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Minimum Wages and Minimum Wage Workers in Canada
The appropriate policy response in the area of minimum wages depends in part on the characteristics of persons affected by minimum wages. A comprehensive picture of those characteristics as well as a picture of minimum wages in Canada is provided in Battle (2003) and Sussman and Tabi (2004).
Trends and Patterns of Minimum Wages in Canada
According to Battle (2003):
- In constant 2001 dollars, minimum wages in Canada (a weighted average across the different jurisdictions) rose from slightly under $6.00 per hour in the early 1960s, to a peak of about $8.50 per hour in 1976, falling steadily to about $6.00 in the mid 1980s to the early 1990s, and then rising again to about $7.00 in the late 1990s to the present (p.6).
- A similar pattern prevails for minimum wages relative to average wages, where they rose from 45% in 1965 to a peak of 50% by 1976, falling to around 38% in the mid 1980s to the early 1990s, and then rising slightly to about 41% in 2001 (p. 8).
- In 2001, minimum wages as a percent of average wages, ranged from lows of 30% to 35% in the North West Territories, Nunavut and Alberta (reflecting the high wages in those areas) to highs of 45% in Quebec and 45% in B.C. (p. 7).
- As a percent of the before-tax low income cut-off (poverty line) for one person, the national average minimum wage ranged from 75% in metropolitan centres, rising steadily for smaller towns to a high of 109% in rural areas, reflecting the lower cost of living in rural areas (p. 10). The percents were all lower for two-earner families, ranging from 60% in metropolitan areas to 87% in rural areas (p. 11).
- Minimum wages in Canada are roughly comparable to those in the U.S. on a purchasing power parity bases (implying that persons on minimum wages in both countries could purchase about the same bundle of goods and services). However, because average wages are somewhat higher in the U.S. than in Canada, minimum wages expressed as a percent of average wages of full-time, full-year workers are lower in Canada (34%) compared to the U.S. (37%). (p. 250).
- On a broader international basis, both countries are at the low end of that spectrum, with Canada being fourth lowest at 34% of 17 countries, higher only than the UK (30%), Spain (28%) and Japan (24%), compared to the high-end countries of Denmark (57%), Belgium (52%), Italy (51%) and France (51%).
Characteristics of Minimum Wage Workers in Canada
According to Battle (2003):
In terms of the probability of being a minimum wage worker (figures are for 2001 or 2002):
- About 4.6% (580,000 of the 12.5 million employees) worked for minimum wages (p. 32), ranging from a low of 2% in Alberta to a high of 8.7% in Newfoundland (p. 33). In 2004, the same 4.6% of all employees worked for the minimum wage, although it was down to 0.9% in Alberta (Fact Sheet on Minimum Wages, 2005).
- The probability of being a minimum wage workers is higher for women (6%) compared to men (3.7%) (p. 35).
- The probability falls dramatically with age: 44% for teens age 15-16; 30% for teens age 17-19; 7% for youths age 20-24, and under 3% for those 25-64; but rising to 8.2% for the small number of workers 65 and older (p. 37).
- The probability generally falls with higher levels of education (p. 41).
In terms of the distribution or composition of the minimum wage workforce (which reflects not only their probability of being a minimum wage worker but also the size of their workforce):
- Almost 80% (78.4%) of minimum wage earners were in Ontario (38.5%), Quebec (27.4%) and B.C. (12.5%) reflecting their large shares (75.8%) of the workforce (p. 35).
- 62% of minimum wage workers are women compared to 38% who are men (p.35).
- Almost half (47%) of minimum wage workers are teenagers and a further 16% are youths age 20-24 (p. 37).
- 58% of minimum wage workers work part-time while 42% work full-time (p. 42).
- 60% of minimum wage workers are teens or youths who live with their parents, 25% are couples (of which 75% have a spouse employed at a job above the minimum wage), 11% are unattached individuals and 4% are single heads of families (p.45).
- Most minimum wage workers are in the service industry: 30% in trade, 29% in accommodation and food services, 6% in other services and 6% in information, culture and recreation (p.45).
A similar picture prevails in 2004 (Fact Sheet on Minimum Wages, 2005). Sussman and Tabi (2004, p. 10, 11) also indicate:
More than half of all minimum wage workers had been in their current job for no more than one year, compared to only 22% of all employees. Many of these jobs are occupied by students and other young people at the start of their careers. With more education and experience, these workers move into better paying jobs. Indeed working for minimum wage was most prevalent for those who had been at their job for three months or less (1 in 9), and least common for those who had been there for more than five years (1 in 80)… Almost two-thirds of all minimum wage workers in 2003 lived with their parents or other family members, again reflecting the large number of minimum wage workers under 25 and in school. This is often a temporary situation until the completion of education and the accumulation of experience.
This portrayal is not meant to imply that minimum wage earners are “little rich kids who live with their parents.” As indicated by Fortin and Lemieux (2002, p.230):
Minimum-wage earners tend to be concentrated in the lower half of the income distribution of adjusted family income. This is true even for youth living with their parents, who disproportionately come from the lower-middle class (deciles 3 to 5). Our results clearly do not support the view that the typical minimum-wage workers are teenagers living in upper-class (deciles 9 to10) or upper-middle-class (deciles 6 to 8) families. This being said, the minimum wage remains a relatively small transfer program, which limits its ability to change the distribution of family income in Canada in a quantitatively important way.
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