Wednesday, May 5

Vancouver's astonishingly high living wage

The Canadian Centre for Policy Alternatives released a study on Tuesday pegging the living wage in Metro Vancouver at $18.17. In other words, a family with two kids living in Metro Vancouver would have to have both parents working full-time at $18.17 an hour in order to meet its "basic needs."

Given that the minimum wage in Vancouver is $8 (or $6, if you have less than 500 hours of work experience), it seemed astonishingly high. As a 20-something guy who may one day want to start a family, it's a little bit nerve-racking to think that it'd take a salary of $36.34 per hour just to provide the most basic support to a wife and a couple of kids.

Fortunately, the report does a very good job of outlining how they calculated the living wage, making it easy to examine whether or not the assumptions behind their calculations are reasonable. Many of the authors' assumptions seem very realistic. However, there are a few assumptions that may cause the living wage to be grossly overestimated.

First, the authors assume that full-time work is 35 hours per week. I know lots of full-time positions are based on 35-hour weeks, but plenty are based on 40-hour weeks. Presumably, if both parents worked 40-hour weeks, it would increase their earnings by one-seventh for the year, and reduce the living to $15.90.

Interestingly, the authors seem to have boggled their rent estimates. The report says it bases the living wage on "$1,346/month (includes conservative rent estimate for a three-bedroom apartment, utilities, telephone, and insurance on home contents)." This raises the issue of whether a husband and wife with two young kids need a two- or three-bedroom place to meet "basic needs." I think this argument could go either way, so I'll give the authors the benefit of the doubt.

Continuing on in the study, the authors note that, "According to Canada Mortgage and Housing Corporation data, the median rent for a three-bedroom apartment in Vancouver went up … to $1,175/month." This raises a second issue: what level of rent should be used? The median rent seems like a gross overestimate of what would be needed for a living wage. Since half the people in Vancouver necessarily pay less than the median rent, there'd be cheaper places available, and surely some of those three-bedroom places must be good enough to meet "basic needs."

I'm not sure how the authors go from $1,175 per month to $1,346, but tacking on $171 for monthly utilities, telephone and home insurance seems reasonable. But there's a third issue with their rental estimates. Looking at the Canadian Mortgage and Housing Corporation's most recent rental market statistics, $1,175 isn't the median three-bedroom rent in Vancouver — it's the average (not median) two-bedroom rent. In other words, they authors pulled the wrong number off a piece of paper. The average three-or-more-bedrooms rent for Vancouver is actually $1,381.

So the authors used a value for two-bedroom rent when they meant to use three-bedroom rent (a gross underestimate) but went with the average rent in Vancouver instead of what's required to meet "basic needs" (a gross overestimate). Let's call it even.

Finally, there's child care. The living wage is based on "$1,096/month (for a four year old in full-time care, a seven year old in after-school care, and six weeks of summer care)." Child care is a necessity for some families. But I know other parents who organize their work schedules so that they don't need child care, or rely on a relative such as a grandparent for child care. If we cut child care out of the equation, the living wage plummets to $10.94 per hour (based on 35-hour work weeks) or a measly $9.58 per hour (based on 40-hour work weeks).

That's a lot less scary than the original $18.17 per hour. It goes to show you how much specific assumptions matter. It also illustrates (assuming the report's child-care estimates are reasonable) how freakishly expensive child-care is.