Wages

Maximum insights on minimum wage workers: 20 years of data

by Dominique Dionne-Simard and Jacob Mille

In recent years, discussions surrounding the minimum wage, and its increase, have been at the centre of Canadian current affairs. The renewed interest in this topic stems mainly from high-profile campaigns2 advocating for a federal minimum wage increase to $15 per hour,3 as well as recent notable minimum wage increases in Ontario, Alberta and British Columbia. A recent report from the House of Commons identifies low-wage work as one of the key elements associated with precarious work in Canada.4 In addition to lower wages, minimum wage workers are also less likely to receive non-wage benefits such as a pension plan, supplementary health benefits or paid sick leave.

There is no consensus as to the immediate, mid-term and long-term impact of minimum wage increases. Some academics argue that increasing the minimum wage can reduce income inequalities and combat poverty.5 Others have argued that these increases might reduce employment and work hours for low-skilled workers,6 as well as employment in automatable jobs.7 Despite this lack of consensus, changes in the composition of minimum wage workers over time and their implications can be analyzed.

A Statistics Canada study found that recent minimum wage increases in Ontario and Alberta contributed to shifting the composition of minimum wage employees from individuals under 25 years of age towards older workers.8 Those types of changes have potential equity and social welfare implications. For example, following a minimum wage increase, employees with years of experience who were making above the minimum wage can find themselves joining the ranks of minimum wage workers, which can mean earning as much as an employee with no experience.

Employees living in urban areas more likely to earn minimum wage in recent years

On average, the cost of living is higher in urban areas10 than it is in rural areas.11 Minimum wage workers in urban areas are therefore faced with tighter budget constraints, which means that for the same wage, urban minimum wage workers may be financially worse off than their rural counterparts.

For more than 10 years, employees living in rural areas had a higher proportion of minimum wage workers compared with urban areas (Chart 3). Between 1998 and 2006, the percentage of employees earning minimum wage in rural areas varied between 5.0% and 6.7%, while it hovered around 4.5% in urban areas.

From 2007 to 2010, the proportion of employees earning minimum wage in urban areas grew at a faster rate than it did in rural areas. In 2013, the proportion of employees earning minimum wage in urban areas (6.9%) surpassed that in rural areas (6.7%) and remained higher until 2016.

Between 2017 and 2018, the proportion of employees earning minimum wage in urban areas grew significantly more than it did in rural areas. Contrary to 1998, proportionately more employees in urban areas earned minimum wage in 2018 (10.7%) compared with employees in rural areas (9.1%).

Characteristics of minimum wage workers

Sex

Throughout the 1998-2018 period, approximately 6 out of 10 minimum wage workers were women. Among women, the proportion of workers who were minimum wage workers was also higher than men’s over the 20-year period, however it increased at a slightly faster pace among men between 2008 and 2018.

Age

In 1998, approximately 6 out of 10 minimum wage workers (60.7%) were youth aged 15 to 24. By 2018, relatively more minimum wage workers were core-aged (aged 25 to 54) or older workers (aged 55 and over), while youth minimum-wage workers now accounted for closer to 5 out of 10 minimum wage workers (52.3%).

Over the last 20 years, the prevalence of employees earning minimum wage remained higher among youth workers. However, it grew at a faster pace among both core-aged and older workers between 2008 and 2018.

Immigrant status

In 2008, the proportion of immigrant employees who earned minimum wage (5.3%) was the same as that of Canadian-born workers (5.1%). Between 2008 and 2018, however, the percentage of immigrant employees earning minimum wage increased at a faster pace than it did for Canadian-born, resulting in a gap emerging between their respective proportions. In 2018, 12.0% of immigrant employees earned minimum wage compared with 9.8% of Canadian-born employees.

Economic family status

The proportion of unattached individuals and lone-parent employees earning minimum wage was similar to that of workers in other economic family types12 in 1998 and 2008. In 2018, 11.3% of unattached individuals and lone- parent employees earned minimum wage compared with 10.1% for employees in other economic family types.

Educational attainment

Between 1998 and 2018, the composition of minimum wage workers shifted from workers with lower educational attainment to workers with higher educational attainment, partly reflecting the increasing educational attainment in the overall workforce over the period.13 In 1998, a little less than one in four minimum wage employees (23.2%) had a postsecondary diploma or above and that proportion grew to a little more than one in three (34.9%) minimum wage workers by 2018.

Over this 20-year period, the percentage of employees with a postsecondary diploma who earned minimum
wage remained lower than that of employees with no postsecondary diploma. The two proportions also grew at similar paces. From 1998 to 2018, among all employees with a postsecondary diploma, the proportion who earned minimum wage rose from 2.3% to 5.5% while the proportion among those with a high school diploma or less increased from 8.3% to 20.0%.

Job status

The percentage of minimum wage workers among full-time employees has remained significantly lower than that of part-time employees over the last 20 years. However, between 2008 and 2018, the proportion of full-time employees earning minimum wage increased at a faster rate than that of part-time employees. In 2008, 2.6% of all full-time employees earned minimum wage compared with 17.4% of part-time employees. Between 2008 and 2018, that proportion more than doubled for full-time employees (to 5.8%) and went up to 31.9% for part-time employees.

The average minimum wage in Canada increased at a faster pace than the average wage for all employees

Compared with 1998, minimum wage employees fared relatively better in 2018 when comparing the average nominal minimum wage with the average nominal wage.19 Over this 20-year period, the average wage grew by 2.7% annually while the average minimum wage20 increased by 3.5% annually.

The ratio of average minimum wage to average wage for all employees expresses the minimum wage in terms of percentage of the average wage for all employees. From 1998 to 2007, the ratio decreased from 0.41 to 0.38 (Chart 6), meaning that the average minimum wage in Canada increased at slower pace compared with the average wage for all employees. The ratio then grew steadily after 2007, to 0.43 in 2017, meaning that the average minimum wage rose faster than the average wage. Between 2017 and 2018, following notable minimum wage increases in Ontario, Alberta and British Columbia, the ratio grew to 0.48, the highest in the last 20 years.

Quebec, Ontario and British Columbia all experienced declines in their ratio of average minimum wage to average hourly wage between 1998 and 2008 while the ratio among the seven remaining provinces either grew or remained relatively stable (Chart 7). After 2008, and leading up to 2018, every province, with the exception of Saskatchewan, experienced growth in their ratio, meaning that the minimum wage increased at a faster pace than the average wage in those provinces. The most notable ratio increases were in Ontario, Alberta and British Columbia.

Innovatank Publishing - Attributions of the content

https://www150.statcan.gc.ca/n1/en/pub/75-004-m/75-004-m2019003-eng.pdf?st=u39-Ubwy