Minimum wage increases can’t keep pace with rising cost of living

With very little room to manoeuvre, cost increases in non-negotiable expenses like shelter, groceries, or transportation may require families to make the difficult choice to cut expenses in other areas.

For working families, rent is often one of the most significant monthly expenses. We can see what kind of hourly wage is required to afford rent in Canada’s cities by consulting the rental wage—the hourly wage needed to afford a one- or two-bedroom apartment while working a standard 40-hour week and spending 30 per cent of income on housing. Despite being based on 2024 rental costs, none of the Oct. 1 minimum wage increases will come close to matching the rental wage required to afford a rental unit in the major cities of these provinces.

For example, Saskatchewan’s newly minted minimum wage of $15.70 falls almost $7 per hour short of what is required to afford a one-bedroom in Regina or Saskatoon. Similarly, Nova Scotia’s increased minimum wage of $17 falls almost $10 per hour shy of what it would cost to rent in Halifax. Of course, the gap between these minimum wages and rent for a two-bedroom apartment is even higher.

We can see the same gap between what the minimum wage delivers versus what is actually required to afford a decent living by viewing the discrepancy between the minimum wage and the living wage in these provinces. The living wage is the hourly rate that each of two parents working full-time must earn to support a family of four in a particular town or city. For working families in Hamilton, that hourly living wage rate is $22.60 per hour, $4.70 higher than Ontario’s new minimum wage rate. Unsurprisingly, the gap in Toronto is even higher, with a living wage rate of $27.20 required—$9.30 per hour higher than the minimum wage.

Increasing shelter costs and higher food prices have been the primary driver of higher living wage rates. In Saskatoon, rising rents and grocery bills saw that city’s living wage increase from $18.50 per hour to $21.50 per hour in the space of two years.

In addition to increased expenses, reduced government transfers are also burdening working families. In particular, the loss of the much-maligned Climate Action Incentive payment (CAIP), or carbon tax rebate, has meant the loss of over $1,500 in annual rebates for eligible families. As expenses grow and transfers are reduced, employment earnings become all the more important for making ends meet. Unfortunately, the meagre increase that minimum wage earners will receive on Oct. 1 is nowhere near what is required to keep up with the accelerating cost of living.

Governments that are serious about addressing the crisis of affordability must confront the gap between what the current minimum wage delivers versus what families actually require. That could include accelerating minimum wage increases, holding down shelter costs through rent regulation, improving and expanding $10 per day child care access and increasing the size and scope of government income transfers. Tackling the affordability crisis will require a multi-pronged approach that increases income and stabilizes expenses. Incrementally raising the minimum wage by a few cents every year while non-negotiable expenses like rent rise unchecked will only leave working families further and further behind.

Simon Enoch is a senior researcher with the Canadian Centre for Policy Alternatives.