Some city workers earn $4 an hour less than a living wage

Sault Ste. Marie councillors will be asked next week to gradually increase pay for 32 part-time and student city employees to ensure they're making enough to meet basic needs.

City staff are recommending working toward bringing all employees up to the Ontario Living Wage Network (OLWN) minimum living wage for northern Ontario of $19.80 an hour.

Currently, some part-time students working for the city make as little as $15.60.

But city staff are also suggesting the city not seek OLWN certification as a living wage employer, reluctant to allow municipal wages to be controlled by an independent third party that can change its pay calculations whenever it pleases and without notice.

OLWN is a nonprofit network of employers and others dedicated to providing a living wage for all workers.

It's supported by annual fees from certified living wage employers, and by financial donations from the Mennonite Central Committee Ontario as well as some credit unions and United Way branches.

Village Media, which owns SooToday and 24 other digital news sites across Ontario, became the first Sault Ste. Marie business to become an OLWN-certified living wage employer in May 2021.

Since then, three other local firms have attained certification:

• Laker Express
• Odd Job Jacks Inc.
• YNCU Sault Ste. Marie

Odd Job Jacks ceased doing business last month, partly because of labour costs.

At Monday's city council meeting, Nicole Ottolino, the city's director of human resources, will recommend that initial changes be made to the current part-time and summer student wage grid.

The following are explanatory excerpts from a report prepared by Ottolino for Mayor Matthew Shoemaker and councillors, including why she doesn't want to seek OLWN certification:

Labour market and inflation

"The regional unemployment rate for northern Ontario was 6.7 per cent in June of 2023 and has risen to 8.1 per cent by early November. In theory, in tight labour markets there may be competitive benefits to guaranteeing a living wage, as increasing wages should produce an increase in the quantity of available labour.

"At some point; however, increasing wages results in a substitution effect. Employers will look for ways to decrease their labour costs by decreasing service levels and/or increasing automation and technological changes in order to reduce the amount of labour required. It can also lead to reduced demand from consumers, due to higher prices being charged for products and services to offset the increased labour costs.

"In 2022, the living wage was determined among a backdrop of record-breaking inflation and Consumer Price Index increases (CPI reached a high of 8.1 per cent in June of 2022). The cost of many items in the OLWN basket of living expenses, such as shelter and food, continues to remain high. With the next calculation of the living wage expected in November of 2024, it will be difficult to predict and budget for what amount the living wage will rise to.

Collective bargaining agreements

Direction to become certified as a living wage employer would be subject to negotiations with our unions where positions or wage bands are below the prescribed living wage. The majority of the city's collective agreements were ratified in 2023 and will not expire until January of 2028.

External organization setting corporation's wages

"As mentioned above, the OLWN calculation is completed annually in November. Certification and the license agreement will require an employer to align their current living wage to the new calculation within six months. The timing of this rate announcement may not be conducive to the city's budget cycle and could result in an inaccurate budget forecast on wages.

"Maintaining certification as a living wage employer would remove the city's ability to determine and set rates of pay for multiple entry/level roles. The city would be obligated to pay the wage set without the ability to challenge the calculation. The OLWN is free to change their calculation parameters at will and without prior notice – as exhibited in 2018 where the length of the work week was changed from 37.5 hours to 35 hours, and in 2022 when the previous 51 boundaries to define distinct living wage areas was reduced to 10 regions.

"Removing the city's ability to control how much it pays its staff regardless of any other factors (minimum wage increases, total compensation, union settlements, labour market pressures, cost of living etc.) could put the city in a position where it has to adhere to the living wage requirements and likely impact the taxpayer or be removed from the program, causing negative public perception.

Wage compression

"Wage compression occurs when the pay of one or more employees in a lower job band is very close to the pay of more experienced employees in the same job, or of those in higher level jobs, including supervisory positions. Often, it is the result of increases being given to a lower banded job that are greater than those given to the higher banded job.

"This can result in inequity within the corporate pay grids, which can lead to employee disengagement and retention issues, particularly for positions directly senior to the position(s) who received the larger wage increase. Implementation of the living wage would exacerbate current wage compression issue with student and part-time wage grids, as well as begin to impact unionized and non-union full-time positions. Further wage adjustments to correct any resulting inequities and compression would then need to be considered.

Financial implications

"All permanent full-time employees of the city are paid above the $19.80 per hour living wage threshold for 2023. Increases to 32 part-time and student positions would be required if the corporation was to become certified as a living wage employer using our 2023 pay rates.

"Using the current wage schedules as of October 1, 2023 and the 2023 living for the north region, the total cost of full living wage certification... would be approximately $721,550. Note this does not include the general cost-of-living calculation in the bylaw that is applied to part-time non-union staff, as that percentage increase amount can not yet be calculated.

"The additional cost of moving only all part-time employees in wage bands currently less than the living wage to $19.80 would be $402,144 in 2024, without considering any further adjustments to deal with the current part-time compression issue.

"The additional cost of moving only all summer student classifications to the living wage would be $319,406 in 2024, assuming no annual differentiation for returning students."

Recommendation

"Staff recommend that as an alternative to certification through the OLWN, council should consider addressing the part-time wage grid salary compression issue and could gradually increase wage rates towards achieving the living wage. This would allow the corporation to advance the living wage goals on an approved schedule and with the level of resource investment that works for the organization, while allowing the corporation to retain control over employee salaries and purchasing processes/ requirements. The corporation would then not be committed to actions or wage rates in the future that may not be feasible.

"Wage increases to provide a living wage and the city's non-union compensation rates are connected. Efforts to make increases in one area impact the ability to increase the other. A compensation strategy which seeks to move part-time staff towards the living wage, while also addressing the larger issue of non-union compensation including compression, recruitment and retention would provide a path on how the corporation can implement wage adjustments for affected positions in a fiscally responsible manner.

"It is therefore recommended that council take the following action: Resolved that the report of the human resources director dated January 8, 2024 concerning living wage be received and that staff be directed to propose amendments to the current part-time and summer student wage grid for council's consideration.