grew from 22.4% to 27.8% over this period.

That’s close to another million people who are at the very least “underemployed.” How should we count them and how do all of the above factors impact our understanding of the labour market and the economy?

The participation rate is another number to watch and think about. Are part-time workers included in the participation rate? Should they be included in the same way as full-time workers? Also the participation rate is critical because it represents the percentage of the working age population that basically supports the entire population. If the participation goes down, which it is projected to do over the next many years, what will that mean for health care for a growing population of seniors, for example.

It’s complex and we need to start collecting and reporting systematically on complex data because the solutions we need to build for society will be – you guessed it — complex solutions. Any politician or economist or business or community leader who tells you differently is doing so from an agenda that is far more narrow than it should be.