What’s in a Living Wage?

The living wage in Vancouver -and British Columbia in general- has experienced a massive jump, courtesy of high inflation. It went from $ 19.50 per hour last year to $ 24.08 for 2022.

$ 24.08 is what each parent of a 4-person family needs to earn in order to pay for basic necessities. It assumes that both parents work full-time, and that their respective employers don’t offer any benefits.

Please note this hourly rate is a gross amount. The net amount paid will be much lower once all payroll deductions have been factored-in.

Let’s take a closer look at what a living wage is and how it’s calculated.

A Living Wage isn’t the Minimum Wage

At the time of writing, the minimum wage in British Columbia is $ 15.65 gross per hour. This simply means an employer can’t offer less than this amount to its employees. Paying less is illegal.

The BC minimum wage is one of the highest in Canada. Only Yukon and Nunavut have a higher minimum wage.

In order to compare with the living wage, let’s calculate the net salary of our 2 parents working 40 hours a week on minimum wage. We’ll also assume their employers don’t offer any benefits, and that they’re paid on a semi-monthly basis.

Their 2 net paychecks would total $ 2 628.86 per pay period, i.e. $ 1 314.43 each. On a monthly basis, our 2 parents earn a combined net total of $ 5 257.72. You can verify the calculations here.

Our family would be eligible for the Canada child benefits. However, I will not factor-in the benefits in the family’s income, in order to have an apple-to-apple comparison.

Some,-maybe a lot- of you think that $5K net per month is a decent amount of money. It definitely is…for a single person and perhaps, a couple without children. “Perhaps” is the key word here.

However, in this case, our couple has 2 children and live in Vancouver, the most expansive city of Canada.

Our family of four would require a minimum of a 2-bedroom apartment, and ideally a 3-bedroom.The average rent for a 2-bedroom in Vancouver is around $ 3 350.00 per month. A 3-bedroom costs $ 4 390.00 per month. Our family would save a little on rent by living in the suburbs, but not as much as one may think.

Let’s say our family rents a 2-bedroom in Vancouver. They’ll spend 63% of their net income on housing. They haven’t even bought groceries yet….

I’m not even discussing buying a property. The average condo price in Vancouver is $ 770 000. A single detached house is over $1.1 million.

If our family were to buy a condo at the above price right now, they’d be looking at a minimum monthly mortgage of $ 3 579; that’s with 20% down and a 5-year fixed rate. This amount doesn’t include strata fees and property taxes.

My point is that being on minimum wage has never gotten anyone ahead financially, at least not in Vancouver and not in 2022.

So, What’s A Living Wage?

A living wage is the minimum income necessary for a worker to meet their basic needs, without relying on government subsidies.

In Canada, basic needs include:

  • Housing
  • Food
  • Transportation
  • Clothing
  • Childcare

In Vancouver, to pay for the above, you need to earn $ 24.08 gross per hour.

Basic needs don’t include:

  • Debt repayment
  • Leisure and vacation
  • Savings for retirement, kids’ education, downpayment etc…
  • Healthcare costs not covered by the province

Let’s see how our parents would be faring financially with a living wage. We’ll use the same assumptions as with the minimum wage.

Their 2 net paychecks would total $ 3 105.16 per pay period, i.e. $ 1 552.58 each. On a monthly basis, our 2 parents earn a combined net total of $ 6 210.32, $ 952.60 more than on minimum wage.

Our family would also most likely be eligible for the Canada child benefits. However, I will not factor-in the benefits in the family’s income. The purpose of a living wage is to be able to cover the basics without government assistance.

Is a Living Wage Really a Living Wage?

It depends on what you look at and on a number of factors.

If we still assume our family rents in Vancouver, they’ll spend 54% of their net income on rent. It leaves them with $ 2 860.32 to feed, transport and clothe themselves, as well as paying for childcare services.

Depending on their personal situation, it may be a bit of a stretch.

Let’s see how far their dollars can go, based on the most costly assumptions.

For example if both their children are under the age of 5, our parents could be looking at a hefty childcare bill. A spot at a licensed daycare for a child under 5 costs between $ 1 000 to $ 1 350 per month and per child.

The government of BC has introduced subsidies for families earning less than $ 111 000 gross per year. In order to benefit from the subsidy, the children need to be enrolled in a participating and qualified daycare. Even with this, our parents would still be looking at over $ 1 100 per month for childcare services, based on one child being 4 and the other 2.

Their funds are now down to $ 1 760.32, based on the above assumptions.

Let’s take a look at transportation. They’ll save money if they’re able to take transit to work, but what if it’s not possible? What if both need a car to go to work? BCAA has a nifty little calculator to help us. A compact car in BC costs about $ 8 000 per year in insurance, gas, maintenance and car payment. That’s about $667.00 per month and per car. If our family has 2 cars, it’s another $ 1 334.00 dent in their hard earned money.

I am aware there are several variations in the car scenario. Our family may have bought their cars several years ago, and no longer have any payments on them. One car may also be used less than the other.

Our family of 4 is now down to $ 426.32 to feed and clothe themselves. A rather modest amount in Vancouver. Our parents will need to shop at Costco or equivalent and look at second-hand clothes….nothing wrong with these options.

For me, having just enough money to pay for the basics isn’t a living wage. It’s a surviving wage.

Surviving isn’t Living…

We all aspire to more than surviving.

As seen above, the “living wage” only includes the basics. It doesn’t include debt repayment or saving for retirement, or anything else for that matter. These are pretty important!

It’s also not realistic to assume people will never take a vacation or eat-out at a restaurant.

A true living wage needs to factor all these aspects in. For our family of four, it would probably be closer to $ 30.00 per hour.

Final Word

There are certainly a lot of variables when it comes to expenses, lifestyles, living costs and personal situations.

Here, I used a profile of a family consisting of 2 full-time working parents and 2 children under the age of 5. This profile definitely exists in real-life. I also used the most costly scenario to determine whether they could live off a living wage, in Vancouver, the most expansive city in Canada.

A “living wage” is a stepping stone and a start, however, it’s a bit of misnomer. It’s more of a surviving wage than a living wage.

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