In October 2024, Ontario raised its hourly minimum wage from $16.55 to $17.20, making it the second-highest provincial rate in Canada—behind only British Columbia at $17.40. This pay bump is an attempt to help wages keep up with Ontario’s skyrocketing cost of living. However, despite consistent increases since the start of the pandemic—when the minimum wage was just $14—many workers and labour advocates argue that the new rate still falls short of a livable wage in the province. Others question whether overall wage increases across the country are truly benefiting the workforce. The term “wage stagnation” often comes up in these discussions, but is Canada really experiencing it?
“Wage stagnation essentially means that, even if your pay goes up, your inflation-adjusted ‘real’ wage isn’t increasing, so you can’t buy more,” says David-Alexandre Brassard, CPA Canada’s chief economist. “If you look at the data from a long-term perspective, Canada has actually seen consistent growth in real wages.”
So, why is the perception that wages aren’t growing fast enough? Brassard suggests that focusing on minimum wage may obscure the bigger picture. “Minimum wage is a bit of a veil,” he says. “The vast majority of the labour market isn’t doing full-time work at minimum wage.” In Ontario, for example, only approximately 11 per cent of workers earned $17.20 or less in 2023. This relatively small percentage reflects a shift in the composition of Canada’s job market, says economist Armine Yalnizyan, an economist and the Atkinson Fellow on the Future of Workers. “The post-pandemic reopening has created huge opportunities for people to move into better-paying jobs that better fit their skillsets, so we’re seeing broad-based upward mobility,” she says, adding that the number of lower-wage, lower-skill jobs—particularly in retail as well as accommodation and food services—is shrinking.
Although the minimum wage has risen at least as fast as inflation over the last three years, many full-time workers in these sectors earn just slightly above the minimum, meaning these increases haven’t significantly impacted them. “Someone making $20 an hour isn’t necessarily benefiting from minimum wage increases, even if that minimum wage is catching up to their pay rate,” Brassard says. This leaves many workers feeling left behind, especially in urban centres where housing costs are soaring. In Canada, housing expenses now consume an average of 22 per cent of household final consumption expenditure, up from 20 per cent in the early 2010s, which translates into roughly $27 billion that could have gone toward discretionary spending.
Some view universal basic income as a solution to wage stagnation for lower-wage workers, but Brassard is cautious, citing its high cost and potential to disincentivize workforce participation. “Our system is already designed to help specific groups—those with low incomes, retirees, families,” he says. Instead, he proposes adjusting government policies on labour supply, noting that competition for lower-wage jobs remains high, especially in urban centres like Toronto—where international students and newcomers are competing with locals for similar positions. “When you increase the labour supply for lower-wage jobs, the increased competition lessens the need to raise wages to attract workers,” he adds.
Will Canada’s overall real wage growth continue into the near future? Yalnizyan isn’t sure that upcoming changes in job composition will perpetuate that growth. For instance, Canada’s aging population will drive massive demand for workers in the “care economy,” including elder and health care. However, Yalnizyan is concerned about wages in these fields. “I’m not confident it will grow in terms of well-paid jobs,” she says, predicting that increased demand may lead to lower certification requirements, which could keep wages down. She also highlights inflation-spiking external factors—such as the economic impact of the U.S. presidential election and the escalating conflict in the Middle East—which could further erode real wages.
Brassard is also skeptical about sustained real wage growth, pointing to productivity as its essential driver. “To pay employees more, businesses need productivity gains—otherwise, wage increases require price increases (inflation) to keep up with higher labour costs, and real purchasing power stays flat or declines,” he says. Although Canada has historically been better than countries like the U.S. at translating productivity growth into wage gains, it has seen minimal increases in labour productivity since 2019.
The future of Canadian wages, then, will hinge on whether productivity can rise enough to drive real wage growth. “Without those productivity gains, Canadians’ financial well-being may stagnate or even worsen,” says Brassard.
Ali Amad is a Palestinian-Canadian freelance writer and journalist based in Toronto. Amad writes culture, real estate and business articles for publications including Toronto Life, Vice Canada, Reader’s Digest Canada and The Walrus. His creative work and essays draw from his passion for film, cultural identity, philosophy and social justice.
Originally published by CPA Canada.
