Getting by on minimum wage in Canada's biggest cities: Don Pittis

Keyur Morthanais no lazy millennial. The 25-year-old lives andworks in one of Canada's most expensive cities andearnsminimum wage, which in Ontario recently rose to $11.40 anhour.

While many businesses complain that moves to raise wages for Canada's poorest paid will mean higherprices and fewer jobs, a new report bybusiness leaders proposing a better kind of capitalismsays low wages are an expense Canada cannot afford.

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On a busy shopping street, beside a giant poster advertising submarinesandwiches at $4 each is a smaller one that says "Now Hiring." But the pay is well below the rich city's median incomeof about $78,000 a year.

Seven days a week

On the day I talk to Morthanathe Toronto Real Estate board has justannounced that the price of adetached house went up 23per cent in the city to an average of $1.29 million.The average price of houses of all kinds is now $756,000.

"I can get by because I work seven days a week," says Morthana, who shares an apartmentwith friends in a distant suburb and commutes to work."Sometimes it's hard."

A few doorsdown the street, a sign in the window of one of a number of waxing and nail salons offers a "dream career."

According to the manager, The Ten Spot, part of a Toronto-based Canadian chain, is a cut above the average nail shop. The pay is $12.50 for counter clerks, rising to $13.50 with experience.

Bad for the bottom line

In Canada, setting the minimum wage isthe responsibility of the provinces, so the rate varies, from a high of $13 in Nunavutto a low of $10.50 in Newfoundland and Labrador.

Buthigher or lower, minimum-wage earners remainfar below levels considered a Canadianliving wage, and nowhere are the extremes of wealth versus cost of living worse thanin Canada's expensive cities.

And according to a new analysis by a group of sophisticated business leaders, that's bad for the bottom line.

Dezso Horvath, dean of York University's Schulich School of Business, says their research shows that the world's most dynamic countries are ones, especially those in northern Europe, that have adopted a "stakeholder" approach to capitalism.

"The countries using this form of capitalism are becoming more globally competitive," saysHorvath, who edited the book with Dominic Barton, global managing partner of consulting firm McKinsey & Company.

With articles contributed by well-known business leaders, the book isintended toacknowledgeandaddresswhat the authors call "a growing public distrustof capitalismand its ability to improve wealth and well-being for the many."

Shareholder model eclipsed

"Whichever direction capitalism ends up taking, it is increasingly apparent that the narrow shareholder model is being gradually eclipsed by a model that is more closely attuned to the complexity and diversity of the world we live in a model that is more stakeholder-oriented and more guided by principles of long-term value creation and sustainability," says the book in a concludingchapter written byHorvathand Barton.

Horvath says one of the key ingredients of the system is a smaller gap between the rich and the poor.

He says inequalityhas beenlargely responsible for the anger that caused the Brexit vote in the U.K. and the rise of Donald Trump in the United States.

"If you look at the U.S. and Britain, they are the [rich world]countries with the largest educational and income inequalities," saysHorvath. "Whereas Sweden,Switzerland and all those, there are no really poor people but neither are there billionaires of really large scale."

Horvath says there are signs that's paying off. Economic growth in Sweden is at an astounding 3.5 per cent, higher than any other country but China, he says.

More equal countries are also winners in innovation.

Minus the military

"Yes, the U.S. is very innovative, but if you take away allthe money that is going to military research, the U.S. is actually not as good," saysHorvath.

He says not only is a stakeholder-driven economy more competitive, it also generates a much higher level of quality of life something quite different from working seven days a week at minimum wage.

"Canada, at the moment, is somewhere in between the United States and the well-developed European nations," saysHorvath. "Minimum wage is much higher [in those European countries]and everybody is reasonably well paid, but as I said, the difference between minimum wage and the highest wage is much more limited."

As usual with great theoretical analysis, the hard part is making the transition. We can't snap our fingers and turn Canada into Switzerland or Sweden. But what the new book's analysis shows is that keeping minimum wages low and letting the rich get very richis not a necessity for business success. In fact, saysHorvath, quite the opposite.

"A large middle class is the engine of economic development."

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