Low-Income Workers in NL are Getting a Bad Deal (and They Know it)

In a new report from the Canadian Centre for Policy Alternatives on what constitutes a “living wage” across different regions of Newfoundland and Labrador, we learned some pretty disastrous things about the state of household finances for low-income workers in the province. Cost of living increases, the housing crisis, and wages that are consistently low relative to much of the rest of the country mean households are struggling — and some reasons for this are unique.

What is the ‘living wage’?

Our report, the first province-wide effort to calculate a regionally sensitive living wage, attempts to follow the lead of other provinces that use living wages as a tool to address the challenges low-income workers face. The living wage is based on a series of calculations about what it costs a representative household to meet the bare minimum expenses of life. The representative household includes two adults and two children, one in childcare. A “living wage” budget is created, which includes all the typical minimum household expenses – housing, transportation, food, clothing, etc. From those costs, we can then calculate how much the adults in that house must earn an hour in full-time work to keep their “heads above water”.

In 2023, those “living wages” are:

The “living wage” is driven by the costs of living. As those go up, the required living wage goes up unless there is government income support or programs that buffer the increase in the cost of living. A higher living wage is not good unless real wages keep pace; it’s a target people need to achieve. For most low-income workers, there is a gap between their wage and the “living wage”. The province’s new $15 minimum wage, for example, means that people on minimum wage, or close to it, are making substantially less than they need to cover the kinds of costs they are encountering; in Labrador that gap is over $10 an hour.

The median hourly wage in Newfoundland and Labrador is $25 an hour, meaning a lot of households currently cannot cover the costs assessed in this study.

The living wage is not meant to replace traditional minimum wages, though it could help inform what those rates should be. Instead, the calculation is a useful tool for employers who want to ensure their workers can achieve a minimal standard of life; some provinces now have certification systems for “living wage employers.” It is also a useful tool for governments to make evidence-based decisions. Achieving a living wage can come from increased wages and/or public programs that reduce the cost of living for low-income households.

The workers we talked to expressed just what a toll living on low income has and what earning a living wage could mean. As one said: “It would be great if we could eat food that didn’t kill us and [have] sleep schedules that didn’t kill us and live in homes that didn’t kill us. I think that that’s a pretty reasonable expectation of any society.” Another said: “I don’t know that I’m looking for anything unreasonable. I think I’m looking for security. And for some level of comfort, so that my life isn’t just a futile existence.”

What’s going on in Newfoundland and Labrador?

Since this is the first province-wide living wage calculation, we cannot compare this year’s living wage to previous years; however, we know from other provinces that inflation and cost of living increases have hit low-income households hard. Most jurisdictions have seen a big jump in the living wage in the last two years. A living wage exceeding $23 an hour should not be surprising – it reveals the hardship many households are encountering now.

Labrador and the Northern Peninsula face unique challenges; the required living wage of $26.80 is among the highest in the country and highest in Atlantic Canada. Costs for transportation and food combine to make Labrador a difficult place to afford the basic necessities of life without considering the challenges several communities have with finding housing.

Residents of Newfoundland and Labrador face some of the highest grocery prices in the country. Worse yet, food prices are rapidly increasing. Food prices here have risen sharply in recent years, up 12 per cent between 2021 and 2022. Food insecurity for NL households is a growing reality, and there is evidence of increased reliance on food banks by working people. Similar cost of living “shocks” have hit transportation; people are finding it harder to just “get around” in our community as the absence of public transit and increased insurance and fuel costs are all stressing household budgets.

Housing costs have also increased markedly, outstripping income increases. Rents, mortgage costs, maintenance bills, and home insurance have all increased. More and more residents find housing precarious, and homelessness is a serious public policy problem confronting local governments.

Newfoundland and Labrador also continues to have a higher rate of children living in poverty than the rest of Canada and one of the highest gender wage gaps in the country. The median hourly wage for women in this province ($23 an hour) is lower than NL living wage rates, meaning that about 50 per cent of women workers earn less than the living wage. Affordable child care is virtually a myth, and families with children are finding it particularly hard to navigate the current cost of living crisis.

Government is not rising to this challenge

Facing these problems, the province’s major labour market intervention, the minimum wage, has become a less and less effective mechanism for ensuring that working people can meet their basic living costs. The province’s 2022 Minimum Wage Review argued that employers were finding it impossible to hire workers at that rate (with a 35 per cent job vacancy rate) and that there needed to be more attention to what would constitute a “living wage” for people in the province.

This province’s residents must also deal with a series of public policy shortfalls that magnify the cost-of-living problems locally. Our “representative household” does not qualify for the Newfoundland and Labrador Child Benefit or the Newfoundland and Labrador Prescription Drug Plan, because they make too much money. They also would not be helped by many of the measures in the province’s new poverty reduction strategy. In our discussions with low-income workers for this report, this was a real sore spot. Residents told us how unrealistic the government’s thresholds are for these kinds of supports. Some felt punished for taking on more hours to try to make ends meet because that only pushed them out of need as defined by the government.

Similar things are true about access to affordable childcare and public transit – two things that are really helping to offset cost of living increases in other parts of the country. Childcare costs have a big impact on living wages. The absence of $10-a-day childcare for most households in this province increases low-income household budgets by about $6000 annually. All of that extra cost has to be made up by earning more wages in the labour market, driving the gap between what people actually earn and the real cost of living even higher in this province.

However, what might be the most important takeaway from what we learned in this study is that there are a lot of low-income workers who don’t really want to be here anymore – there is a growing sense that life is just better outside of our province – that wages are higher elsewhere and the cost of living is lower – something the data clearly shows.

According to British Colombia’s living wage data, household budgets in cost-of-living-crazy Metro Vancouver and the Fraser Valley are not that different from our province, but government programs do more there to make life affordable, resulting in a lower living wage. When that is combined with a much higher minimum wage ($16.75 an hour) and much higher wages in general, low income people are getting a better deal.

What should we do?

Of course, employers that can commit to paying a living wage, should. In fact, we would like to see certification schemes like those in other jurisdictions. Employers that care about a happy and healthy workforce could commit to meeting the living wage standard.

But it is also the case that government can do more. The province should think seriously about how it calculates the minimum wage and what purpose it serves. The provincial government should also carefully assess threshold and clawback levels for existing household supports. For example, only a family whose net income is below $17,397 will receive the full NL Child Benefit, an income that doesn’t pay many bills.

Both federal and provincial governments are responsible for managing this crisis. Actually-available affordable childcare, pharmacare, and a host of other measures that help shield low-income families from a high cost of living are vital in responding to the realities households in are facing. And the urgency to act is amplified this time of year.

As one participant in the study told us, the extra household budget stress of the holiday season makes this “the hardest time of the year to try to survive.”