Trends Leaders Cannot Ignore

In September I am doing six workshops at Tamarack’s Community Change Institute. One of the workshops is: Ten Trends Leaders Cannot Ignore. I am gathering data right now, investigating trends identified by others; there are so many trends we have to pay attention to that I am not yet certain of the ten I will showcase.  But here are a few trends I am tracking right now that I believe qualify for some substantive, authentic attention by our political, economic, and community leaders.

All the charts below are all based on data from Statistics Canada. Ask yourself what the implications are of these trends and what options we have to address them. While you might take issue with my commentary, the data is the data. Do you think these trends and patterns suggest good news for our society going forward?

wealth
I have written before about Wealth and Income Inequality. While the gap in Canada is not yet as severe as the worldwide trend, the gap is significant and it’s getting wider, as the chart below indicates. Continue reading

Income Trends and Canadian Consumer Debt

Over the past 15 years Canadian consumer debt has risen dramatically.  Since 2000, the percentage of Canadian debt in relationship to disposable income has risen from 110% of income to about 165%. The change in debt to income ratio represents a 12 year increase of 50%.

Income to Debt

The old adage about “people should live within their means” has validity no doubt in many cases, but such maxims simplify the complexity of economic influences and impacts and in this case categorically blame individuals for their debt problems. It’s akin to telling people living in poverty to just buck up and get a job. Stop being lazy and all of that.

Does rising debt have a correlation to slow if any growth in income for Canadian workers? The chart that follows tells a disconcerting story about after tax income in Canada by three cohorts: the top 20% of earners, the middle 60%, and the bottom 20%.  The chart goes back much further in time than the chart above and ends in 2011, but the trends are very clear.

incometrends2

From 1976 the trend in after tax income growth was about the same for all cohorts. In the latter 1990s, however, things changed. Income for the top 20% has escalated quite markedly since then, whereas income growth for the 60% middle earners and the bottom 20% have been small at best.

As the majority of Canadians have experienced flat to very small growth income over the years, they have also experienced far more growth in the expenditures required to house themselves, feed and clothe their families, and so on.

In Edmonton, where I live, the cost of rental accommodations increased on average by 75% between 2000 and 2010. Incomes for the large majority of city residents did not experience such gains. Add rising costs of food over that same period of about 5% per year on average, and the income to expense challenges are obvious.

pullquote1The more one spends to survive, the less likely it is that they will save for a rainy day, much less for retirement or even a short vacation. This contraction on disposable income creates vulnerability for people. When faced with a family emergency or job loss, even job loss for a short period of time, the options are few. Using one’s credit cards are among the few options available.

The Canadian Payroll Association has done annual surveys for a number of years and each year the results indicate that between 45 to 50% of Canadian workers are living pay cheque to pay cheque. The loss of a job to them would, according to the Association, result in serious threats to maintaining their housing. This suggests that half of Canadian workers, while not necessarily qualifying as living below the poverty line while employed, are economically vulnerable to disaster should their pay cheques be lost or interrupted, even for a short period of time.

There are other life experiences that lead to unmanageable levels of consumer debt. Divorce plays a role for many, in particular women who leave the relationship with children to care for, and all too often insufficient, if any, child support. Add to this that the majority of women earn less income than men and we end up with single parents financing their transition from marriage to single parenthood with debt.

Health problems can exacerbate debt as well. Temporary absences from work for surgery, for example, plus recovery time add to the fray. Even those with health and short term disability benefits experience reductions in income during those periods of time. And those without any such benefits are left without any supports from their employer. In Ontario, for example, one-third of workers do not have extended health and dental benefits, according to the Wesley Institute.

Of course debt problems are also caused or at least magnified by a lack in money management skills and other aspects of financial illiteracy. Increasing knowledge and skill about money should be attended to, but to think financial illiteracy is a panacea answer would be both impractical and irresponsible.

Rising consumer debt is not just an economic problem in and of itself. It is part of an overall pattern of systems and values that work to keep worker costs as low as possible to order to drive up margins and that fosters and sustains discriminatory practices that stymie participation in the economy by women,  visible minorities, Indigenous people, the disabled, as well as older and younger workers.

As a general rule unemployment rates and levels of income are higher in the former and lower in the latter for these populations. How come? Do we really believe that such populations do not measure up to the mainstream of the workforce in terms of skills, experience, and work ethic?

There is an irony in all of this. While there is a tendency to blame individuals for accumulating unmanageable debt, our economy is based on growing profits and to do so products and services are pervasively and unrelentingly marketed to grow sales. Persuasive advertising is fundamental to such growth in profits and it tends to work, resulting in too many people purchasing what they want more so than limiting themselves to what they need. In other words, one could argue that we are happy when a sale is made but then critical of those who grow their debt because the advertising worked.

We are seeing progress in addressing some of the factors mentioned above. There is a growing and welcome trend across the nation around employers paying a living wage. For many workers, especially those that have employer-based health and dental benefits, this will make a difference. Paying a living wage is connected to paying a fair wage, but on its own the living wage movement is a partial answer. For example, the cost of living for a single mother with two young children will more times than not be far greater than an increase in income brought about by a living wage.

If we want to turn the tide on economic vulnerability and poverty in Canada, we need to act on the income problem systemically. Child Tax Credit payments are helping and do lift many out of poverty, but for too many the transfers are insufficient.

Canada’s universal health care system is not really universal. For example, unlike many if not most countries with universal health care, we lack a national pharma benefit. Without employer-based benefits, the cost of medications can mean that Canadians are not able to buy them, which eventually leads to higher public expenditures on hospitalization for acute and chronic care. Add to this mix the dramatic trends in length of life, one has to wonder how a rapidly growing number of senior citizens living into their 80’s will be able to manage their health care costs without a pharma plan.

pullquote2Tax reform has a place in the changes we need to make, but on its own is not the answer either. While it seems reasonable for the super-rich to pay more taxes and have less access to opportunities to avoid taxation, the bigger challenge has to do with how governments see priorities, how they decide to spend our money. Systems change that doesn’t address this will be hard pressed to effect substantive change.

Attitudes and values need to be assessed as well. There is an emerging movement to consider human rights in our economic and social decision making. If in a democracy we believe people should be treated equally and have at least equitable opportunities to participate in the economy and in social living, what are the human rights that should guide decision-making?

Our systems appear to place more value on those who are working and doing well than on others who are struggling or who for a variety of reasons cannot work at all (e.g. the mentally ill). While there is a general acceptance that governments should provide income security programs for those who are between jobs or who can’t work at all, there is little, if any, justification for the inadequate financial benefits these income security programs provide. Across the country, at least from what my own research has uncovered, income security benefits do not come close to what it costs to be alive in Canada.

There is encouragement to be found in governments that are exploring a Guaranteed Minimum Annual Income as well as adopting living wage policies and practices in their own shops, but if we carry the same sentiments that keep current benefits far lower than what is reasonable, then I fear a GMAI, for example, will fall far short of the mark. Program changes unaccompanied by a shift in values will at best produce inadequate progress.

While there is a growing understanding that poverty is not just about money, let’s be careful that we don’t step away from the undeniable impact that a lack of income has on people’s lives. The millions of Canadians living on low and unstable incomes may benefit from more social inclusion or subsidized public transit or free passes to recreational facilities, but such programs, although welcome, will not turn the tide of the biggest most pervasive aspect of living in poverty, which is a lack of sufficient income to survive, much less thrive.

Across the country, local communities are taking charge of poverty reduction and this is exactly where such leadership should come from. Local economic reforms are possible in local communities but without addressing national and provincial systems that work to marginalize people of low income and keep them poor, we won’t win the battle. Which is another way of saying, despite our progress, we have so much left to do and we need to foster ways to improve our systems together, across all sectors.

RESOURCES
Vibrant Communities Canada

Time to reframe poverty reduction as matter of rights (Maytree)

Living Wage Canada

Canadian household debt soars to yet another record

Canadians living paycheque to paycheque, especially in B.C. and Ontario, survey warns

Canada needs a national pharmacare plan: Editorial

 

Some Questions: Minimum and Living Wage

Some short snippets to ponder:

None of the government contracts my organization currently has provide sufficient monies to provide my staff with an RSSP or pension plan. Funny though that every one we deal with about our government contracts is paid more than my staff and have a pension plan. Why is that?

I wonder how many of those employers (owners, senior staff) who decide it is cost-prohibitive to provide their workers with benefits have company benefits themselves?

***

Look at how many Alberta-based companies already offer a living wage to their employees. Some small businesses in the mix as well as major non-profits. Click HERE.

***

The Fraser Institute believes that child care costs are not the basic costs of raising a child. Here is what they say: “The exclusion of daycare costs from the list of needs using the budget standard approach is not because daycare is not a legitimate expense for households with children but mainly because many families with children will have little or no daycare costs. For example, in some two parent (intact) families, one parent may decide to stay at home to care for a pre-school child or children. In other cases, parents may have free daycare at their place of employment or have a close relative who cares for pre-school children. For school-age children, there are again a number of low-cost (or no-cost) options for parents” (Source: Page 40 of this report).

Interesting perspective when considering that the lack of affordable day care for low income or poor families keeps them out of the job market. The idea that most families can send their kids to somewhere free (like have a relative or friend take care of them) is, I suggest, a weak argument. Many poor people live in isolation, have no family support. What do you think of what Fraser Institute is saying?

***

Some people don’t want to go with a living wage because they believe the economy can’t pay a living wage. It could be true. However, two things to ask yourself. Often these same voices talk about how great our economy is doing. How great is an economy that cannot pay a living wage? Second, whether or not it is affordable, a living wage is based on what it costs to live. It is not tied to affordability of the economy; it is tied to the affordability of living.

***

Isn’t expendable income critical to the economy? If so, why are we content to have more and more people just barely able to get by, if that? How is that good for business?

What is your slant on this. Leave a comment below.

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.

What does “living” mean in a Living Wage?

The Edmonton Social Planning Council just published research that indicates the living wage in Edmonton should be $17.36 per hour for a two-parent family with young children and both parents working 35 hours per week. The monthly budget prepared for this sample family assumes both workers are making $17.36 per hour.

Before going further, setting a living wage is a complex undertaking. No matter what number the Council came up with, people can quibble. It’s easier to pick at the budget the Council did for the family or point at suppositions that unduly biased the formation of a recommended number.

There are two major qualifiers to the recommended living wage. First, the monthoneofthekeyly budget for this family is a “conservative estimate,” according the Council. I agree but add that sometimes there are budget lines that seem to be more barebones than conservative (e.g. health and dental costs, school fees, to name two). Also, as the report notes, certain expenses were not included in the development of the family’s budget: debt payments, savings for the children’s education, retirement savings, any type of vacation (no matter how frugal), and it seems very little to support family recreational activities.

One might quibble about recreational expenses being included, although one of the fundamental principles of setting a living wage is to factor in the costs of “belonging” or what jargon-heads like me call “social inclusion.”

That said, how realistic is it to assume people who need a living wage have no debt and why would saving for retirement or for the education of children be viewed as unessential to “living?”

My remarks are not criticisms of the Council’s research, which as usual, is very well done. The authors used respected sources and produced a living wage recommendation based on accepted methods of doing so. By being consistent with how other provinces and cities are determining their living wages, the Council is able to provide a local version of a living wage based on best practice.

However, I am questioning the presuppositions of the research that allow best practice to ignore debt, education for children, and retirement as legitimate “living” expenses. Sometimes I wonder if we actually see a living wage through a welfare lens. That lens would have us ensure that recipients of welfare type programs don’t live large off the public purse. Typically that sentiment results in income security benefits being too low and in some cases so low the benefit is more akin to punishment than resembling anything close to “security.”

A living wage is not a welfare program. It should be based on what it costs to live a reasonable quality of life. A living wage should allow parents to invest in the future of their children. If people don’t save for retirement, they will cost society more later on. Shouldn’t a living wage be about now and tomorrow?

The other big question we may wish to consider is this: the recommended $17.36 per hour living wage is actually a subsidized living wage for a family of four. That family would require $1,100 per month in government transfer payments and child care subsidies to break even each month. To pay their own way completely, these two parents would have to average roughly $21.00 per hour each to live without any subsidies or transfers.

Oh yes, the question: which is the real living wage? $17.36? Or $21.00?

The lower of the two wages results in the family costing the “system” $13,000 plus per year. At $21.00 they would be paying taxes of about $10,000. That’s quite the turn around.

I am a proponent of government transfer payments and subsidies for child care, but believing these are needed programs does not mean we shouldn’t wonder about when they should and should not be deployed. It can’t just be carte blanche and on the flip side the answer isn’t to abolish them. Also, we should look into who benefits from the transfers and subsidies. I suggest it is not only the two parents in the above example.

Let’s face it. The living wage “debate” is contentious. Businesses that pay low wages are generally against raising the minimum wage in Alberta to $15.00, much less consider paying a true living wage. One argument is that businesses will have to raise prices to maintain their operations and that consumers will have to pay for the increase anyway or that jobs will be lost.

Another argument is that low costs drive profits which fuel the economy and benefit everyone. It’s one of the most common arguments for maintaining poverty wages. I have to say the argument looks good on paper, but lacks sufficient proof to become an incontrovertible economic principle.

There is a host of data that indicates the economy is working far better for those already making good incomes and hardly at all for the majority of citizens. I think it is reasonable to expect the economy to work for the majority; that doesn’t mean we all make the same thing. But consider the following data from the report or other sources:

  • Just over 100,000 Edmontonians are considered to be living in poverty, based on 2012 data.
  • Three in five of Alberta children living in poverty are from families in which one or both parents are working. That’s the highest rate in at least 20 years.
  • 20% of employed Edmontonians (124,000) earned less than $15 per hour in 2011.
  • Various studies indicate that approximately half of wage earners in Canada are living pay day to pay day and are vulnerable to losing their home if a disaster hit their families (Source: Canadian Payroll Association). In Edmonton, that would be up to 350,000 workers.

These four data points indicate that the economy is not benefiting the majority of citizens, but there is one more piece of data that further drives this home. As noted on page four of the report, “income inequality in Edmonton Census Metropolitan Area (CMA) is growing in line with provincial and national trends. Between 1982 and 2012, the bottom 50% of tax filers saw a 3.3% increase in their real median incomes compared to a 50% increase for the top 1% and a 137% increase for the top 0.1% of the population (Statistics Canada, 2014a).”

profoitsbynatureThere are many obstacles in the way of ending poverty, which means there is no single solution that we can all rally behind. We are fond of saying poverty is a complex problem and it’s true, but complex problems ride on top of diverse perspectives, values, and biases. Agreeing that the problem is complex is fairly easy to do but agreeing on the complexity of solutions is quite another thing.

We end up in polarizing arguments across sectors that disallow sufficient transformational thinking while deepening the ideological divide among sectors, political parties, and community leaders.

Not all social problems are connected to economics, but most are. One of the basic economic principles I think we should talk about is that the economy should work for the majority. If it doesn’t – and admittedly that’s my assessment – then don’t we need to look at how our economy is structured, how workers are treated, and how we can also grow profits to fuel growth and equitable benefits for everyone?

As mentioned before, the proposed living wage of $17.36 is actually a subsidized living wage. It’s easy to identify how the government transfer payments and child care subsidies help families make ends meet. But don’t the subsidy/transfer arrangements also benefit employers and in particular businesses that earn big profits?

I saw a tweet a bit ago from a business leader who said something like “businesses set prices to achieve the highest ROI.” If that’s a fundamental position of business leaders, then wages become a cost centre more than an investment in people and the general feeling about costs is to keep them as low as possible.

And if the desire for the highest ROI means that wages are kept so low to help produce higher and higher profits, don’t the subsidies received by our two parent family also subsidize the costs of business operations?

I understand that many businesses cannot pay a $21 per hour living wage. No doubt some would go out of business; others would scrape by instead of producing a reasonable profit. Special interest groups like Chambers of Commerce will say it isn’t fair to do that to businesses.

But… is it fair that tax payers pick up the difference?

Again, many of the same special interest groups decry raising taxes, especially corporate taxes.

These two positions seem incongruent to me. In an economy that is growing wealth for the wealthy and relying on subsidies and transfer payments to top up wages that are inadequate for workers to live on, who is supposed to pay for that?

One of the key questions in the living wage debate should be at what point are tax payers subsidizing insufficient wages paid by profitable businesses? And once we understand what that point is, how do we feel about that?

There is a lot of data that indicates a strong correlation between social and health problems and the growing income gap across the world and in our country. Generally speaking the greater the divide the more we see persons of low income imprisoned. Health problems, including mental health issues, increase as does social isolation. None of these things are good for the economy, are they?

If our community is serious about ending poverty – and I do believe a growing number of people across all sectors are serious about it — we won’t accomplish this noble goal without questioning and changing our perceptions and values around terms like “healthy economy,” “profits,” and “return on investment.”

The challenge is not to create equal income across the population. There will always be those who benefit more from the economy than others. In fact, we need income variances in order to fuel economic growth. The more risk one takes, the higher the rewards should be. The question is how far is too far in terms of the growing income gap in our country and across the globe?

What do we believe an economy should look like that has equitable benefits to all citizens?

I have worked for years in the human services sector and my primary focus has been on serving the poor and the homeless. On occasion over the course of my career I have experienced people who point to food bank users driving away with their hamper in a late model vehicle. Some tell stories of people on welfare driving the proverbial Cadillac. These stories are invariably used to demonstrate that the poor are not really poor and worse, they are something akin to a gold digger.

The inference is tax payers shouldn’t have to subsidize that kind of expenditure. And to be honest I agree with them, though their outrage is sourced in a very, very small minority of “poor” people.

whatdowebelieveThere is a flip side to such simplistic analysis. Why is it we don’t wonder why tax payers should subsidize workers so that CEOs and business owners can pay workers the minimum possible while driving their Mercedes to their mountain cabin?

Please understand I am not pitching that the for-profit sector is nefarious or driven primarily by greed or a lack of concern for employees. But I am trying to offer some balance to many voices that cite gloom and doom at a $15 per hour minimum wage, which I assume will only resound much louder at the living wage proposal of $17.36.

Poverty is not just a social problem or the result of personal defects. It is very much an economic problem and if we don’t address that in significant ways, let’s stop thinking we can end poverty through more collaboration and collective impact initiatives and leave the economy as it is.

But also let’s stop thinking that an economy that increasingly benefits a few will be sustainable. There is a tipping point and I think we all would be better served to avoid it.