By Jaime Woo

Photo by Marc Lostracco.
Last week, minimum wage was raised to $8.75 an hour in the first of three scheduled increases. According to the arguments provided in the media (and on Torontoist), an increased minimum wage is necessary to help people make ends meet, but could force businesses to cut jobs to accommodate the increased costs.
From a numbers point of view, the raise was a necessary antidote to the minimum wage being frozen at $6.85 from 1995 to 2003. Using the Consumer Price Index for Toronto, $8.75 adjusted for inflation ends up being $6.85 in 1995 dollars. Businesses caught off-guard by this year’s minimum wage increase must be pretty naïve to not realize that, after eight years of locked minimum wage rates, a correction was coming. However, each increase (or decrease) of the minimum wage by the government must be justified as the costs come off the back of the employers.

2010: A Wage Odyssey

To investigate what a salary provides, Torontoist has sketched out budgets for a full-time worker either making the low-income threshold determined by Statistics Canada ($22,000 annually) or the current minimum wage ($8.75 per hour, or $18,200 annually).
Naturally, one budget can’t speak for all people; however, the budget helps suggest the amount of flexibility and reach minimum wage has. Priority was given to housing, food, and health, with the remainder of the budget going towards luxuries that provide a quality-of-life in Toronto. (Quality-of-life is relative, and will shift as societal norms change. For example, a person unable to purchase a computer would be considered to have a lower quality-of-life.) The first budget is for a person at the low-income cutoff.

$22,000 A Year: 75% of Earnings Goes To Necessities

A single worker in Toronto making $22,000, or around $10.60 per hour for a 40-hour work week, could spend almost three-quarters of their after-tax income on enjoying a basic quality-of-life ($1,185 out of a $1,605 monthly salary).
A single worker would probably live with other people to help lower communal costs, so rent was set at $700 including utilities. An additional $100 was budgeted for clothing, and cleaning/personal hygiene supplies.
A monthly grocery budget of $225 provides for three meals daily (though Canadians tend to spend around 10% of their income on food, lower-income earners spend proportionally more).
To get to work and back, this scenario relies on public transit. The Metropass costs $100 on the yearly plan.
Finally, as the cost of prescription drugs, dental treatment, and emergencies can be daunting, basic health insurance was purchased at $60 a month.

Within One Year: LCD TV, MP3 Player, Cell Phone, and Desktop

$240 would go towards purchasing electronics and entertainment, which are expenses tied to quality-of-life. Although not necessary for survival, it’s important to be able to enjoy a night out or two, and to communicate with loved ones.
In the first year, a person could accrue $140 monthly to put towards the purchasing of electronics, such as a 26” LCD television, a DVD player, a low-end MP3 player, and a desktop computer (using the television as the monitor). After the first month, a worker could afford a new mobile phone with a 200-minute pay-as-you-go plan from Virgin Mobile. Within five months, he or she could afford the television and the DVD player. By nine months, he or she could purchase the music player and the desktop computer. With equipment costs out of the way, the budget sustains basic, low-speed internet access and basic cable television (both with Rogers), with enough left over for four DVD rentals per month.
Each month also provides $100 for entertainment and miscellaneous expenses.
On this frugal budget, there’s still $180, or almost 10% of their pre-tax income, for savings. Is the lifestyle laid out by this budget considered living poorly?

Current Minimum Wage Gives Two-Thirds Less To Spend On Non-Necessities

It’s easier to make such a distinction if one is living off of today’s minimum wage. Per month, a person would take home $1,340, a figure that requires most items from the previous scenario to be scrapped—remember that the necessities cost $1,185 monthly, and a low-end pay-as-you-go phone costs $25 per month.
A worker on today’s minimum wage could then expect to have $130 remaining to split between savings and entertainment, about a third of what the worker from our first scenario had. The priority should be on saving for the future, so $90 a month (or 7% the minimum wage income) would be locked in the back. $40 is left for entertainment (and miscellaneous) expenses, equal to going out for dinner and a movie once a month.
As it stands, with 90% of income going towards necessities (including a phone), the current minimum wage doesn’t leave much grace for unexpected expenses. One way to maximize earnings would be to continue to split the cost of accommodations by living with three or four other people. Looking at this budget, one wonders how minimum wage was determined to begin with. Before this month’s increase, workers on minimum wage survived on about $1,600 less (a whopping $130 less per month).

Inflate Minimum Wage Properly

This admittedly simple budget suggests that within two years—as minimum wage grows from $8.75 to $10.25—the room for savings and spending on entertainment will grow by almost triple. Most likely, the minimum wage by 2010 will be suitable for most single people to have a comfortable quality-of-life. As such, to prevent further arguments by either side, the government should stop any future heavy-handed manipulation of minimum wage by pegging it to inflation starting in 2011.