What is a “living wage”

When people talk about the living wage they are referring to the hourly wage a worker needs to earn enough money to cover their basic expenses and participate in their community. This number is specific to region or city within Canada and takes into account the very basics of living like rent/mortgage, food, heating, electricity and any other monthly expenses people might have.

These numbers have been calculated as a way to show governments and organizations that often the living wage is higher than the minimum wage, leaving a lot of people without the proper funds to live. Before we discuss more about the living wage, let’s talk about the difference between the living wage and minimum wage.

The biggest difference between a living wage and minimum wage is that minimum wage is set by the government and is the amount businesses must pay their employees. The minimum wage will be the same across the entire province, while the living wage would differ depending on where you live.

For example, the living wage for Calgary is $18.60/hour, while the minimum wage for the province of Alberta is $15.00/hour. That means that people living in Calgary who make minimum wage are not making enough money per hour to cover all their expenses.

This is not an uncommon phenomenon, as in many places across Canada people are struggling to pay their bills. For years the minimum wage has been too low to lift someone above the poverty line, even when they are working full-time for the entire year. The living wage is based on the principle that if you work full-time, you should earn enough to make ends meet and participate in your community.

The minimum wage is mandatory for most occupations, but giving your employees a living wage might be the better thing to do. The problem with that is that the living wage is a voluntary commitment of employers to go beyond the minimum standard for paying employees.

That means that each organization has to choose whether or not to participate in giving their employees a living wage which not all organizations are willing to do. When profits are more important than the living conditions of workers, organizations will choose to pay a minimum wage rather than a living wage. Also, without the awareness that minimum wage is not the same as a living wage, then organizations might be making decisions without all the relevant facts.

Related: Best Benefits for Employees

How a living wage is calculated

In general, a living wage for the different areas of Canada is calculated based on the expenses and income of a family of four. The family would be made up of two parents and two children living in the area you are calculating the living wage for. The two parents would be both working full-time jobs (35 hours a week per parent) and one of the children would be in daycare. The calculation also takes into account things such as a parent taking college courses to better their prospects at work. Living wage also takes into account things such as taxes and the child benefit payment that parents receive.

Once all of these numbers are calculated, there would be a calculation of all the expenses the family is likely to have. Not only do they calculate regular things like food, but they also make room for unexpected expenses so that the living wage takes into account real-life possibilities. The final number is then calculated by comparing money coming in, to money going out. By doing this they can come up with an hourly wage people would need in order to have a living wage.

By calculating the living wage in this way, there is assurance that the companies that choose to pay their employees this way will be paying a wage that is good for a typical family in the specific region of the country.

Why providing a living wage can be good for business

Paying employees more than minimum wage may sound counterintuitive, but there are a lot of benefits for companies who do so. The following are some of the benefits of providing a living wage to your employees.

Increased Productivity

When people are able to pay their bills properly and do not have to worry about money, they have less stress. With less stress, employees can concentrate better and will be able to be more productive. Also, employees might have fewer negative feelings towards the company they work for as their work is being appreciated properly. When this happens, workers are more motivated to work harder and can be more productive.

Increased Employee Retention Rate

People do not want to work for companies that are not paying a living wage. Without paying enough compensation to pay their basic bills, employees will start to feel frustrated with the organization and are more likely to change jobs as soon as one becomes available. Having higher retention rates means that your company can save money on things such as recruitment and training which is why having increased employee retention rates can be so beneficial.

Decreased Absenteeism

When people have difficulty paying their bills, they are more likely to rely on cheaper food, which normally means having to buy food that is unhealthy. This can cause them to be more likely to get diseases or colds that will take them away from work. You will also find that without money for things like proper daycare, some workers will be forced to take time off work if their child gets sick. When you pay a living wage to your workers, these types of issues become less frequent and you will have fewer workers needing to call in sick.

Easier to Hire New Employees

When your business needs to hire someone, you might be doing yourself a disservice by sticking with paying the minimum wage. There will be fewer people who will apply for the job as people know how much of a struggle it is to live on minimum wage. Also, the quality of talent will be lower than if you pay a living wage as the more talented candidates will not consider your company as a viable option.

Good for Your Brand

When people know that you pay a living wage, they are more likely to want to do business with you. People like doing business with companies that have good moral values and being a company that has committed to paying their employees a living wage have proven that this is true.

As we see in the above examples, there are a lot of benefits for the entire organization when you decide to pay a living wage. 

Providing your employees with a living wage is an effective way of improving your company and your employees’ lives. A living wage can revitalize your company by creating a place where people want to work and where customers are happy to do business. Choosing to pay your employees a living wage could end up being one of the best decisions for the organization.

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