Minimum wage laws – The state of pay in Canada

Most Canadians have had only fleeting contact with the minimum wage. Perhaps that first job as a teenager in a fast food restaurant or working at the cash register of a local store. Then, it was on to bigger and better-paying jobs.

But minimum wage employment is still the reality for many in this country. Some never manage to rise above those so-called entry-level positions. In 2007, for someone working full-time, that means an annual income of less than $16,000. Some try to support a family on that.

Minimum wage

Number of Canadians working at or below minimum wage in 2005:
587,000 (4.3% of all employees)

Source: Statistics Canada

The minimum wage is designed to impose a broad and enforceable standard on employers that would guarantee a minimum level of income for unskilled, non-unionized workers. Minimum wage standards are also designed to stop these workers from trying to undercut each other by agreeing to work for less than someone else.

The minimum wage also serves as a benchmark for many more workers who are paid above the minimum wage. Many of these better-paid employees also see their wages rise when the minimum wage is bumped up.

History of minimum wage legislation

If you found yourself as an unskilled, uneducated worker in the 19th Century, you were on your own in Canada. There were no minimum wage standards anywhere in the country; no labour code to protect you from exploitation. Employers could pay workers as little as they wanted and many did just that. Craft unions arrived in the latter part of the century and were often able to win improvements in pay and working conditions. By 1912, as many as 160,000 Canadians were members of a union – often in such areas as mining and the railways.

The first minimum wage legislation in Canada was passed in 1918 by both British Columbia and Manitoba. Two years later, Ontario, Quebec, Nova Scotia, and Saskatchewan followed suit. Interestingly, these early wage laws applied only to women and only to some kinds of employment. According to a labour law analysis by Human Resources Development Canada, the thinking at the time was that labour unions (which represented male workers) could do a better job of ensuring that men earned a living wage by bargaining on their behalf.

Other provinces and territories gradually brought in minimum wage legislation for women and men, with Prince Edward Island being the last province to do so in 1960. For many years, provinces also legislated higher minimum wages for men than for women. The prevailing thinking was that men deserved more pay because the family's main breadwinner was usually male. Gender-based minimum wage rates weren't abolished in all provinces until 1974.

There used to be a federal minimum wage too. That applied to workers whose jobs were covered under the Canada Labour Code – like those in banking and the railways. But in 1996, the current provincial or territorial rates were adopted as the federal minimums.

At one point, many provinces also had higher minimums for workers in urban centers than for those in rural areas – a distinction that disappeared by the 1970s.

Currently, minimum wage rates in Canada vary by less than $2 an hour between the highest and lowest standards. The minimums generally do not automatically increase according to the inflation rate, but are adjusted on an ad-hoc basis by provincial and territorial governments. On April 1, 2007, Yukon becomes the first jurisdiction to peg annual increases in its minimum wage to the Consumer Price Index. A few provinces are bound by statute to review the minimum wage standard every year or two, but none is required to change it. Critics point out that the legislated minimums have often not kept pace with inflation.

All provinces provide for fines for employers who pay covered employees less than the prescribed minimums.

Are there exceptions to the basic minimum wage rates?

Yes, and lots of them. Millions of Canadian workers are not covered by minimum wage laws. Self-employed workers, independent contractors, students in training programs, and salespeople paid exclusively by commission are almost never covered in any province or territory.

Most provinces also have their own rules that either exclude some kinds of workers from minimum wage coverage or allow lower minimum rates for some kinds of workers.

Some provinces, for instance, allow employers to pay less to workers who serve alcohol or otherwise accept tips. Ontario is the only province that still allows young workers to be paid less than adults. New Brunswick says domestic workers and live-in care workers aren't covered by minimum wage laws. In some other provinces, domestics are covered, but nannies aren't. Farm labour and homeworkers are usually not covered, but there are exceptions there too. And depending on the jurisdiction, camp counsellors, hunting and fishing guides, and inexperienced workers may also have lower minimum wage provisions.

Does the minimum wage prevent poverty?

Just about everyone agrees that a minimum wage is not a living wage. It's virtually impossible to live independently on $16,000 a year in any major Canadian city.

The Vanier Institute of the Family, in its 2005 submission to the Federal Labour Standards Review, said the minimum wage is now "not even close" to being a living wage. "No longer can a minimum wage employee hope to provide for a family," it said. "Even two minimum wages in a household will not protect its children from the short-term and long-term consequences of poverty." Similarly, research by Campaign 2000 (which fights child and family poverty) said 45 per cent of all low income children in 2002 lived in families where at least one parent worked full-time.

In 2005, the Canadian Labour Congress said a single person working full-time in Canada needed an hourly rate of at least $10 to reach a poverty-line income. The CLC estimates that a quarter of all workers make less than that. Women, visible minorities, part-timers, people with disabilities, those with less than a high school diploma, and recent immigrants are over-represented in the lowest-paid ranks.

So what's the solution? Some say raising minimum rates to $10 an hour is a good place to start. But the Canadian Chamber of Commerce says higher minimum wages cost jobs for young and unskilled workers. "It is estimated that a 10 per cent increase in the minimum wage results in a 2.5 per cent decline in employment," the Chamber said in a 2005 paper calling for changes to the Canada Labour Code. The Chamber also cited research that associated high minimum wage rates with higher school dropout rates, as teenagers are persuaded to leave school.

Others have suggested that simply raising the minimum wage may not be the best poverty-fighting mechanism. They suggest wage supplements for the working poor. The labour movement also says it's no coincidence that the lowest paid jobs are typically non-union. And others say better wages will result when the quality of jobs improves.

Main sources: Human Resources Development Canada Database on Minimum Wages, Canadian Labour Congress, Campaign 2000, Vanier Institute of the Family, Canadian Chamber of Commerce, Statistics Canada.