Minimum Wage Trends in Canada

According to Finance Canada, more than 1.2 million net new jobs have been created in Canada since the depths of the recession—one of the strongest job creation records in the G-7. 

However, the growing trends in minimum-wage earnings should give us some pause:

• Recent job increases are being driven by part-time work and largely by jobs in the retail and food and accommodation industries, sectors with the largest proportion of minimum-wage earners.

• There is a rising share of employees earning the minimum wage in Canada.

• For almost a decade, the average minimum wage has been increasing faster than the average hourly wage.

• Average weekly earnings are increasing primarily in industries that rely heavily on minimum-wage labour.

Minimum wage earners generally engage in low-level, unstable jobs, which do not encourage overall confidence in the economy, significant savings, or consumer spending that would help to stimulate the economy.

A recent Statistics Canada report reveals that the real average minimum wage in Canada (adjusted to 2013 dollars) remains almost identical from 1975 ($10.13) to 2013 ($10.14). However, that’s not the whole story. The average minimum wage did fluctuate in that time period, declining to $7.53, increasing to $8.81 in 1996, and remaining stable at about $8.50 until 2003. Since 2003, the real minimum wage has increased by almost $2.00, with every province seeing the same upward trend.

It is interesting to note that the average minimum wage in 2013 represented approximately 46% of the average hourly earnings, an increase in this ratio from 41% in 2005. In other words, the average minimum wage grew faster than average hourly earnings (in constant 2013 dollars), which changed very little over the same period.

The proportion of workers earning the minimum wage has also increased, from 5.0% in 1997 to 6.7% in 2013, with the bulk of that increase occurring between 2003 and 2010, when the minimum wage experienced the most growth across the country.

It should come as no surprise that employees who are young, less educated, working part-time, or employed in the service industries make up the bulk of minimum-wage workers. For example, in 2013, minimum-wage earners accounted for 50% of employees aged 15 to 19, and the accommodation and food services and retail trade industries combined accounted for a total of 60% of all minimum-wage earners.  However, these jobs are important to this age group – should they disappear, savings for higher education by teenagers could be affected, for example.

So have minimum-wage jobs become a major factor in Canada’s employment economy in recent years? The latest Labour Force Survey, released by Statistics Canada in March 2015, does seem to confirm that trend:

• March 2015 saw an employment gain of 29,000, driven primarily by growth in part-time jobs. The unemployment rate remained unchanged at 6.8%.

• The first-quarter employment increase was a mere 0.4%, or 63,000 jobs, similarly driven by an increase in part-time employment.

Statistics Canada’s January 2015 numbers for payroll employment, earnings and hours worked reveal that three of the largest sectors of the economy—wholesale trade, manufacturing, and accommodation and food services—were the only industries that outpaced the national average in year-over-year growth of weekly earnings.

So what do these trends all tell us?  While the trend to part-time, minimum-wage labour means that businesses are better able to control their employment costs, this trend may not be as positive for our economy overall. 
In the bigger picture, if increases in employment income are legislated rather than stimulated by robust corporate investment in the labour force, should we all be concerned about Canada’s ability to be competitive in a knowledge-based economy?  Your thoughts on the matter are welcome.