Paying workers enough to live in Halifax is a “substantial burden” for employers, the construction industry told a committee of council, claiming the policy is “hurting the lower wage people.”
Representatives from three construction industry associations made a presentation to council’s Community Planning and Economic Development Standing Committee at its virtual meeting on Thursday outlining their concerns with the living wage requirement added to council’s social procurement policy in September. The requirement comes into effect for all new contracts on April 1. It means some contractors working with the municipality will have to pay their employees at least $21.80 — the current living wage as defined by the Canadian Centre for Policy Alternatives.
Melody Hillman, acting president and CEO of the Construction Association of Nova Scotia, led the presentation, telling councillors the policy will disproportionately affect small businesses.
“There will be substantial burden from an administrative, staffing, and human resources perspective, and many small businesses, who make up the majority of our membership, will not be appropriately set up to handle these extra burdens placed on them,” Hillman said. “We feel that HRM is trying to raise up smaller companies, so we feel that this current structure will likely do the opposite, and favour larger companies who are better setup to handle these complications.”
Hillman also warned of a domino effect from the policy, where all employees would get raises.
“If your junior level employees moved from minimum wage to $21.80 per hour, there needs to be consideration for what that will do to the supervisor that made $20 an hour, who will now need a pay bump, and their manager, and so on and so on,” she said. “You will be increasing your total costs more than you likely know.”
Having to pay workers enough to live will mean no contractor wants to bid on HRM jobs, Hillman warned, and that means paying more, too.
“A shortened bidders list means that less competition, potentially higher prices and not the best value for the taxpaying public,” she said.
In a recent report to council’s budget committee, finance staff at the municipality told councillors the policy is now expected to cost much less than the $8 million originally expected. In fiscal 2021-2022, the preliminary estimate is $123,040. That’s expected to rise to $161,091 by 2024-2025.
The policy doesn’t impact construction generally, as it excludes construction services. But Hillman said snow clearing and solid waste contractors are members of her organization and the others on the line.
“While we understand that, to many, it may seem that snow removal and solid waste management may not be considered construction, we assure you that the current accepted format does impact many of our members,” she said. “As well, we have great concerns that there will be scope creep, and that this will work its way into other areas, which will provide even more hurdles.”
Just this week, council approved new contracts for solid waste collection that mean those contractors won’t have to pay a living wage for five years.
While two councillors, Patty Cuttell and Trish Purdy, expressed sympathy for small businesses who will have to pay the living wage, councillors who approved the living wage requirement before the election challenged the industry representatives.
“It seems to me that what’s being most focused on are the things that are wrong with his policy but not the things that are wrong with the industry,” Coun. Lindell Smith said.
“This policy isn’t just about making life more difficult for the construction industry, it’s also about making life less difficult for individuals who are part of it … Do you not see there’s value in having these policies exist?”
Smith also asked about diversity in the trades, and whether the organizations believed the supplier diversity initiatives in the larger social procurement policy would make a difference.
Grant Feltmate, executive director of the Nova Scotia Road Builders Association, told Smith he didn’t think the living wage will help diversity.
“I think it will probably detract from the ability to get more diversity than help it,” he said.
Feltmate suggested the living wage could hurt lower wage workers:
In fact, there is some research out there that would indicate that if you put a living wage policy in, you actually are hurting the lower wage people, because the contractor then goes, “Oh, so I had two guys, or two folks working at $15 an hour and now they’re both supposed to paid $21.80. How much of those two people can I keep? Do I have to drop one? Do I have to drop their hours?”
So it is a slippery slope to go into the living wage factor. It sounds good on paper, but it has lots of negative possibilities and for diversity, I’d, like I say, I think we should be having discussions that are separate that are saying, how do we get the folks in? What is the best way to move them into the workplace because we have the demand, and we’re quite happy to have them, but we don’t have an easy way, we feel, I don’t maybe the wrong word, but we don’t have a good methodology for getting those folks from where they are to working for us.
Coun. Sam Austin asked the association whether it was opposed to paying the living wage. He never really got an answer. He said council went into this knowing that it would have those ripple effects on other wages. That was the goal.
“We were very deliberate in saying, ‘Yeah, that’s actually using the influence that we have as a large contractor to actually lift people, potentially out of poverty-type conditions out there,’” Austin said.
“I’m fine with further discussion with the associations here regarding trying to lessen administrative burdens trying to streamline those sorts of things, but the fundamental argument — should people continue to be paid salaries that are not enough to live on in this city? — I’m just not interested.”
No councillor made any motion or notice of motion following the presentation.
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Pay a person a good wage and this wouldnt be an issue..I think if these min wage people were unionized,they would be better off…remember.. these people spend their pay in the area,they dont hoarde lots of money in tax loopholes, and big bank accounts,they actually do good for the living and business community
There are cities who have supposedly successfully adopted a living wage policy. Lincoln, Nebraska is one of them. Do we know what kind of effect that has had on construction and rents there? I realize they are not Halifax and are also in the States. But what factors have played a role there to help make it a success (if it still is considered a success)?
I see the housing situation as being in a double bind/opportunity place where low interest rates and high construction costs are not being fitted together in a socially useful way. If developers can borrow money at extremely low rates to build, surely they needn’t expect returns more than a point or 2 above their borrowing costs? (Think of that guaranteed rate of return we gave Emera, 9%, which likely now should be half that or less.) Rents need not be as high as suggested. There needs to be enough affordable purpose-built housing units come on the market to hold down rent increases on developer-built incoming stock. Why are municipal housing authorities not leveraging the federal affordable housing money, and requesting matching provincial dollars, and building units?
Carol. you are correct in that low interest rates should enable lower rents, but the problem is construction costs are escalating at 5-7% per year. As such, the two are just barely balancing out, and how long before rates begin to increase? Currently, the 10 year rate is up 40-50 bps in the past month. In addition, the 100 to 200 bps spread you proposal does not provide enough of a cushion for the risk involved. its not enough to compensate for construction overruns, delays, the risk of increased construction rates at takeout, etc.
The issue is that local, provincial and federal groups dont seem to integrate their efforts well. CMHC has some really good programs right now, but the Province doesnt build anything, and most private sector programs are only in place for 10 to 15 years, then the restrictions come off. Halifax, has a very limited nonprofit sector, which has to be a key focus if there is to be long term change.
In addition, HRM has to stay ahead of the game and keep approving projects. the current construction pipeline is now 4,900 units under construction!! this is triple our production from 10 years ago. vacancy rates are going to keep increasing as these units come on line, and with that will be a softening of rental rates. Basic math
dharrison’s comments are spot on.
HRM staff routinely completely miss the financial impacts of their policies; likely because most have no training in finance or economics. A new apartment building costs $500 a month to operate (heat, lights, taxes, snow removal, garbage removal, repairs, management, etc etc). So in order to rent a new apartment for $500 a month, someone needs to give you a free building (new construction prices in the urban core at $275,000 to $300,000 per unit). If the developer needs to get a return on the investment of that $300,000, then you will need to add another $1,200 to $1,300 a month to the rent (total cost of $1700 to $1800 a month).
At a living wage of $21.80 per hour, if you work 40 hours a week, you can make $45,000 a year. that means you can afford to spend $13,500 a year on rent, or $1,125 per month. so to occupy a new building, two people will have to live together. Or, someone will need to write down / subsidize the cost of construction by providing free land, free permits, free HST, etc etc for a total subsidy of about $140,000 per apartment (lets face it, there is not enough tax payer money for that).
I get the need to pay a living wage to make things affordable, but it will also have the opposite effect of driving up the cost of construction and operating costs, so that new apartments will be even more expensive. And of course if the price of new goes up, it will pull along the price of older apartments due to the substitution principle.
The discussion I am not hearing about is how do we improve the competitiveness of our economy??? Yes, it’s easy to give everyone a raise – look at the daylight lists for public sector employees, or what happened the HRM fire/police departments after amalgamation. However, if the person that you give the wage increase to is not more productive, Adam Smith would postulate that the owner will invest capital to substitute for labour (e.g., automation). So giving an unskilled worker a big pay raise (without making him/her more productive) is only going to result in less employees/less hours, outsourcing, or the implementation of labour saving automation devices. Bank on this.
The solution is education, education, education. We need to train unemployed / under employed workers to be technicians who can use computer equipment to run factories, hospitals, etc. How about a program for youth to teach them plumbing, electrical work or masonry (a mason with 3 to 4 years work experience can make $70K to $80k) a year. IT sector to learn how to code, etc. This is where we should be spending our tax payer dollars.
So, as long as more people keep discovering our little city and moving here, get ready to more headlines about rising residential rents. This new living wage will help a select few, but it won’t address the underlying cause of the problem, the lack of skilled workers who can add value to the economy.
There are very few things that will cause employers to pay higher wages, a shortage of labour, Unions or legislation. Perhaps if the “Association” doesn’t want to pay a living wage then some Unions should be out there organizing. Then they could improve working conditions, not just wages.
HRM should start looking at itself in the mirror. Average rents in HRM are $1170, up 4.1% but in Moncton, average rents are $925, down 1%. Why? Has the Community Planning and Economic Development Committee ever asked why the cost of housing is so high in HRM? That might be a useful thing to do while they are deliberating on things like a living wage. HRM does not consider the impact of its urban design rules on the cost of housing. Why not? What about development fees? Halifax Water fees are through the roof. What about planning approval times and property taxes, i.e., the cost of municipal government? Are housing prices being pushed by more demand from population growth in HRM than in Moncton? Maybe… 2% population growth in HRM compared to 1.4% in Moncton. Higher land prices? That’s the only cost-push factor I can think of that may have any merit, but not across the board.