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OECD cherry-picking minimum-wage situations

July 30, 2015

3-minute read

Over the past few weeks, an OECD infographic has been making the rounds on social media. The image shows the number of weekly hours needed at minimum wage to move out of poverty in certain of countries.

The infographic suggests that in Canada, one needs to work 38 hours per week at minimum wage to get out of poverty. Therefore—according to the OECD—it would seem that the minimum wage is actually a living wage in Canada. But is that really true? To a certain extent, the OECD's statement does hold true. However, the infographic is a little misleading and one needs to dig a little more into these numbers to better understand what they really mean.

A note of caution: this text only analyzes the situation in Quebec. It would be interesting, however, to replicate it in the rest of Canada, as well as in other countries.

Cherry picking and the minimum wage

In its infographic, the OECD uses a relative poverty line (the median household income cut in half), compares various available incomes (and not net revenue) and uses as its basic category for comparison single parents working at the minimum wage to support two kids.

Working 38 hours per week at the current minimum wage ($10.55 per hour), after tax, contributions and transfers (tax credits, benefits, etc.), a single parent comes close to a living available income in Quebec. The gross annual income of a person working at minimum wage is $20,846 when working 38 hours per week. If he or she has two kids (one attending daycare, the other in elementary school), it turns into an available income of around $36,000 per year thanks to transfers, credits, and benefits for people with both low incomes and children.

At IRIS, we calculated the living wage for a single parent with only one child a few months ago. We realized that even after transfers and benefits, the single parent with one child did not earn enough to support his or her family and hope to move out of poverty. That being said, the benefits and credits that come with having a second child (around $5,000 more than for a single parent with previously only one child) makes it possible to pay for the newborn's food as well as his or her clothes and even affords a little wiggle room financially to study part-time. There remains a shortfall before a truly livable wage can be reached, but it is considerably smaller than for single moms with one child, unattached individuals or families with both parents working at the minimum wage, who do not earn a living wage.

Therefore, there is an important methodological bias in the OECD's graph: it's a classic case of cherry picking. It may be true that in Quebec, in 2015, a single parent with two children earning the minimum wage has an available income close to something viable, close to a living wage. That does not mean that the minimum wage is a living one in all situations. It would therefore be misleading to say that 38 weekly hours at the minimum wage are enough to attain a living income because unattached individuals, families made up of two adults and two children and even single parents with one child do not earn a living wage.

In other words, in the vast majority of situations, the minimum wage is not a living wage in Quebec. And I would be surprised to find that it is for the vast majority of situations throughout the rest of Canada.

Grounding wage in people's actual needs

The OECD infographic is a reminder that we need to be careful when looking at numbers. On a human level, it's also a reminder that the legally established minimum that a worker should earn should not be calculated according to arbitrary principles or categories, but in accordance with these men and women's real needs, both material and cultural, in their daily lives.

To do so, we need to take into account the myriad of situations in which workers can find themselves as well as the cost of living, which can vary from one area to another. In other words, to put a number on a minimum wage, we need to ground it in the daily experience of workers, something that OECD does only very partially and which, ultimately, can lead us to the wrong conclusion if we're not careful.

This article was written by Minh Nguyen, a researcher with IRIS—a Montreal-based progressive think tank.

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