Saturday, May 07, 2005

We Need a Living Wage


Public Policy wonks, both from the left and right, the soul of capitalism; the TD Bank, and Stats Canada all agree that for twenty boom years of capitalism in North America, Canadian workers still have yet to benefit.

The famous trinkle down effect of tax cuts, (royalty rebates, outsourcing, privatization, acquisition and mergers, end of inheritence taxes,ETC.) all that stuff about allowing the market to determine its own future, ends up with that old cliche being true; the rich get richer and the poor get poorer.

It is quite apparent from the empirical data that despite the bluff and bluster of the free market hacks like the Fraser Institute, the Atlantic Institute for Market Studies the contrary, the working class has suffered a drought waiting for the trinkle down effect for over twenty years.


Tax cuts have produced no measurable effect for the average Canadian family for twenty years. And in fact have contributed to the continuing immizeration of Canadian workers. When Jim Stanford of the Canadian Auto Workers (CAW) and the Chief Economist for the TD.Bank agree on this empirical fact, when will the Conservative right wing admit that their policies do nothing for us but lots for our bosses.

Directly tied to the rights Neo-liberal agenda has been its relentless class war against the working class as a whole and specifically against the weapon of the working class; unions. Cooresponding to the low pay regime of neo-liberalism is also the decline in unionization as another Stats Canada study for this same time period shows.

The battle field of class war has been the introduction of just in time production techniques, team management, flexible working conditions, into the social fabric of all workplaces, private and public. The result of this was an successful campaign to reduce wages even in the unionized sectors as Safeway workers can attest to. Capitalism created a new part time low waged workforce to replace its permanent workers with in the 1980's. Since then it has been full out class war.

This resulted in the broader right wing campaign of contracting out, outsourcing, privatization, as well as the layoff of thousands of public sector workers during the 1993-1996 deficit hysteria, have resulted in a low waged economy.

This combined with technological innovations and mass layoffs, the dumbing down of work and skills, has not resulted in the decline of the falling rate of profit.
It has only temporarily allowed for extensions of the boom in the boom and bust economy of the business cycle.

In order to maintain its high rates of profit the capitalist class war has been to keep wages low, reduce the workforce and create a new culture of piece work or contract work. The result has been that while profits are made, and obscene profits at that, and worker productivity has increased, wages have not.

When you have less workers you have increased productivity. When you have low wages you have increased productivity. If there is a productivity decline in Canada its not because of the low waged work force, it is because the capitalists have failed to re-invest their record profits in their business and in its technology, resulting in decline productivity.

There is lots of cash flowing, usually into someones pocket like Enron, Worldcom, Nortel, Hollinger, Tyco, etc. etc. ad nauseum, but
of course not in wages and benefits for workers.

Stanford and the TD Bank are joined by the right wing business think tank the CD.Howe Institute in their criticism that the tax breaks and priming of the pump by the state in its money give aways to Corporate Canada have not resulted in investments in R&D, technology or even improving working conditions. Thus Corporate Canada is directly to blame, as are the various levels of simpering compradour governments provincial and federal, for Canada's lack of competitiveness in the marketplace.


This should be screaming tombstone 72 pt headlines across the nations print media, it should be featured as the lead newsstory on the electronic media. And it isn't. Here is empirical evidence that the twenty year campaign of neo-liberalism has failed Canadians and benefited the wealthy few. Despite all the rhetoric and propaganda to the contrary. The facts show that the business boom in Canada is a direct result of a low wage policy. That tax cuts have increased profit but not productivity. That this is a NATIONAL SCANDAL of Adscam proportions.

But no, the story is buried in the business and back pages of the papers. And no direct link is drawn by the reporters to how these stories all say the same thing; the Neo Conservatives are Wrong! Wrong! Wrong!

They were wrong when Von Mises was in charge of the Post WWI Austrian Economy. They were wrong when Milton Friedman inflated the Pinochet Chilean Economy. They have been wrong since theier policies were applied by Thatcher, Reagan and Mulroney. They have been wrong when applied by Klein, Harris and now Campbell.

And yet the right wing has not abandoned its predicatable cry for more and more tax breaks as the CD Howe Institute article shows. Never let the facts get in the way of ideology. The CD Howe report shows that investment is the problem not corporate incentives. But they still fall back to the old neo-con mantra; tax cuts.

We don't need tax cuts for corporations we need a Social Wage for all Canadians!

One of the social democratic reforms called for forty years ago was the Guaranteed National Income, which has been recently revived by European Socialists like Andre Gorz and other reformists as the Social Wage.

With the boom in profits that has occured over the past twenty years such a social wage should come directly out of businesses before tax profit. And it could easily be done when you consider most workers in Canada produce at least twice their total salary and benefits in profit.

We need a social wage in Canada of a minimum $10 an hour with a full benefits, and a portable pension plan for all workers. Whether part time, full time and those employed hourly, those on social assistance and EI, and those doing unwaged work.

Corporate Taxes Already Cut, With Few Benefits

According to the TD Bank report, which was released on April 28, Canadian corporations are showing record profits, which they aren't reinvesting. The report attributed the lack of reinvestment to uncertainty due to a volatile global political situation, but warned that “corporations cannot simply build up savings in perpetuity,” but need to invest to “maintain competitiveness”.

"Corporations cannot simply build up savings in perpetuity," the report said, warning that businesses need to invest to maintain their competitiveness.

"In all probability, merger and acquisition will remain a top priority for many Canadian companies in 2005," it said. "But we may also begin to see more in the way of dividend payouts and productivity-enhancing investment initiatives, which, so far, have underperformed profit growth."

Mr. Drummond cautioned, however, that profits will not continue to grow at the unprecedented pace they have been in recent years.

"We're certainly not going to sustain that pace of profit growth through 2005 and 2006, never mind out as far as 2008 when the tax cuts were to have kicked in," Mr. Drummond said.

In fact, a slowdown in profit growth has already started.

Canadian Labour Congress economist Andrew Jackson said that the report shows that past corporate tax cuts are responsible for the profits that aren’t being reinvested. “One is struck by the discrepancy between extremely solid corporate profitability... and the fact that real investment by corporate Canada... has not increased by anywhere near as much,” Jackson was quoted as saying.


Eric Beauchesne
The Ottawa Citizen
Friday, May 06, 2005

Canada invests less than its competitors, particularly the United States, in ensuring its workers have the latest tools to make them productive, the C.D. Howe Institute said yesterday.

This year, it appears the amount invested in productivity-enhancing machinery and equipment in Canada will be about $1,150 less than the average in all industrial countries, and $2,690, or 23 per cent, less than the U.S.

The report from the business-backed think-tank was issued the same day the United States reported another surge in business productivity in the first quarter, bringing output per hour worked up 2.4 per cent from a year earlier. The U.S. news wasn't all good: labour costs also soared.

Still, the latest figures for Canada suggest there has been virtually no productivity growth here for the past two years. The institute argues increased investment is the key to higher productivity.

In Central Canada, however, capital investment per worker is low and declining, it said, projecting that this year the level in Ontario will be 39 per cent less per worker than in the U.S., while Quebec will 44 per cent less, and Manitoba 36 per cent less.

Pasta Paycheques
- The service industry in Alberta is becoming more competitive in this hot economy. Witness the wage list published on Joey Tomato's website, and listed in an ad for a recent job fair: line cook, $7 to $10 an hour; dishwasher, $7 to $9 an hour; hostess, $7 to $14 an hour. The real payoff is in being a manager, or shift leader: $30,000 to $150,000 a year. Aspiring restaurateurs, note: your eatery needs to dish up a lot of pasta to earn that top figure.


Proportion of low-paid workers unchanged since 1981
Those earning under $10 an hour make up one of every six full-time workers: study

Norma Greenaway, CanWest News Service

May 6, 2005

The share of Canadian jobs paying low wages has not shrunk since 1981, leaving one in every six full-time workers earning less than $10 an hour, says a new study by Canadian Policy Research Networks Inc. "Does a Rising Tide Lift All Boats? Low-paid Workers in Canada "

The study, being released today, also says that contrary to popular opinion, many low-paid workers -- defined as earning less than $10 an hour -- do not graduate to higher-paid jobs over time.

"There is a tendency to say we know people earn $7 or $8 an hour, but these are teenagers flipping hamburgers, or selling jackets or jeans, and in a few years they will be out earning decent wages and we don't need to worry about them," said Ron Saunders, author of the report.

"What the data show is that -- although teenagers are very disproportionately low-paid -- the rate of low pay is actually high among all age groups."

Saunders said he's surprised the proportion of low-paid workers, about 16 per cent, has not changed since 1981, considering the economic and job gains the Canadian economy has experienced. On top of that, he said, there has been a significant increase in the proportion of the workforce with post-secondary education.

The study says that of the 1.7 million full-time workers being paid under $10 an hour, 30 per cent -- or more than 500,000 -- live in households where the collective income falls below the Statistics Canada low-income cutoff.

"These are full-time workers," Saunders said. "So we're not meeting a very basic societal objective (that) if you're working full time, you ought not to be poor."

Saunders traced the problem to the competitive pressures of globalization, which he says has prompted employers to scramble to cut costs by doing such things as hiring temporary help and outsourcing jobs, the decline in unionization in the private sector and an erosion in social support systems.

Among the study's findings:

- Of those working for low pay of less than $10 an hour, half will not graduate to better wages within five years. Most of them are women and have low education.

- Low pay is four times as prevalent among those who did not complete high school. Among university graduates, about one in 17 earns less than $10 an hour.

- One-quarter of recent immigrants were low-paid in 2000, compared with one-sixth of Canadian-born workers.

- Visible minorities are the most vulnerable among recent immigrants, with almost one-third getting low pay, compared to their counterparts who were not visible minorities.

- At least one in five lone parents, unattached individuals under the age of 40, and persons with a disability also fell into the low-pay category.

Growth in workers' wages dismal since '81, TD Bank says

OTTAWA -- The wage growth of Canadian workers over the past two decades has been even more dismal than suspected, the TD Bank says.

All that prevented inflation-adjusted, after-tax earnings from actually falling was that today's workforce is better educated, more experienced and includes more women, it said in an analysis Wednesday.

"Having a better-educated workforce with more experienced workers, more women, and a narrower male-female earnings gap are all achievements to be applauded," it says. "These are the only factors that prevented an outright and substantial real decline in Canadian hourly wages between 1981 and 2004."

In a report earlier this year, the bank estimated that the real after-tax incomes of workers rose by only 3.6 per cent over the last 15 years, markedly less than the 25.5 per cent growth in the economy over that time.

Further, it noted that Statistics Canada has reported that median wages in Canada have changed little over the last two decades despite the growing experience and educational attainment of the workforce.

However, if one takes into account that wages normally rise with experience and education, the bank now says: "The result is an even more pessimistic picture of Canadian wage growth than past estimations."

The real hourly wages of men did fall more than two per cent between 1981 and 2004, it says. However, those of women, who now account for a greater share of the workforce, rose by more than eight per cent over that time, although their wages remain lower than men's, it says.

Meanwhile, the average age of workers has increased over the two decades to 39 years from 34 years, it says, adding that because older workers tend to be more experienced, they tend to earn more.

As such, the aging of the workforce should have boosted wages, it says. Adjusting the changes in wages to take that into account, the bank calculates that men's real hourly wages have fallen by more than 10 per cent, while women's wages have increased by only 4.1 per cent.

"Just as changes in gender and age composition can skew the true rate of wage growth, so too can changes in education," it adds.

The proportion of adult Canadians with a university education has increased to more than 25 per cent from 16 per cent in 1981, it notes.

"This means that part of the reason personal income rose at all over the past few decades was that more people were graduating with university degrees, and as a result, getting better-paid jobs," it says.

However, the increase in workers' wages over that time was less than the increase in education would suggest it should have been, it adds.

"In fact, holding age and education constant, Canadians of both genders saw outright declines in their wages," it said. "Astonishingly, for all levels of education and for both sexes, workers earned less in 2004 than in 1981."

© The Vancouver Sun 2005



Sutton Eaves
Ottawa Citizen; CanWest News Service

Tuesday, April 26, 2005

OTTAWA - Despite popular theory, statistics show that getting an education is no guarantee a well-paying job will follow.

A Statistics Canada study-Escaping low earnings- of low-paid labour trends indicates that while adult workers are better educated than ever, they are no better paid than they were 20 years ago.

"You have two movements: on one hand, a better-educated workforce, but on the other hand, for some groups, you have falling pay rates," said government researcher Rene Morissette.

Typically, a well-educated employee will earn more money quicker than those with lower education levels, especially as they gain experience and aspire towards higher-paid positions.

The new study pops a hole in this theory, showing that despite rising levels of education among adult workers, many still toil in low-paying jobs.

The proportion of adult workers with a university degree rose about 10 per cent between 1981 and 2004, making them better educated than their predecessors.

Still, the number of adult employees earning less than $10 an hour dropped just one per cent in that time.

All prices have been adjusted to reflect changing inflation rates.

For young, less-educated males, the findings were more stark. Comparing workers whose level of education -- a high school diploma -- did not change since 1981, Morissette found their wages have actually declined by 20 per cent since then. This category is dominated by men aged 25-34.

Morissette offered a couple of theories for the slide backwards. One correlates to the decline of wages across the globe, which forces firms to stay competitive by reducing labour costs.

"Another explanation is that the technological changes we have witnessed over the past 20 years, like the computer-based revolution, may have tended to reduce the demand for low-educated workers," he said.

Overall, wages for workers aged 16-74 rose modestly since 1981 by about six per cent.

For part-time workers, the trend was reversed so the average wage fell 14 per cent from $14.53 an hour to $12.47.

Despite the decline or plateau in worker's wages, the number of employees living in low-income households has not changed since 1981.

This is attributed to the growing number of dual-income families that, with the help of two or more employed members, keep the income level above the low-income cutoff line.

The study says the most economically vulnerable groups are people living alone, single female parents, individuals with only a high school education and recent immigrants to Canada. Twenty-five per cent of working females under the age of 40 were employed in low paying jobs in 2000. For men, that number is 17 per cent.
© The Edmonton Journal 2005


P.M.Lawrence said...

Nice thinking, but there's more to be said on the subject. Unfortunately space does not permit, but here's one conclusion without reasoning.

In the long term, subject to Malthusian constraints, there is a range of viable social wages. These are always below a "living wage", and they work because they allow people to price themselves into work. It makes more sense to go for a distributist solution than for a social wage, to get government and taxation out of the loop. But either way, a full living wage is unworkable as it leads to a collapse.

In the shorter term, there are huge transitional problems, and the only short term approach that is workable (starting from here) is some variant of Professor Kim Swales' scheme, which I go into in various pieces at my publications page,

eugene plawiuk said...

You are correct, a living wage would lead to the collapse of capitalism, which is no bad thing.