Canadian wages on par with U.S.

By Special to MoneySense on June 16, 2014
Estimated reading time: 3 minutes

Less educated Canadians earn slightly higher wages than their American counterparts, but well-educated Canadians earn slightly less.

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Wage levels in Canada are generally in line with those in the United States, says an internal government study, suggesting the pay packets of Canadian workers pose no special competitive disadvantage. The research, by Employment and Social Development Canada, found that since the 2008-2009 global financial crisis, any average differences in the two countries’ absolute wage levels have largely disappeared. Less educated Canadians earn slightly higher wages than their American counterparts, but well-educated Canadians earn slightly less. The result appears to be a more equalized wage economy that is well-positioned internationally to compete with Canada’s largest trading partner and others. The results show that Canada’s wages are lower than their U.S. counterparts for wholesale and retail, finance and business, manufacturing, and transportation and utilities. And wages are generally the same for construction, community services, personal services and public administration. Only in the primary sector, such as resource extraction, are they higher. The 2013 study, obtained by The Canadian Press under the Access to Information Act, was partly intended to measure whether Canada’s wage levels are hurting the country economically. “Wages are often a key factor for Canadians’ standard of living, and a comparison helps to illuminate Canada’s international competitiveness,” said Eric Morrissette, a spokesperson for the department, when asked why the study was undertaken. A labour economist for Unifor, the union representing Canadian autoworkers and others, said the government study is a useful corrective to the claim that overpaid workers are damaging Canada’s economic prospects. “Hourly wages are not higher than in the U.S., despite the rhetoric of some politicians that our wages have somehow priced us out of international competitiveness,” said Jim Stanford. “They invoke this claim to justify their attacks on unions and pay, but this research indicates that our competitiveness problem is not due to wages. It is mostly due to an overvalued exchange rate.” Stanford noted that the study looked only at hourly wages. Had salaries been considered as well, Canada’s competitive pay advantage would be more pronounced, he said. The study, entitled “Which is a lower-wage economy: Canada or the United States?,” looked not only at relative wages as measured by exchange rates but also took into account so-called absolute measures, by looking at the actual purchasing power of differing wage levels. The research by Jun Chen and Guohan Zhu found that “Americans with university education earn significantly more than Canadian counterparts.” “Workers with some post-secondary and high school education earn about the same in Canada and the U.S.” And “Canadians with less than high school earn slightly more than their American counterparts.” Stanford said the research, going back to 1997, also shows how little progress workers have made over the years. “Real wages in both countries have been shockingly stagnant,” he said. “Workers have not really got a raise in either country for the entire period covered by the data.” “Stagnant household incomes are a key factor holding back our economy, weakening consumer purchasing power, and contributing to high indebtedness.”