Labour Market Assessment 2018: Wage inequality – Update

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This note updates selected results from our assessment published in October 2018, incorporating recently released data for the fourth quarter of 2018. Specifically, we examine cumulative wage growth by selected percentiles and the gender wage gap, in addition to providing an estimate of the impact of the increase in minimum wages on wage growth in 2018.

 

Key results

 

• Due in part to significant increases in minimum wages, cumulative wage growth since 1997 at the lower end of the wage distribution now exceeds that of the upper end of the distribution (Figure 1).

 

• The hourly wage gap between women and men persists across all wage levels. In 2018, women earned 87 cents for every dollar men earned, on average, for each hour worked (Figure 2).

 

• Based on our calculations, increases in provincial minimum wages in 2018 accounted for 30 to 40 per cent of the increase in the average hourly wage at the national level in 2018 (Figure 3).

 

Details

 

Figure 1 shows the cumulative growth in real hourly wages since 1997. We find that wages at the lower end of the distribution (10^th percentile) increased significantly over the course of the past two decades. This increase largely reflects successive minimum wage increases at the provincial level, which we discussed in our labour market assessment. In addition, cumulative wage growth in the middle of the distribution (median wage) underperformed those at both ends of the distribution (10^th and 90^th percentiles).

 

 

 

Figure 1 – Cumulative growth in real hourly wages from 1997 to 2018, by selected percentile

 

Figure 2 shows the hourly wage gap between women and men across the wage distribution. In 2018, at the lower end of the distribution (5^th percentile), women earned 97 cents for each dollar men earned per hour worked. At the upper end of the distribution, the wage gap was 87 cents. The hourly wage gap is most pronounced toward the middle of the distribution, in particular at the 70^th percentile, where women earned slightly less than 84 cents for each dollar men earned. On average, women earned 87 cents for each dollar men earned per hour worked in 2018. There has, however, been some progress in reducing the gender pay gap across the wage distribution since 1997.

 

 

Figure 2 – Hourly wage gap between women and men

 

Lastly, Figure 3 shows hourly nominal wage growth in 2018 at the national level. The average hourly wage (including all employees) increased by 2.9 per cent in 2018. This wage growth reflects the significant increase minimum wages in Ontario, Alberta and British Columbia. If we exclude the first 10 percentiles of the distribution in each province, that is those who would be most affected by the change in minimum wage, the increase in the average wage would be 2.1 per cent at the national level. Based on our calculations, this result suggests that the increases in provincial minimum wages in 2018 accounted for 30 to 40 per cent of the increase in the average hourly wage at the national level in 2018.

 

Given inflation of 2.3 per cent in 2018, growth in the average real hourly wage was 0.6 per cent at the national level. Accounting for the impact of the increase in minimum wages, this would indicate a decline in the average real hourly wage of 0.2 per cent.

 

 

Figure 3 – Growth in the hourly nominal wage in 2018