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What impact from boost in federal minimum wage?

Raising the federal minimum wage to $15 per hour won’t have a direct impact on many workers, but Ottawa hopes the move raises the bar for others to follow.

The new rate comes into effect at year’s end, applying only to federally regulated aspects of the private sector, such as banking, telecommunications, and parts of the meat processing industry, for example. All told, that amount to about six per cent of the Canadian workforce.

The minimum wage for other workers is set by the provinces – in Ontario, that’s $14.25 (expected to rise by another 10 cents in the fall based on the province’s consumer price index).

It’s not a big step, but the increase is welcome news to a growing number of low-wage workers who face precarious working conditions of no steady hours, no benefits and no provisions for emergencies – precisely the kind of people hardest hit by the pandemic, and for whom a number of relief programs were enacted.

As we get the pandemic under control and the economy recovers, longstanding economic issues return to the fore.

Good jobs are increasingly hard to come by. The low-wage workforce in Ontario has grown by almost 100 per cent over the past two decades, vastly outstripping the 30 per cent growth in total employment.

Very much indicative of the problem is the increase in the number of workers earning the minimum wage. Between 1998 and 2018, the proportion of employees earning minimum wage doubled to 10.4 per cent from 5.2, with most of that growth occurring between 2017 and 2018, coinciding with notable minimum wage increases in Ontario, Alberta and British Columbia.

A Statistics Canada study found that recent minimum wage increases in Ontario and Alberta contributed to shifting the composition of minimum wage employees from individuals under 25 years of age towards older workers. Those types of changes have potential equity and social welfare implications.

Stats Can found the proportion of employees earning minimum wage rose just prior to the 2008 economic downturn as changes in economic conditions forced an increasing number of workers to accept jobs paying minimum wage. Then Alberta, Ontario and British Columbia increased their minimum wage significantly in 2018, bringing the proportion of employees earning minimum wage to unprecedented levels. All these changes also had implications on the composition of minimum wage employees. Compared with 1998, minimum wage employees in 2018 were relatively more likely to live in urban areas, work in retail trade, be employed in a large firm, work full-time and be older than 24.

Over the last 20 years, the prevalence of employees earning minimum wage remained higher among youth workers. However, it grew at a faster pace among both core-aged and older workers between 2008 and 2018. About half of Ontario workers earning less than $15 an hour today are between the ages of 25 and 64.

Employment growth in trade (retail and wholesale), business services (which includes temporary agencies, cleaning, and security services), and accommodation and food services outpaced overall Ontario employment growth. All of these industries have wages that are far below the median for all workers. In short, a rising share of Ontario workers is in low-wage work. These workers are more likely than higher-wage employees to have variable hours where their schedule and pay is unpredictable.

It used to be that bad, low-paying jobs were the rite-of-passage experience for teenagers. Today, however, 66 per cent of minimum wage workers are older than 20 and only 34 per cent are teens. In other words, two out of every three wage earners are adults trying to make ends meet on a minimum wage that keeps a full-time, full-year worker below the poverty line. We’ll see if the federal increase changes that trajectory.

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