한국정치 노트 Notes on the Politics of Korea

China Is Leading the World to an Electric Car Future


 New emission rules will force global carmakers to redraw their road maps.


Bloomberg News

November 14, 2018, 4:00 PM EST Updated on  November 15, 2018, 5:01 AM EST


The world’s biggest market for electric vehicles wants to get even bigger, so it’s giving automakers what amounts to an ultimatum. Starting in January, all major manufacturers operating in China—from global giants Toyota Motor and General Motors to domestic players BYD and BAIC Motor—have to meet minimum requirements there for producing new-energy vehicles, or NEVs (plug-in hybrids, pure-battery electrics, and fuel-cell autos).


 A complex government equation requires that a sizable portion of their production or imports must be green in 2019, with escalating goals thereafter.




The regime resembles the cap-and-trade systems being deployed worldwide for carbon emissions: Carmakers that don’t meet the quota themselves can purchase credits from rivals that exceed it. But if they can’t buy enough credits, they face government fines or, in a worst-case scenario, having their assembly lines shut down.



“The pressure is mounting,” says Yunshi Wang, director of the China Center for Energy and Transportation at the University of California at Davis. “This could be a model for other countries; it could be a game changer globally.”



The message coming from the world’s largest emitter of greenhouse gases is clear: Even as President Trump withdraws support for alternative fuels, attempts to gut mileage requirements, and begins the process of pulling out of the Paris Agreement on climate change, China is dead serious about leading the way to an electrified future. That would help it reduce a dependence on imported oil and blow away the smog choking its cities. It would also help domestic automakers gain more expertise in a car manufacturing segment that’s burgeoning globally.



Given the size of the Chinese market, the largest for cars overall and for EVs, auto companies will have to rapidly accelerate their development and manufacturing efforts to meet the targets. By 2025, China’s leaders want 7 million cars sold every year, or about 20 percent of the total, to be plug-in hybrids or battery-powered. 


“This is probably the single most important piece of EV legislation in the world,” Bloomberg NEF said in May.


The world’s largest automaker is certainly taking notice. 


Volkswagen AG, which sold just under 40 percent of its vehicles in China last year, says it will introduce about 40 locally produced NEV models in China within the next decade. “Volkswagen Group China will meet the government’s targets,” the company said in a statement.



The formula for doing so is algebraic, and the 10 percent credit target in the first year won’t necessarily equate to 10 percent of cars sold. For example, a pure-electric vehicle with a range topping 300 kilometers (186 miles) will generate more credits than one with lesser performance or than a gasoline-electric hybrid.


 The rules apply to all companies that manufacture or import more than 30,000 cars annually. The floor rises to 12 percent in 2020, then keeps increasing in line with the government’s ultimate plan to eliminate fossil fuel vehicles by a still-unspecified date.




BMW AG, which sells more cars in China than anywhere else, makes two plug-in hybrids there and plans to produce two pure-electric cars, including the iX3 SUV, starting in 2020. 


Yet some companies will struggle to reach the goals under their own steam. “Carmakers are both technically and commercially not ready for a ramp-up in EV production to the level of the quotas,” says Sophie Shen, an automotive analyst at PwC in Shanghai.


So they’re turning to a wide range of solutions to avoid falling short. Ford Motor Co., which lost $378 million in China in the third quarter, is teaming up with Zotye Automobile Co., a minor domestic player, to jointly produce cars eligible for the credits, Asia-Pacific President Peter Fleet said in October. Ford will introduce at least 15 hybrids and EVs in China by 2025. Vehicles sold through the Zotye partnership will have a new brand name.


Some rivals, however, are putting their names on the same generic car. Toyota, Fiat Chrysler Automobiles, Honda Motor, and Mitsubishi Motors all plan to sell the same electric SUV, developed by Guangzhou Automobile Group, to Chinese drivers. Other than brand-specific pricing and specifications, the models will be largely identical. That’s not ideal in an industry that prizes distinctive marketing, but it’s a necessary compromise until the companies develop their own technologies.


While carmakers have plenty of regulatory reasons to flood Chinese showrooms with EVs, it’s not clear that consumers will want them. 


Electric cars remain considerably more expensive than their gasoline counterparts everywhere; in China, where gasoline cars such as Chongqing Changan Automobile Co.’s Benben Mini model sell for as little as 29,900 yuan ($4,300), the difference can be especially pronounced.


For now, government subsidies for EVs cover much of that gap, running to as much as $7,900 for an all-electric vehicle with a range longer than 400km. That can offset almost one-third of the sticker price of a BYD e5 electric car.



The incentives, though, are being phased out and will disappear in 2021. 


That could mean a risky several years for automakers, since battery costs aren’t expected to be truly price-competitive with internal combustion engines until 2024 to 2028, depending on a vehicle’s type and the region of the globe where it’s sold, according to BNEF.


Still, the government has other levers should demand fall short. Several of the largest cities, including Beijing, Shanghai, and Shenzhen, limit the number of cars on their roads by restricting the issuance of new license plates. In those metropolises, simply acquiring the right to purchase a car can be pricey.


 A plate for a traditional gas guzzler costs as much as $14,000 in Shanghai. But if a consumer decides on an EV instead, it’s free.


BNEF already expects 2.5 million passenger EVs to be sold in China in 2022. But if similar restrictions take off in other cities, particularly the rapidly growing industrial hubs of the interior, EV growth could be even more dramatic.



For the moment, domestic models will mostly remain confined to the Chinese market. “Right now a lot of the cars selling in China have zero brand value outside of China,” says Janet Lewis, the head of industrials and transportation research for Asia at investment bank Macquarie Capital. But the EVs that are successful in the early-adopting mainland market may eventually help China develop the manufacturing and branding expertise it will need to export more vehicles to other countries, experts say.



China undoubtedly will tweak its credit-and-subsidy regime as it seeks to encourage an electric-first domestic auto industry. The minimum thresholds of the cap-and-trade system for 2021 and beyond haven’t been laid out, though they’ll have to rise rapidly to meet government sales targets for NEVs.



It’s a direction of travel that couldn’t be more different from that of the Trump administration. 


But for global carmakers, it’s increasingly clear that policymakers in Beijing, not Washington, are in the driver’s seat. —Matthew Campbell and Tian Ying



— With assistance by Yan Zhang, Keith Naughton, Christoph Rauwald, and Oliver Sachgau








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Inequality-redistribution in Canada update



Two years ago I posted my first guest blog focused on income inequality, specifically how changes in Canada’s redistribution over the last three decades have increased after-tax income inequality, and how these changes compared to OECD trends. The figures and analysis in this post update the earlier blog, based on the most recent OECD data to 2015. I also look at the market inequality-redistribution relationship and find that Canada is the only country that combines low market inequality with low redistribution.


Figure 1 presents market and after-tax income Gini coefficients for Canada and selected OECD countries. Market income is before taxes and government cash transfers, while after-tax income is after such taxes and transfers. The Gini coefficient varies from 0 to 1.00, with higher values representing higher inequality. Figure 1 includes data on the USA, the four larger Nordic countries (“Nordics-4”): Denmark, Finland, Norway and Sweden) and the other eight OECD countries for which data are available from the mid-1980s (“Other OECD-8”: Australia, France, Germany, Italy, Japan, Netherlands, New Zealand and UK). I have annotated Figure 1 to explain these inequality-related concepts and data. Focusing on the last few years (readers can refer to the earlier blog for a longer-term analysis), Figure 1 shows a general continuation of recent trends. Market inequality in the Other OECD-8 and Nordics-4 has continued to increase, while the long-running economic expansion in the USA appears to have finally (and perhaps only temporarily) paused the long-term increase in market inequality in that country. Canada continues to have relatively low market inequality and average after-tax inequality.


 








Figure 2 shows the percentage point difference between market and after-tax income Gini coefficients and reflects the extent to which Governments reduce market inequality by taxes and cash transfers. The Nordics-4 have traditionally had the highest level of such redistribution, currently lowering inequality by about 50% more than Canada does. Over the last decade Canada and the USA have had about the same low levels of redistribution (the two lowest among the OECD).



 









Figure 3 shows the political-economy outcome of the market inequality-redistribution relationship. For each of the 14 OECD countries listed above, Figure 3 includes average market inequality plotted against average redistribution (as measured above). Figure 3 appears to include three distinct “clusters” of countries:


  • Low market inequality with medium redistribution, including Denmark, Netherlands, Norway and Sweden.
  • Medium market inequality with low redistribution, including Australia, Japan and New Zealand
  • High market inequality with high redistribution, including Finland, France, Germany and Italy.

These three clusters include a total of eleven countries, leaving three “outliers” that do not belong to any particular cluster. Canada is one of these outliers, being the only “low inequality / low redistribution” country. Others are the USA (high market inequality with low redistribution) and the UK (high market inequality with medium redistribution).



Each country’s inequality-redistribution outcome is the result of a series of complex national political-economy interactions. The cluster analysis in Figure 3 shows, however, that international and regional influences also matter. It is perhaps not surprising that Australia and New Zealand are in the same cluster, as is Japan. The “Nordic” cluster (including Netherlands but excluding Finland) could also be expected given proximity and historical ties. France and Germany being in the same cluster is also consistent with this hypothesis. That the UK is an outlier is perhaps not surprising (e.g. Brexit, etc.). The USA has always followed its own path and therefore is also a high inequality / low redistribution outlier.


Which brings us to Canada, another outlier, the only low inequality/low redistribution country. It has maintained Nordic-type levels of low market inequality via the public provision of universal human-capital-enhancing programs (e.g high quality health care, education, etc.), while implementing only USA-type levels of redistribution. Current political battles and outcomes related to the minimum wage, taxes and social assistance indicate that market inequality-reducing measures (e.g. minimum wage, etc.) continue to be more politically-feasible than those that increase redistribution and reduce poverty outcomes (e.g. more progressive taxation, increased social assistance, etc.). While fighting to maintain and expand universal social programs, progressives should work harder to prepare the political ground for Canada to increase redistribution, especially for when market inequality increases.


 


2. 2016 년:


Redistribution, Inequality, and Federal Policy: Guest Post by Edgardo Sepulveda

We are pleased to present this rich guest post by a new PEF member, Edgardo Sepulveda. Edgardo has been a consulting economist for more than two decades advising Governments and operators in more than 40 countries on telecommunications policy and regulation matters (www.esepulveda.com).

Redistribution, Inequality and the new Federal Tax & Transfer initiatives

I want to present an analysis of Canada’s taxation and transfers system from a historical and international perspective, focussing on how changes in Canada’s fiscal redistribution over the last two decades have increased after tax income inequality. I also situate three of the new Federal Government’s proposed initiatives: the “middle class tax cut” (“MCTC”), the new Canada Child Benefit (“CCB”); and increases to GIS benefits in this broader context. This work brings together several elements that have been discussed here and in other research, and updates the analysis based on recently-released internationally-comparable data from the OECD.

Analysis

Figure 1 presents “market” and “after tax” income Gini coefficients for Canada and the OECD. Market income is before taxes and government cash transfers, while after tax income is after taxes and transfers. The Gini coefficient varies from 0 to 1.00, with higher values representing higher inequality. For comparative purposes, I include the “OECD-14” (representing the 14 OECD Member-Countries for which Gini coefficients are available from the mid-1980s) average, as well as the traditional inequality/taxation revenue “book-ends”: the USA and the four larger Nordic countries (“Nordics-4”: Denmark, Finland, Norway and Sweden).

Sepulveda Fig1

 












Figure 1 shows that market income inequality generally increased relatively quickly until the mid-1990s, after which it slowed down or stabilized across the OECD-14. Canada’s market inequality is below the OECD-14, similar to that of the Nordics-4 and lower than the USA. Governments redistribute income via the tax and transfer systems (“fiscal redistribution” or “redistribution”) and hence after tax income Gini coefficients are always lower than the respective market income Gini coefficients.


Fiscal redistribution varies significantly across time and countries. For example, Canada has historically had lower market inequality than the OECD-14, but has historically had higher after tax inequality. Similarly, Canada has had market inequality comparable to the Nordics-4, but has historically had much higher after tax inequality. One way to measure redistribution is presented in Figure 2, which shows the percentage difference between market and after tax income Gini coefficients. For example, Canada’s figure of 34% for 1994 indicates that redistribution reduced market to after tax inequality from 0.432 to 0.287. Figure 2 confirms that Canada (currently at 27%) has traditionally had less redistribution than the OECD-14 (currently at 35%) and the Nordics-4 (currently at 41%) and that its redistribution has decreased since peaking in 1994. Redistribution in Canada has been closer to the USA (currently at 23%) for more than a decade.





Sepulveda Fig2














A country’s redistribution is a combination of its fiscal capacity and allocation of revenues and expenditures. Figure 3 presents total (“all Government”) taxation revenues as a percentage of GDP and shows a steady increase and subsequent stabilization until about the mid/late 1990s for Canada, the OECD-14 and the Nordics-4, at around 35%, 37% and 45%, respectively (the USA is an outlier at around 25%). Figure 3 shows that Canada’s taxation revenues to GDP started to decline in the late 1990’s so that by the 2010s Canada had stabilized at around 30%-31%; Canada is now closer to the USA than the OECD-14 and is at its lowest level since 1980.




Sepulveda Figure 3 (standard res1)

 













Research has shown that transfers have generally accounted for about two-thirds of the redistributive impact, with taxes accounting for the other third. Personal income tax (PIT) revenues to GDP in Canada have been historically similar to those in the OECD-14, and hence cannot explain the differences in redistribution. In fact, Figure 4 shows that these differences are due to transfers; Canada has historically had lower transfers to GDP than the OECD-14. Since 1980, the OECD-14 have on average allocated 34% of total taxation revenues to transfers, while Canada has averaged 28%. Taken together, Canada’s relatively low and decreasing taxation revenues to GDP and its low allocation to transfers have led to comparatively low and decreasing transfers, resulting in low and, and since 1994, decreasing redistribution.





Sepulveda Figure 4 (standard res)

 













The next two figures separate the effect of taxes and transfers on redistribution since it peaked in 1994. This more disaggregate analysis is possible for Canada because Statistics Canada also makes available the “total” income Gini coefficient (not available from the OECD), which is the market income plus transfers, but before taxes.




Sepulveda Fig5














For Canada, Figure 5 brings together the changes in transfers to GDP with the transfers component of redistribution. Figure 5 also includes total redistribution (all numbers indexed to 1.00 in 1994). Figure 5 shows that transfers to GDP and transfers redistribution are closely correlated and have stabilized at between 20%-25% below the 1994 peak: decreased transfers lead to less redistribution. Transfers redistribution decreased more than total redistribution. The redistributive impact of any fiscal variable may be disaggregated between the size and the progressivity of the variable. The close relationship between transfers and transfers redistribution suggests that it is primarily the size of transfers that has changed since 1994 (with only modest changes in progressivity). In effect, other research indicates that the main drivers of this overall reduction were decreases in the “size” of provincial social assistance (SA) and federal Employment Insurance (EI) relative to GDP.

Figure 6 presents the equivalent data for the taxation component and shows that both PIT revenues to GDP and the tax redistribution increased from 1994 to 1999 (higher taxes led to greater redistribution), after which they generally decreased (lower taxes led to less redistribution). Figure 6 shows a relatively close relationship between the two variables over the 1994-1999 period, but less so during the 2000-2014 period, with PIT decreases not resulting in commensurate increases in inequality, suggesting that the progressivity of PIT increased somewhat during this period.



Sepulveda Figure 6 (standard res)

 














Discussion

Canada’s tax and transfers have historically provided less fiscal redistribution than almost all our OECD-14 counterparts. Most of the difference in this performance is due to Canada’s low and declining transfers, which together with lower personal income taxes, has led to higher after tax income inequality in Canada over the last two decades.  This is in spite of underlying market income inequality being relatively stable over this period.  In almost all these respects Canada has diverged from the OECD-14 and converged to the USA over the last two decades.

Such changes in fiscal redistribution are policy-induced and therefore subject to change. I have shown that other OECD-14 counterparts have achieved and maintained much higher redistribution and lower after tax income inequality.

This analysis identifies a number of broad policy options to increase redistribution, which I also use to situate and discuss the new Federal Government’s three proposed initiatives.

·         One policy option is to increase the progressivity of taxes and/or transfers. The MCTC is a good example of this, in that it re-allocates about $3 billion of PIT around the upper income distribution while (more or less) being “revenue neutral”. The MCTC is therefore modestly progressive but its relative “size” is very modest (accounting for less than 2% of PIT revenues), so I expect its redistributive impact will be very modest.

·         A second policy option is to increase the size of taxes and/or transfers. The increase of about $0.7 billion in GIS benefits is a good example of this. This proposed initiative may be expected to be relatively progressive, but its relative size is very modest (accounting for less than 1% of Government cash transfers), so its redistributive impact will also be very modest.

·         A third policy option is to combine an increase in the size and progressivity of taxes and/or transfers. The new CCB is a good example of this because it eliminates three existing child benefits (about $18 billion + $2 billion from income splitting elimination) and combines them into a new $22 billion CCB (with an additional $2 billion) (therefore a net increase of $4 billion), that is designed to be somewhat more progressive. I expect that the CCB will have a modest redistributive impact.

All three Federal Government initiatives will increase redistribution and will therefore reduce after tax income inequality. As possible future work I may try to model the redistributive impact of these three initiatives. Based on the analysis above and other research, my current “back of the envelope” estimate is that, ceteris paribus, when fully implemented, the combined redistributive impact of the three initiatives would decrease Canada’s after tax Gini coefficient by perhaps up to 0.005 points and thus increase Canada’s redistribution perhaps by one percentage point – that is, from the current 27% to perhaps about 28%. These initiatives are therefore relatively very modest and would constitute only first steps in a long process towards returning Canada’s redistribution to prior levels (peak of 34%) or those that are comparable to most of our OECD-14 counterparts (currently at 35%), let alone the Nordics-4 (currently at 41%).

Of course, given Canada’s system of fiscal federalism, the Provinces would also have to do their part. The Provinces together collect PIT revenues that are comparable to those of the Federal Government, receive transfer payment from the Federal Government intended for social programs (the Canada Social Transfer (CST)) and are also responsible for important transfers, including social assistance (SA); hence have both the fiscal capacity and the tools to increase redistribution.  As noted above, the size of SA relative to GDP has decreased considerably since the mid-1990s. Using the same “back of the envelope” methodology, I estimate that for the Provinces to “match” the one percentage point redistribution increase from the Federal Government’s three initiatives, they would have to, for example, increase the “size” of SA by perhaps in the range of $5-$6 billion in total. Such an increase could be through some combination of broadening the eligibility criteria or increasing the amount of cash benefits.


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캐나다 알버타 주, 신민주당 NDP 일자리 창출 논쟁

알버타 주지사: 사민당 계열 신민주당 레이첼 노틀리 주지사 4만 2300 일자리 창출에 대해서, 보수파들이 비난하고 있는 형국이다.

공공 서비스 (공무원) 일자리는 늘어난 반면, 민간 부문에서 일자리는 오히려 감소했다는 증거를 대고 있다.




NJ(원시)Tweet text
 
 


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캐나다 브리티시 컬럼비아, 생활 임금 보고서


BC_LivingWage2018_final_Making Paid Work Meet Basic.pdf


Prepared by

Iglika Ivanova,

Seth Klein and

Tess Raithby

April 2018

The original 2008 full report

and the 2018 calculation

guide are available at

http://policyalternatives.ca/livingwage2018


The 2018 living wage for Metro Vancouver is $20.91/hour. This is the amount needed for

a family of four with two parents working full-time at this hourly rate to pay for necessities,

support the healthy development of their children, escape severe financial stress and participate

in the social, civic and cultural lives of their communities.


The Metro Vancouver living wage was first calculated in 2008 by the Canadian Centre for Policy

Alternatives, First Call: BC Child and Youth Advocacy Coalition and Victoria’s Community Social

Planning Council. In 2008, the living wage for families was $16.74/hour in Metro Vancouver,

and $16.39/hour in Metro Victoria. That full report, detailing the principles, rationale, methodology,

data sources and business case for the living wage, can be found at policyalternatives.

ca/livingwage2018.


Since 2008, of course, the cost of living has increased significantly and government taxes and

transfers have changed—so each year we update our calculation. Notably, the 2018 living

wage is 29 cents/hour more than last year. Although the cost of living continues to rise, the new

BC Child Care Fee Reduction Initiative and the 50 per cent cut to Medical Services Plan (MSP)

premiums absorb some of the higher costs (read more about this on page 5).


For more on the Metro Vancouver Living Wage for Families campaign, including information on

how to become a living wage employer, visit livingwageforfamilies.ca.


FAMILIES WHO WORK FOR LOW WAGES face impossible choices—buy clothing or heat

the house, purchase groceries or pay the rent. The result can be spiralling debt, constant

anxiety and long-term health problems. In many cases it means that parents are working

long hours, often at multiple jobs, just to pay for basic necessities. They have little time to

spend with their family, much less to help their children with school work or to participate

in community activities.


The frustration of working harder only to fall further behind is one to which many Canadians

can relate. CCPA research shows that most families are taking home a smaller share of the

economic pie despite working longer hours, getting more education and contributing to

a growing economy.


In BC, the contradiction between years of economic growth and rising insecurity is especially

stark. BC’s child poverty rate (18.3 per cent) remains above the national average and

is much higher than the lowest provincial child poverty rate of 14.4 per cent in Quebec.1

The story of child poverty is very much a story of low wages. In 2012, 72,200 British

Columbians with children were working yet lived in poverty (22,300 single parents and

1 First Call, 2017. 2017 BC Child Poverty Report Card. p. 8.


2018

Making Paid Work Meet Basic

Family Needs in Metro Vancouver

2018 Update

Working for a Living Wage

2 WORKING FOR A LIVING WAGE: 2018 UPDATE


49,900 in two-parent families).2 In 2011 (the last year for which we have data), one out of every three

poor children in BC (32 per cent) lived in families where at least one adult had a full-time, year-round job

and a majority lived in families with some paid work (part-year or part-time).


3

The living wage is a powerful tool to address this troubling state of poverty amid plenty in BC. It allows

us to get serious about reducing child poverty, and ensures that families who are working hard get what

they deserve—a fair shake and a life that’s about more than a constant struggle to get by.


A living wage is not the same as the minimum wage, which is the legal minimum all employers must

pay. The living wage sets a higher test—it reflects what earners in a family need to bring home, based

on the actual costs of living in a specific community. The living wage is a call to private and public sector

employers to pay wages to both direct and contract employees sufficient to provide the basics to families

with children.


WHY A LIVING WAGE?


Living wages benefit families, communities and employers now and into the future.


A growing body of evidence tells us that growing up in an engaged, supportive environment is a powerful

lifelong determinant of a person’s health and general well-being. Children from low-income families

are less likely to do well at school, have lower literacy levels and are more likely as adults to suffer from

job insecurity, underemployment and poor health.


According to the National Longitudinal Survey of Children and Youth, parents in households with

low incomes are more than twice as likely as parents in either middle- or high-income families to be

chronically stressed.4 Not having enough money to buy household essentials and feeling that unrealistic

expectations were being placed on their time are two of the primary sources of stress identified in this

research. These parents are more likely to suffer from poor health and to be higher users of health care

services. Adolescents living with chronically stressed parents are more likely than other youth to have a

tough time socially and in school.


Other research has shown that paying living wages has concrete benefits for employers, including reduced

absenteeism and staff turnover, increased skill, morale and productivity levels, reduced recruitment

and training costs, and improved customer satisfaction. It is also good for a company’s reputation. For

example, a study on living wage employers in London (UK) found that turnover rates were cut by 25 per

cent on average after organizations implemented a living wage policy.5 (See Fears Concerning the Living

Wage Affecting Business Profitability Overstated on page 41 of the original 2008 report for a discussion of

employer concerns about paying a living wage.)


WHAT’S IN A LIVING WAGE?


The living wage is calculated as the hourly rate at which a household can meet its basic needs, once government

transfers have been added to the family’s income (such as federal and provincial child benefits)

and deductions have been subtracted (such as income taxes and Employment Insurance premiums).


2 Ivanova, Iglika. 2016. Working Poverty in Metro Vancouver, p. 28.

3 First Call, 2015. 2015 BC Child Poverty Report Card. p. 25.

4 Ross, David and Paul Roberts. 1999. Income and Child Well-Being: A New Perspective on the Poverty Debate.

Ottawa: Canadian Council of Social Development.

5 Wills, Jane and Brian Linneker. 2012. The Costs and Benefits of the London Living Wage. September. London:

University of London and Trust for London.


The story of child


poverty is very much a

story of low wages. The

vast majority of BC’s

poor children live in

families with some paid

work. And in 2011 (the

last year for which we

have data), one-third

lived in families where

at least one adult had a

full-time, year-round job.

WORKING FOR A LIVING WAGE: 2018 UPDATE 3


A LIVING WAGE IS:

Based on the principle

that full-time work

should provide families

with a basic level of

economic security, not

keep them in poverty.

The amount needed for

a family of four with two

parents working full-time

to pay for necessities,

support the healthy

development of their

children, escape severe

financial stress and

participate in the social,

civic and cultural lives

of their communities.



For Metro Vancouver,the living wage in 2018 is $20.91.


A Bare Bones Budget


At $20.91 per hour for Metro Vancouver—or $38,056 annually for each parent working

full-time—here’s what a family could afford:


FOOD: $867/month. Derived from the 2017 food costing data provided by Population and

Public Health, BC Centre for Disease Control, part of the Provincial Health Services Authority.

These estimates do not consider special dietary needs, cultural or other food preferences, and

the cost of condiments or spices.


CLOTHING AND FOOTWEAR: $146/month.


SHELTER AND TELECOMMUNICATIONS: $1,906/month. Includes a conservative rent estimate

for a three-bedroom apartment, utilities, Internet, two basic cell phone plans, and insurance

on home contents.


TRANSPORTATION: $521/month. Includes the amortized cost of owning and operating a used

car as well as a two-zone bus pass for one of the parents, replaced by a discounted student

transit pass, the U-Pass, for eight months of the year.


CHILD CARE: $1,365/month. For a four year old in full-time licensed group care and a seven

year old in before- and after-school care, full-time care during winter break (one week, the other

assumed covered by statutory holidays and informal arrangements) and spring break (two

weeks) and six weeks of full-time summer care. This amount assumes the family’s child care

provider is receiving the new BC Child Care Fee Reduction grant, which lowers the monthly fee

by $100 for the four year old beginning in April 2018. Even with the fee reduction, child care

remains the second largest expense in the living wage family budget after shelter.


MSP PREMIUMS: $75/month. MSP was cut by 50 per cent in January 2018.


NON-MSP HEALTH CARE: $148/month. The cost of a basic extended health and dental plan

with Pacific Blue Cross Insurance, which does not include expenses only partially covered by

the insurance plan.


PARENTS’ EDUCATION: $94/month. Allows for two college courses per year.


CONTINGENCY FUND: $244/month. Two weeks’ wages for each parent, which provides some

cushion for unexpected events like the serious illness of a family member, transition time

between jobs, etc.


OTHER HOUSEHOLD EXPENSES: $764/month. Covers toiletries and personal care, furniture,

household supplies, laundry, school supplies and fees, bank fees, some reading materials, minimal

recreation and entertainment, family outings (for example to museums and cultural events),

birthday presents, modest family vacation and some sports and/or arts classes for the children.


This living wage calculation does not cover:

• Credit card, loan, or other debt/interest payments.

• Savings for retirement.

• Owning a home.

• Savings for children’s future education.

• Anything beyond minimal recreation, entertainment, or holiday costs.

• Costs of caring for a disabled, seriously ill, or elderly family member.

• Much of a cushion for emergencies or tough times.


4 WORKING FOR A LIVING WAGE: 2018 UPDATE


The full details of the calculation methodology are spelled out on page 23 of the original full report from

2008, which is available at policyalternatives.ca/livingwage2018. 


The living wage is based on:


• A family of two parents with two children aged four and seven. In BC, 77 per cent of families

with children are headed by couples, and 57 per cent of them have two or more children.6 And

while the poverty rate is particularly high for single-parent households, half of BC’s poor children

live in two-parent families.7


• Both parents working full-time, 35 hours per week. Full-time employment for both parents is the

norm for families with children in BC. According to data from the Labour Force Survey, in 2017

BC workers worked an average of 35.5 hours per week.8


• Estimated family expenses in 10 categories (see box on page 3).


• The cost of government deductions (provincial and federal taxes, Employment Insurance

premiums and Canada Pension Plan contributions).


• The value of government transfers like the Canada Child Benefit (more on this below).


• Employers providing the statutory minimum paid vacation and no paid sick time. In BC, there is

no requirement for employers to provide paid sick leave.


This methodology now serves as the model for living wage calculations across the country. More than 50

communities in Canada (including 20 communities in BC) have calculated their local living wage based

on this approach at the time of publication. See livingwagecanada.ca, an online portal supporting this

national living wage movement.


This methodology was developed in collaboration with academic and social policy experts and organizations

that work with low-income families, and was informed by feedback from focus groups of low-income

working parents and employers in 2008. To ensure that the calculation continues to reflect the realities

of low-income families in Metro Vancouver, the methodology was reviewed by a roundtable of social

policy experts and community advisors and two focus groups with low-wage parents in 2014, which

resulted in some refinements. Additional refinements were made in 2017 because Canadian families are

shifting away from landlines to cell phones and internet access at home has become a requirement for

participating in community life and for accessing public services and education. This is particularly true

in small towns where government offices have closed and in-person education opportunities are not

easily available.9


The living wage gets families out of severe financial stress by lifting them out of poverty and providing a

basic level of economic security. But it is also a conservative, bare bones budget without the extras many

of us take for granted.


The living wage calculation is based on the needs of two-parent families with young children, but would

also support a family throughout the life cycle so that young adults are not discouraged from having

children and older workers have some extra income as they age. In most communities, the living wage is

enough for a single parent with one child to get by as well. This was the case in Metro Vancouver until the

2012 living wage update but since 2012, the living wage is no longer sufficient for a single parent with

one child in Metro Vancouver. The problem is explained in more detail in a separate article, which can

be found at policynote.ca/living-wage-not-for-single-parents. In short, too many programs intended for

low-income families (such as the BC child care subsidy and the BC rental assistance program) have income

6 Statistics Canada. 2017. Cansim Tables 111-0011.

7 First Call, 2017. 2017 BC Child Poverty Report Card. p. 14..

8 Statistics Canada. 2018 Cansim Table 282-0028. Average actual hours in all jobs (worked in reference week).

9 According to the CRTC, more Canadian households have cell phones than landlines and 87 per cent

of Canadians use Internet at home in 2015 (the latest year with data available). CRTC, 2017, Canada’s

Communication System: An Overview for Canadians. Section 2.0. https://crtc.gc.ca/eng/publications/reports/

policymonitoring/2017/cmr2.htm#s20


CALCULATING THE LIVING WAGE

An accompanying

guide and spreadsheet

are available for those

seeking to calculate

the living wage in

other BC and Canadian

communities. Visit

policyalternatives.ca/

livingwage2018.

If you are calculating

the living wage for your

community, please let

us know by contacting

the CCPA–BC office or

the Living Wage for

Families Campaign.


WORKING FOR A LIVING WAGE: 2018 UPDATE 5


thresholds that are much too low and the subsidy amounts provided have been frozen for years while costs

of living keep rising. As a result, the value of these subsidies has eroded over time and families are left with

large out-of-pocket costs even if they qualify for the full subsidy. We will have to wait until next year to see

whether the new BC affordable child care benefit will change this trend.


EXPLAINING THE INCREASE IN THE 2018 LIVING WAGE UPDATE


The 2018 living wage for Metro Vancouver is $20.91/hour—up 29 cents from $20.62/hour last year or

1.4 per cent. This is the first increase after two years of small decreases following the introduction of the

federal Canada Child Benefit, which boosted family incomes enough to fully absorb the higher costs of

living, until now.


The core take-away from this year’s calculation is that rising housing costs are swamping affordability

improvements in other areas. Although the 50 per cent cut to MSP premiums and the initial Child Care

Fee Reduction lower the cost of living for the living wage family, these gains are more than offset by sharp

increases in rental costs.


Shelter is the most expensive item in the Metro Vancouver family budget, and it is also one of the fastest

growing. CMHC data show that the median monthly rent for a three-bedroom unit in Metro Vancouver

rose by $100 in 2017 to $1,600, a whopping 6.7 per cent increase. While any family lucky enough to have

stable housing would have only seen a rent increase of up to 3.7 per cent (the allowable rent increase in

BC for 2017), families that had to move for a new job or because their landlord was selling or renovating

the property faced extremely low vacancy rates and soaring rental prices in the region. The CMHC median

monthly rent data reflect the existing combination of long-tenure tenancies and new rentals on the market,

and are therefore lower than the typical rent a family would encounter when they have to move.


Shelter costs further rose because of increased utilities charges. BC Hydro rates went up by 3.5 per cent

in April 2017 and another 3 per cent in April 2018. Fortis BC also increased their natural gas delivery

rates in 2017.


Transportation costs for the living wage family rose by $37 a month or 7.6 per cent. This is largely due

to the increased cost of owning and operating a car as estimated by Statistics Canada’s Market Basket

Measure, including a big hike in gasoline prices in 2017 and higher ICBC basic insurance rates. The cost

of monthly transit passes rose slightly in July 2017 with another increase scheduled for July 2018.


Food costs in Metro Vancouver increased by $21 a month or 2.5 per cent. Food comprises 14 per cent of

the living wage family's budget and higher food prices put even more pressure on lower-income families.

There were some notable family expense decreases this year. The costs of clothing and footwear continued

to go down for the fourth year in a row, trimming $16 per month from the living wage family

budget. More substantially, after seven consecutive years of increases between 2010 and 2016, MSP

The core take-away

from this year’s

calculation is that

rising housing costs are

swamping affordability

improvements in other

areas.


Living Wages in BC

This year, nine BC communities are releasing their 2018 living wage calculations at the same time:


• Metro Vancouver $20.91 • Greater Victoria $20.50 • Revelstoke $19.37

• Fraser Valley $17.40 • Kamloops $17.31 • Powell River $17.15

• Parksville/Qualicum $17.02 • Comox Valley $16.59 • North Central BC $16.51

For a full list of communities, see www.livingwageforfamilies.ca.


6 WORKING FOR A LIVING WAGE: 2018 UPDATE


was cut by 50 per cent as of January 2018. The resulting savings of $75 per month more than offset the

increases in all other family expenses except shelter costs.


Child care fees, the second largest expense for the Metro Vancouver family, decreased slightly this year

due to the new Child Care Fee Reduction Initiative, an opt-in grant available to all licensed child care

providers that receive provincial operating funding. Providers who opt in and meet basic criteria will

receive additional grants to reduce parent fees by predefined amounts depending on the age of the

children they serve and the type of care provided (family or group care). In addition to the fee reduction

grant, participating providers receive a 10 per cent increase on their base operating grant.


Child care providers were invited to opt in when they renew their 2018/19 operating funding contracts

with the Province in March or April 2018. It is also possible to opt in at any time during the year to

receive the grant beginning the following month. It is too early to know what share of licensed child

care providers will opt in but initial government data suggest a strong take-up—86 per cent of providers

who had returned their contracts before March 29 had opted into the program. This is why the Metro

Vancouver living wage calculation assumes the family’s child care provider is receiving the grant and

builds in a fee reduction of $100 per month (the amount available for preschool aged children in group

care) for nine months of the year.


The Child Care Fee Reduction Initiative saves the living wage family $900 in 2018, more than offsetting

the combined increase in child care fees for both children from 2017. As a result, the family’s annual child

care expense is $425 lower than last year, a reduction of 2.5 per cent. This is the first ever child care cost

reduction since the Metro Vancouver living wage was originally calculated in 2008 and it follows a decade

of fee increases that well outpaced inflation. Without the Fee Reduction Initiative, child care expenses for

the family would have increased by 2.8 per cent this year.


The living wage takes into account federal and provincial taxes and transfers. Notable changes that affect

the living wage family include inflation indexing of the Canada Child Benefit as of July 2018, reduction in

the Employment Insurance premium rate, cancellation of the negligible BC Back-to-School tax credit and

elimination of several federal tax credits as of the 2017 tax year, including the public transit tax credit (as

of July 2017), the child fitness and arts tax credit, and the education and textbook amounts.


GETTING THERE: THE ROLE OF EMPLOYERS AND GOVERNMENT


The living wage is first and foremost a call to public and private sector employers (primarily larger ones)

to sustain families. This can be achieved through wages, or a combination of wages and non-mandatory

benefits, such as extended health benefits, paid sick time, coverage of MSP premiums (until their elimination

in 2020), subsidized transit passes, etc. If an employee receives non-mandatory benefits, the hourly

wage they need to be paid to reach a living wage rate will be reduced. For more details, see the Living

Wage for Families calculator at livingwageforfamilies.ca/employers/living-wage-calculator.


In a time of slow economic growth, it is particularly important that public sector employers (such as

municipalities, school boards, health authorities and universities) and financially healthy private sector

companies seek to sustain and enhance the earnings of low-income families. Boosting the earnings of

these households is one of the most effective ways of stimulating the local economy because lower-income

families tend to spend almost all their income in their communities.


But the living wage is not just about employers—the labour market alone cannot solve all problems

of poverty and social exclusion. Our standard of living is a combination of pay, income supports and

accessible public services that reduce costs for families.


First, direct government transfers can put money into the pockets of low-income families. The more

generous these transfers, the less wages a family requires to achieve a decent quality of life. The introduction

of the Canada Child Benefit—which resulted in small decreases in the Metro Vancouver living

EMPLOYERS GET BEHIND

THE LIVING WAGE

A growing number

of local governments

are seeing the value of

becoming living wage

employers. Nine local

governments have

adopted living wage

policies as of April

2018, including New

Westminster, Huu-ay-aht

First Nations, Vancouver,

Port Coquitlam, Parksville,

Pitt Meadows, Quesnel,

Central Saanich, and

YuułuɁiłɁatḥ Government

(Ucleulet First Nation).

In the last two years

the number of BC

businesses and non-profit

organizations certified as

living wage employers

has doubled, with

over 110 living wage

employers across the

province (for a full list see

livingwageforfamilies.ca).

These employers have

committed to paying

all their direct staff and

contract employees a

living wage, including

janitorial, security

and food-service staff.

The Living Wage for

Families Campaign

works with local living

wage community

coalitions to certify

living wage employers

across the province.


WORKING FOR A LIVING WAGE: 2018 UPDATE 7


wage for two consecutive years in 2016 and 2017 despite rising costs of living—shows how significant

government transfers can be. However, most other government transfers and subsidies are reduced or

eliminated once a family reaches an income level well below the living wage. For example:


• Federal GST credit (not available to families with a net income above $53,269).


• BC Child Care subsidy (starts to decline for the seven-year-old at a net income above $23,196

and for the four-year-old above $35,016 and ceases entirely at the income level of our living

wage family, frozen for the last 12 years).


• BC Rental Assistance Program (not available to families with gross income over $35,000 at the

time of writing, to be increased to $40,000 in September 2018).


• Working Income Tax Benefit (not available to families with net income over $29,597 to be

increased to $36,483 next year).


• BC Low Income Climate Action Tax Credit (not available to families with net income over

$57,158 even after the increase that came into effect in April 2018).


Provincial and federal governments must review all low-income transfers and credits regularly to ensure

that the amounts provided are keeping up with the actual expenses they are meant to defray (such as

child care fees or rent), and that they are not clawed back at income levels that leave many families

struggling with a bare-bones budget. When government transfers fail to keep up with the rising cost of

living, the families hardest hit are headed by earners who are already marginalized and tend to do poorly

in the labour market, including single mothers, indigenous people and recent immigrants.


This year, there were welcome enhancements to benefits for modest-income families in the BC and federal

budgets. Notably, the Canada Child Benefit will be indexed to inflation starting July 2018 to ensure its

value to families does not erode over time. And a new, more generous BC affordable child care benefit will

be available to families with incomes up to $110,000 with infants and toddlers in licensed care starting in

September 2018 and will extend to three to five year olds in 2019/20.


The living wage is also affected by indirect government transfers in the form of public services and

infrastructure that shift certain costs away from individual families. The U-Pass program is a great example.

It provides a reduced-cost system-wide transit pass to all students enrolled in publicly funded

post-secondary institutions in BC. A parent taking two courses is eligible for the U-Pass, which lowers the

family’s public transit costs from $126 to $41/month for the eight months they are in school. Without

the U-Pass, the living wage in 2018 would be 25 cents/hour higher.


The 50 per cent MSP cut and the Child Care Fee Reduction Initiative are other examples illustrating the

important role public policy plays in enhancing affordability. These two policy changes lower the Metro

Vancouver living wage by 36 cents/hour each.


Affordable housing, universal affordable child care, national pharmacare or dental coverage for children

and modest income families, and policies ensuring paid sick leave are other examples of government

actions that would lower the living wage, easing the role of employers in ensuring that families can meet

their core budgetary needs. For example, if BC fully implemented the widely endorsed $10-a-day child care

plan, the Metro Vancouver living wage would go down by $3.94 per hour to $16.97.


And so, a key way in which employers can reduce the payroll costs of the living wage is to advocate for

progressive policy changes to increase government benefits to low-income earners and enhance public

services that improve quality of life for all families.


$10 A DAY CHILD

CARE PLAN AND THE

LIVING WAGE

The living wage can

be achieved through

a combination of pay,

income supports and

accessible public services

that reduce costs for

families. Child care is the

second largest expense for

the living wage family after

rent. If BC fully adopted

the $10-a-day child care

plan, the Metro Vancouver

living wage would be

much lower.

Without full child care plan:

living wage $20.91.

$10 a day Child Care Plan:

lliving wage $16.97 (a

reduction of $3.94 per hour)

See www.10aday.ca.

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