Even with minimum wage hikes, workers are falling behind

Posted on October 17, 2024 by Ryan Dahlman

On Oct. 1, the minimum wage increased in Ontario, Manitoba, Saskatchewan, and Prince Edward Island. All other provinces except Alberta brought in increases earlier this year. That means most minimum-wage workers are doing better, right?

Right?

Not necessarily.

Minimum-wage workers living on their own are most likely to rent. In recent years, rent increases have outpaced minimum wage increases, eating away at workers’ additional income. According to the latest calculations by the Canadian Centre for Policy Alternatives (CCPA), this is happening almost everywhere in Canada.

The “rental wage” is the hourly wage required to pay rent while working a 40-hour week, 52 weeks a year, and spending no more than 30 percent of one’s income on housing. Put simply, the rental wage is how much people need to earn in order to pay their rent without sacrificing other basic needs.

Unfortunately, the rental wage is considerably higher than the minimum wage in every province.

The gap between the minimum wage and the rental wage for one-bedroom apartments varies from $1.79 per hour in Newfoundland and Labrador ($15 vs. $16.79) to $13.21 per hour in B.C ($16.75 vs. $29.96).

The gap for two-bedroom units is even higher.

In B.C. and Nova Scotia, the two-bedroom rental wage is more than double the minimum wage. That’s nearly the case in Ontario, too. Quebec has the smallest gap, but even there, workers need to earn $4.79 more per hour ($15.25 vs. $20.04) to afford two bedrooms without spending too much on rent.

The CCPA calculations include the rental wages for 62 urban areas. Minimum-wage workers can afford a one-bedroom apartment in only nine of them.

It’s no doubt a problem that minimum wage workers are priced out of almost all urban areas in the country. But even more concerning is that the trend is worsening.

From October 2022 to October 2023, minimum wage increases fell behind rental wage increases almost everywhere.

Alberta is the starkest case. The minimum wage in the province didn’t budge, while the rental wage for two-bedroom units rose by more than 10 percent. In B.C., the rental wage increased 8.5 percent in this period, beating an otherwise significant seven percent minimum wage increase. Ditto for Newfoundland and Labrador, where a notable 9.5 percent boost in the income of minimum wage earners paled in comparison to a 16.2 percent rental wage increase. In Ontario and Saskatchewan, the rental wage outpaced the minimum wage by 2.5 percentage points.

The story is different in only two provinces.

Manitobans saw a 13.3 percent minimum wage increase and a 5.1 percent rental wage increase. Prince Edward Islanders saw a 9.5 percent minimum wage increase and an 8.5 percent rental wage increase. These two provinces have the country’s most robust, if not flawless, rent control policies.

There is no sign this trend will be reversed any time soon.

Between October 2022 and October 2023, 12.5 percent of rental units in Canada saw a change of tenant. At the turnover from the old to the new tenant, landlords increased rents by an average of 24 percent. In Vancouver, the average increase was 34 percent, and in Toronto, 40 percent.

Similar increases happened the year before, and there is no reason to believe similar increases won’t happen this year and the year after. Provincial governments are hiding their heads in the sand, refusing to act on rent regulation that could immediately improve this situation.

Wage increases should benefit workers whose financial pressures ease, employers whose workers are more satisfied and productive, and shop owners whose customers have more to spend.

But until governments bring rents under control, the lion’s share of minimum wage increases will just keep going where they’re going now – straight into landlords’ pockets.

Ricardo Tranjan, PhD, is a political economist with the Canadian Centre for Policy Alternatives and author of The Tenant Class. 

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