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Why living wage policies don't work
There have been a number of letters to the editor regarding New Westminster’s Living Wage Policy.
I believe that all contributors want the best for society but fail to marry idealism to reality.
I view this matter from personal experience. In 2000 I accepted a position as a construction manager at a unionized contracting company. During the previous tenure of the NDP, the union representing employees at our firm had lost 60 per cent of its membership. This was during a time when fair wage policies governed all provincial construction projects.
As the non-union sector was my largest competitor, I sought to lure their top talent into the union where I could have them work for me. The wage package I offered was on average 75 per cent higher than the non-union sector offered, so I was interested in the fact that all my new hires from the non-union sector had worked on "fair wage projects."
I soon learned that all these employees had been paid as per the hourly agreed wage. There was one caveat: these workers usually had to work eight hours to get paid for five.
In my opinion this is why the fair wage policy will always be a failure.
The incentive for unscrupulous contractors will always exceed the will and means of the government to enforce the rules. The fair wage policy as instituted during the '90s actually worked against workers receiving a fair wage, as it favoured unscrupulous contractors over ethical contractors.
Above I have only presented the problem. I believe there is a solution that has been used for a long period of time to great success. With the typical government contract the focus is entirely on price. In the private sector when one is working directly for the end user the focus tends to be on quality and reputation.
In the private sector when working for the end user, there is considerable effort made to demonstrate corporate integrity, quality control, safety and other areas of importance to the end user. Only a limited number of contractors are able to provide these assurances and be able to tender to work for the end user. Although the initial price may be higher, the final product is less expensive because of the benefit of an enduring quality product.
The price-focused contracts to be adversarial, as everyone has underbid the project and is trying to make a profit at everyone else’s expense.
In a quality and reputation-focused contract, the firm performing the work has to have employees with high levels of expertise with a long history working in the firm’s corporate culture.
In my experience, the best compensated employees in the industry have always worked for firms that have focused on quality, reputation, and corporate longevity.
It is to the benefit of the City of New Westminster to focus on quality and reputation over price. It is more difficult for companies to fabricate a reputation than hourly pay sheets.
The side effect of this is that ethical corporations will grow stronger and the city will receive better quality work.