Happy Minimum Wage Day, Canada! - Centre for Future Work

Half of Canada’s provinces all increased their minimum wage on October 1: Saskatchewan, Manitoba, Ontario, Nova Scotia, and Prince Edward Island. So this is a good occasion to celebrate the importance of higher minimum wages as a powerful tool for improving incomes and reducing inequality.

Four other provinces, the three territories, and the federal government also increased their minimum wages earlier this year. Unfortunately, Alberta is the exception, having frozen its minimum wage for 7 straight years (with no adjustment since October 1, 2018).

To mark the occasion, Centre for Future Work Director Jim Stanford joined Matt Galloway on CBC Radio’s national program The Current to discuss the economic effects of higher minimum wages. Their conversation is available here. He was also interviewed by Courtney Theriault on 880 CHED Radio in Edmonton, to discuss Alberta’s punitive minimum wage freeze, and its consequences. Listen to their conversation here.

Here are a few facts to consider as the latest minimum wage increases show up in paychecks for millions of low-wage Canadian workers:

B.C. is Best: After the 2025 increases, B.C. once again boasts the highest provincial minimum wage in Canada, at $17.85 per hour. Two territories (Nunavut and Yukon) have even higher minimum wages, in recognition of very high living costs.

Alberta, from Champ to Chump: With Saskatchewan’s 50-cent increase, Alberta now gains sole possession of last place in the interprovincial minimum wage sweepstakes. In the 7 years since its last minimum wage increase (which set the wage at $15), consumer prices in Alberta have grown 22%. A wage freeze combined with fast inflation has produced a dramatic reduction in the real purchasing power of incomes for low-wage workers in the province. Despite such a low minimum wage, Alberta has the second-highest unemployment rate of any province, and had the highest inflation of any province in 2024 – discrediting claims that keeping wages low somehow improves employment and reduces inflation (more on this below). The long freeze in the provincial minimum wage has been a major factor in Alberta’s fall from being the highest-wage province in Canada, to today barely matching Canada-wide average wages.

More than Keeping Pace with Inflation: Some provinces (like Ontario, Manitoba, and Saskatchewan) have tied minimum wage increases to changes in the provincial price level (measured by the provincial consumer price index, CPI). If sustained, that policy would mean the real purchasing power of the minimum wage would never increase. Given that minimum wages are far too low to support a decent living standard (more on this below), freezing minimum wages in real terms would lock in poverty-level incomes for the long term future. Thankfully, however, most provinces have done better in recent years than just keep up with the CPI. The following figure shows the change in the real value of the minimum wage over the last five years, by province. Most provinces increased minimum wages more than inflation in this period, giving low-wage workers a boost in their real income. That was especially important during the faster inflation experienced for a time after the COVID pandemic. Again, Alberta is the painful exception to this rule: its minimum wage has fallen 16.5% in real terms in the last five years.

Nova Scotia’s current minimum wage policy adjusts the wage each year by the annual growth in provincial CPI plus 1%. That ensures gradual increases over time in its real value. Other provinces should also raise minimum wages faster than inflation, in order to lift real incomes for the lowest-paid workers.

Canada in Middle of Global Pack: Minimum wages in Canada are not high by the standards of other industrial countries. The figure below illustrates national minimum wages measured as a share of median wages in each country. This is a common way to measure the “bite” of minimum wages as a tool for lifting up wages, in the context of general wage and price levels prevailing in each country. (This is more meaningful than simply comparing the nominal levels of minimum wages across countries.) Among the 30 countries in this comparison, Canada ranks 21^st, with minimum wages (averaged across provinces) equal to about 50% of the median wage. High-income countries with higher effective minimum wages than Canada include Germany, France, Portugal, Korea, Australia, and the U.K. The U.S. has by far the weakest minimum wage in the OECD: the federal minimum wage there is just $7.25 per hour, has not been increased since 2009, and is equivalent to just 25% of the median wage level. (Many U.S. states and even some cities have their own, higher minimum wages, to fill in the void left by the long federal wage freeze.) Several countries (including the Nordic countries and Switzerland) do not have a national minimum wage. Instead, they rely on sectoral collective agreements and generous income support programs to effectively set a floor under wages (since employers are compelled to offer more than those income benefits in order to attract workers).

Sea-Change in Economics: Old-fashioned free-market economists used to claim that minimum wages inevitably create unemployment, by lifting the wage above its natural market-clearing level. This view has been discredited by a historic about-face in economic research on the effects of minimum wages. Empirical evidence (including studies pioneered by Canadian-born economist David Card, who received the Nobel Prize in Economics for this work in 2021) shows negligible impacts of minimum wage increases on employment. Under some circumstances, higher minimum wages can even lead to higher employment. This can occur when aggregate demand conditions are very weak, and hence additional spending power from higher wages can stimulate growth and employment (an outcome called ‘wage-led growth’). It can also occur under ‘monopsony’ conditions in the labour market, whereby very large employers (like Amazon or WalMart) can suppress wages, unless a minimum wage prevents them from doing so.

Some Benefits for Business: Business lobbyists almost never endorse higher wages, since their individual bottom line is improved when labour costs are lower. But there are some ways higher minimum wages benefit business. They can enhance recruitment and retention of staff – highly relevant given business groups’ ongoing complaints about a supposed ‘labour shortage’ in Canada. And higher wages are often associated with higher productivity. These benefits offset some of the costs of higher minimum wages. And since a higher minimum wage applies to all employers (if properly enforced), this helps employers raise wages to recruit and retain staff, but without undermining their competitive position versus other firms.

Minimum Wage not a Living Wage: Despite real increases in most provinces in recent years, the legal minimum wage is not high enough to cover the costs of a basic standard of living. Various living wage projects across Canada (including Ontario and B.C.) have estimated that both wage-earners in a two-income two-kid family would need to earn at least $22-26 per hour, working full-time year-round, to meet basic living standards. This confirms that the minimum wage is not enough for workers to escape poverty.

Close the Loopholes: Another problem with existing minimum wage policies is inadequate and inconsistent enforcement. Some employers engage in under-the-table wage theft – paying below-minimum wages in cash, or demanding kickbacks from workers (especially targeting those in vulnerable positions, like non-permanent migrant workers). A bigger problem is the mis-use of independent contractor arrangements to justify below-minimum wage compensation, on grounds that the affected workers are not ‘employees’. This problem is rife in the platform or ‘gig’ economy, where hundreds of thousands of workers (again, disproportionately young, racialized, and immigrant) earn wages that frequently fall below legal minimums. Reforms in some provinces (like Ontario and B.C.) to guarantee a purported minimum wage for ‘engaged time’ do not solve this problem, since they ignore the many hours workers spend online waiting for instructions.