www.waterlooregion.org / poverty / talk

Poverty Fact Sheet #5

Produced by The Urban Poverty Consortium of Waterloo Region November 15, 2000

Employed Workers and Poverty
In this Fact Sheet Series, we have been looking at some subgroups of people in poverty. Another one of these specific groups is the "working poor". While there are many definitions of the working poor, the term is used here to refer to people who are employed and whose wages make up the main portion of the family's income, but who still live below the poverty line. Some are employed full time, and some are employed part time. Slightly more than half (51%) of all poor people in Canada worked in the labour force at some time during the year in 1995.[1]

The National Council of Welfare states that a good job is the "best insurance against poverty"[2] , but not all jobs pay enough to keep people out of poverty. In the Waterloo Region, almost 5% of all workers with full-time, full-year jobs live in poverty. People with low wage jobs or insufficient hours of employment often live in poverty, as defined by Statistics Canada's Low Income Cut-off (LICO). The LICO is adjusted for community size and measures the amount of money needed to live and participate as a Canadian citizen. A person or family is considered to be living in poverty if their income falls below the LICO.

Figure it out!
If you worked for minimum wage, would you (and your family) be above the poverty line?

The Ontario minimum wage rate of $6.85 per hour provides an earning which falls thousands of dollars below the poverty line. In the Waterloo Region, a person who works at minimum wage for 40 hours per week for 50 weeks of the year makes $13,700 per year, below the LICO of $14,694 for even a single person in the Region of Waterloo. If that person is the sole bread winner in a family, the gap between earnings and the low income cut-off increases considerably. Minimum wage was originally brought in to ensure that every worker could make a decent living and that people who are doing work that is valuable to an employer and to society, should earn enough to live in dignity. Clearly the present minimum wage does not allow this.

The primary cause of the poverty of the "working poor" is the hourly wages being earned, not the number of hours worked. The Canadian Council on Social Development points out that many jobs do not pay high enough wages to provide full-time workers with enough income to support their families adequately. As we can see from Figure 2, at minimum wage, one worker in a family of four would bring home only 50% of the income necessary to raise the family out of poverty. Such distressingly low income is far below the intent of the minimum wage legislation adopted 60 years ago, which declared its purpose to be "... the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being of workers."

Working but Not Getting Ahead
Many people think that holding a job protects a family against poverty, but, as George Gershwin's song tells us, "it ain't necessarily so!" In 1997, about 52% of low-income families were headed by people who worked in the paid labour force at least some of the year, but remained poor because they earned low wages and/or could find only seasonal or part-time work. About 14% (1/7) of all poor people in the Region have full-time, full-year jobs. [3] The working poor are the fastest growing segment of the poverty population. Because of the 20% reductions in the last few years in social assistance, the number of people who are employed but remain poor can be expected to continue to grow.

The "working poor"
"My husband works full-time but only makes $340 a week. We couldn't pay to fix our car when it conked out so we had to scrap it, and now he has to take two buses to get to work. We had to give up our townhouse because it was too expensive, so we're living in a campground until we can save the money for first and last month's rent for an apartment that we can afford. It's hard on our two children, but what other choice do we have?:
Married mother of 2 in the Waterloo Region

Who are the "working poor"?
Most of the working poor live in families with children, so their poverty affects others as well. The majority are couples with children, and 51% have more than one earner in the family.[4] The working poor hold the lowest paying and most unstable jobs.

"So many young families now just don't get the opportunities for permanent employment. You get two parents both working at lots of jobs, lots of hours, but they are living in poverty."
Cathy Brothers, Executive Director, Catholic Family Counselling Centre, Region of Waterloo

About 5% of all employees in Ontario worked for minimum wage or less in 1998 . More than half of minimum wage earners are workers under 25 years of age, the majority of whom are students trying to pay for their education. Most adults over 25 who are earning minimum wage are women, and minimum wage earners are three times more likely to work part-time. About one-third of minimum wage workers are married, and 14% were the sole adult providers in the family.

"I get paid a little more than minimum wage, and it's really hard on that amount to provide for my two kids. I really want to work and set a good example for my children, but every year it seems to be more and more difficult with the same little amount of money and bigger bills. I can't see it getting any better, so maybe I'll have to go back on assistance."
Single mother of 2 in Waterloo Region

Most low-earning parents in Waterloo region are in low-paying retail trade or services. [5] And many people get stuck in minimum and other low wage jobs – there's no chance for wage improvements or employment benefits, such as extended health care. Health suffers.

"If either of my children gets sick and I end up having to shell out $300 or $400 in prescriptions, something has got to give. I don't make a whole lot of money, so that something that has to give is me." [6]

Another cause of poverty among people who are working is the unstable employment situation. Even though we have seen an increase in employment levels in Canada and in this Region, many people are "under-employed" – they are working part-time when they want full-time work, or cannot get a job in their field. The working poor are also the most likely to suffer from involuntary layoffs.

"Right now I'm in the process of looking for another job. Hopefully it's not a contract this time. Hopefully it's full time. I heard that the economy is really booming, but I don't know. I'm looking for full-time permanent work but if a contract comes up I'll take it. I don't have a choice because I want to work, I need the money and I'll just have to take it." [7]
Single mother of 2

Minimum wage does not change as costs rise – it has not increased in Ontario since 1995. But in 1998, the top 100 CEOs in Canada had a 56% increase in their compensation. [4] And the minimum wage has consistently fallen in purchasing power over the past couple of decades, leaving those with minimum-wage jobs with far less purchasing power over time. (See Figure 3.)

If we compare the living standards of minimum wage earners compared to average wage earners in the Waterloo Region, it gives us some idea of relative wealth. In comparison with the average wage, in 1995 a minimum wage earner (full-time, full year) earned just less than 50% of the average income in Waterloo Region. When we look at total income of working age families, poor families earn less than one-quarter (22.5%) of the average total income of all families.[9]

Employment costs money. When wages are low, child care and other employment expenses, such as transportation and appropriate clothing, make it that much more difficult to climb the "poverty wall". The cost of raising children is a major reason why so many families fall below the poverty line, in spite of their labour market participation.

"My wife is working. This means without a doubt that we can't give much attention to the children. My son is 13 years old, and he has spent his summer vacation locked up in the house. Our daughter is 9 years old, and she has had to spend time with us at work, standing there all day. They haven't been able to enjoy their childhood."[10]
Married father of 2

In conclusion, the financial stability of most low-wage earning families remains precarious. Poor people are struggling to deal with low wages and part-time jobs as they try to find affordable housing and child care, feed themselves and keep healthy.

"My income is not enough to meet our needs, but what am I going to do? My main concern is to pay the rent and then buy the food. Whatever is left over, I can sort of juggle."[11]
Single mother of 3

So What? A few points to ponder:

• In the last decade, food banks have found that the greatest increase in people who are hungry has been among the working poor. Despite the strength in the economy and their own hard work, they cannot always make ends meet.
• Low wages have remained the same, but all other costs have increased. People who are poor and are working in the labour force are falling farther and farther behind
• People who can only get part-time employment are taking 3 or 4 part-time jobs, just to try to make ends meet. In their attempts to provide for their families, low -earning parents end up sacrificing time with them.
• The cost of child care is a major financial drain on poor families already on the edge of poverty.
• Unlike higher paid positions, in low-income jobs there are seldom training and personal development opportunities. The working poor, then, have few opportunities for skill upgrading or in-house training to prepare themselves for more highly paid work.

References

1. Kevin K. Lee (2000). Urban Poverty in Canada: A Statistical Profile. Canadian Council on Social Development, p.59.<back>
2. National Council of Welfare (1999).Poverty Profile 1997. <back>
3. Kevin K. Lee (2000). Urban Poverty in Canada: A Statistical Profile. Canadian Council on Social Development, p.7.<back>
4. David P. Ross, Katherine J. Scott & Peter J. Smith (2000). The Canadian Fact Book on Poverty, Canadian Council on Social Development, pg.120.<back>
5. David P. Ross, Katherine J. Scott & Peter J. Smith (2000). The Canadian Fact Book on Poverty, Canadian Council on Social Development, pg.120.<back>
6. Kate Bezanson & Susan McMurray (2000). Booming for Whom? People on Ontario Talk about Income, Jobs and Social Programs. Caledon Institute of Social Policy.<back>
7. Booming for Whom?<back>
8. Yalnizyan, Armine (1998).The Growing Gap: a Report on the Growing Inequality between the Rich and the Poor in Canada, The Centre for Social Justice.<back>
9. David P. Ross, Katherine J. Scott & Peter J. Smith (2000). The Canadian Fact Book on Poverty, Canadian Council on Social Development, pg.120.<back>
10. Booming for Whom?<back>
11. Booming for Whom?<back>

Poverty Fact Sheet Series

1. What is Poverty?
2. Immigrants (New Canadians)
3. People who are disabled
4. Seniors
5. Working Poor
6. Children
7. Youth
8. Sole Support Parents

For More Information...
contact the Urban Poverty Consortium of Waterloo Region: