As Inflation Rages Minimum Wage Hikes Fall Short

Governments’ failure to care about low-wage workers has meant real-dollar pay cuts for those who can afford them least

Ten years ago, advocates in the United States started a campaign for a $15-an-hour minimum wage. In 2014, low-wage workers in B.C. and Ontario followed suit. Before long, the call for $15 had spread right across the country.

Eight years later, how do the provinces measure up?

Six provincial governments increased the minimum wage this month. At a time of high inflation, that’s welcome news. But those increases still fall short of what’s needed.

Across Canada, only three provinces (B.C., Alberta, and Ontario) already have a $15-or-better minimum wage. Manitoba, P.E.I., and Newfoundland and Labrador will get to $15 in 2023. Saskatchewan and Nova Scotia are scheduled to get there in 2024. Quebec and New Brunswick currently have no plans to reach $15.

But is $15 still the right target? No, it isn’t. Based on Bank of Canada inflation forecasts, by the time Saskatchewan and Nova Scotia have a $15-an-hour minimum wage, it will only be worth $10.55 in 2014 dollars. That’s a full 30 per cent below the original target.

Even provinces already at $15 have seen those gains eaten away by inflation. Alberta’s $15-an-hour minimum wage is only worth $11.82 in 2014 dollars. Ontario’s $15.50 and B.C.’s $15.65 minimum wage are only worth $12.21 and $12.33, respectively.

Here’s the problem: even increases that exceed the current inflation rate do not make up for past years of minimum-wage freezes. It’s not even close. Governments’ failure to care about low-wage workers has meant real-dollar pay cuts for those who can afford them least.

Inflation does not impact everyone equally. It has actually been lucrative for Canada’s corporations, which set most of the prices we all pay.

On the consumer front, it may be hard to believe, but there is a sizable group of Canadians who simply don’t pay much attention to prices. If a restaurant meal that was $200 last month is $220 this month, they just go ahead and pay it. Inflation doesn’t affect their day-to-day decisions at the grocery store. They don’t take their kids out of sports or music lessons. They don’t worry about the cost of housing.

Most Canadians do notice inflation, though, and it affects what they do. With wages not keeping up, they change their shopping habits and vacation plans. They drive less. They hold off on household purchases.

With a decent income, they have some flexibility. But those on the low end of the income scale are not so fortunate.

Roughly 10 per cent of Canadian workers earn the minimum wage or very close to it.

These workers were living paycheque to paycheque long before the current spike in prices. They never had a cushion of savings to fall back on or extra money at the end of the month.

Now, jammed between rising rents and skyrocketing food prices, they have their backs to the wall.

The government of Canada’s recent move to temporarily boost the GST credit to low-income Canadians will help, but it’s not enough. That’s why a new generation of Canadians is calling for a $20 minimum wage.

These calls should be heeded. Low-wage workers and their families need help. Unlike the untargeted cash giveaways that many provinces have tried, boosting the minimum wage is a targeted policy that puts money where it needs to be.

It doesn’t come with a big price tag for governments, but it does recognize that an increasing share of minimum wage workers works for large companies. With profits rising due to inflation, a faster increase to the minimum wage – in every province – means that some of those profits will be shared more equally with the employees who make those profits possible.

Raising the minimum wage is now on the agenda in almost every province. Let’s make sure it goes up enough.

By Sheila Block

Sheila Block is a senior economist with the Canadian Centre for Policy Alternatives Ontario office.

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