Part 2: The Incidence of Workers Earning
Minimum Wage in Canada

Evidence for the incidence of the minimum wage in Canada is drawn from data from two fairly recent Canadian studies (Fortin and Lemieux 1997; Akyeampong 1989).¹¹ Since much policy discussion regarding minimum wages centres on their impact on the distribution of income in society, it is important to identify who, in fact, earns the minimum wage. Knowledge of the incidence of the minimum wage in tandem with an understanding of the likely economic impacts of minimum wage legislation enables us comprehensively to evaluate the desirability of increasing the minimum wage.

Geographic dispersion of workers earning minimum wage

Table 1 displays data on the geographic dispersion of workers earning minimum wage in 1986 and 1993. It is apparent that, for Canada as a whole, workers who earn minimum wage make up a small portion of all paid workers in both years. The data are taken from two studies that examined the incidence of low-wage workers in Canada in 1986 and 1993, and some caution should be exercised because the authors define workers earning minimum wage in slightly different ways. Akyeampong (1989) defines anyone who worked for less than $4.00 per hour in 1986 as a worker earning minimum wage. In contrast, Fortin and Lemieux (1997) define anyone who worked within 25 cents of their provincial minimum wage in 1993 as a worker earning minimum wage. While these differences in measurement may limit comparability across years, it still seems fair to say that the share of workers earning minimum wage in Canada (however defined) is probably less than 10 percent of the labour force. In other words, the vast majority of workers in Canada earns more than the minimum wage and hence cannot be classified as working for minimum wage.

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Table 1 also reveals that there is substantial variation across provinces in the incidence of workers earning minimum wage. Incidence in the Atlantic provinces is consistently higher than most other provinces in both sample years and, in both years, the incidence of workers earning minimum wage was fairly low in Ontario and in Quebec. There has been some change in the incidence of workers earning minimum wage in the Western provinces: while the percentage in British Columbia and Alberta was fairly high in 1986, it had fallen considerably for both provinces by 1993. In Saskatchewan and Manitoba, meanwhile, the incidence of workers earning minimum wage rose between the two sample years. The differences among the provinces likely reflects the considerable regional differences in labour-force participation rates, provincial minimum-wage rates, and regional economic activity.

Age, sex, education, and
occupation of workers earning minimum wage

Workers who earn minimum wage are primarily young workers. This is shown in table 2. In this table, taken from Fortin and Lemieux, the incidence rate is calculated as the percentage of hours worked by workers earning minimum wage in 1988 and 1995. The majority of men earning minimum wage tends to be young (24 years or younger) in both sample years while almost one-half of the women earning minimum wage are 24 years or younger. Not surprisingly, the majority both of men and of women earning minimum wage have a high school education or less.¹² In 1995, only 6.7 percent of men, and 4.3 percent of women, who earned minimum wage had a university degree (3.3 percent and 5 percent, respectively, in 1988). The increase in the percentage of men with a university degree who were earning minimum wage over the two sample periods perhaps reflects the relative decline in male earnings, even after controlling for education, that has been found by Beaudry and Green (1997). In contrast, over 36 percent of both men and women earning minimum wage had dropped out of high school. This accords with the results from Statistics Canada’s 1991 School Leaver’s Survey, which found that those who had dropped out of high school tended to have poorer labour-market outcomes than those who stayed in school (see Gilbert 1993).

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Table 2 also shows the incidence of workers who earn minimum wage by occupation. As one might expect, a large portion of men and women earning minimum wage were employed in clerical, sales, and service jobs (service jobs include work in the accommodation, food and beverage, and personal service sectors). This accords well with the popular conception of what constitutes a minimum wage job. In 1995, 63.5 percent of men, and 82.9 percent of women, earning minimum wage were employed in these occupations. In contrast, fewer than 6 percent of the men and women earning minimum wage were employed as professionals, managers, and technicians.

A more disaggregated
approach

Table 3 presents a more disaggregated look at the characteristics of those earning minimum wage. As discovered earlier, men who are classified as minimum-wage earners are disproportionately young. While male youths from 16 to 23 years of age comprised only 15 percent of all male workers, they made up roughly 70 percent of those earning minimum wage. Hence, the direct impacts of changes in the minimum wage on the male labour force are mostly likely to be felt by the young.

Men with low levels of education are also well-represented among the ranks of those earning minimum wage. In 1993, 37 percent of male workers had attained a high-school diploma or less. However, those with a high-school education or less accounted for nearly 50 percent of those earning minimum wage. In contrast, only 15.4 percent of men earning minimum wage had a college, trade-school, or university education, even though men with these qualifications composed well over 40 percent of male workers.

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Some interesting family characteristics of men earning minimum wage are also provided in table 3. The data reveal that 78.3 percent of young men earning minimum wage were living at home with their parents. Since young males between the ages of 16 and 23 constituted 70.8 percent of all those earning minimum wage, it follows that 55.4 percent of all men earning minimum wage were living at home with their parents. The remaining 44.6 percent were young men living alone, young men whose family status was unidentified, or older men of various family status. It is worth noting that 43.5 percent of the older men earning minimum wage were identified as husbands with or without children or as single fathers. Since older men only constitute 29.2 percent of all workers earning minimum wage, older men with dependents only composed 12.7 percent of all workers earning minimum wage. Hence, the image one takes away of the “average” worker earning minimum wage is that of a young man living at home with his parents.

Table 4 presents disaggregated statistics on the age, education, and family status of women earning minimum wages. Women are disproportionately represented among workers earning minimum wage. Although women account for almost 50 percent of the working population, they take over 60 percent of all minimum-wage jobs. Furthermore, young women are well represented among the ranks of female workers earning minimum wage: 55.5 percent of all women working for low wages were between the ages of 16 and 23 even though the 16-to-23 age group only accounted for 16.7 percent of all female workers. Unsurprisingly, women with university education were least likely to be paid minimum wages: only 4.5 percent of all women earning minimum wage had completed a university degree.

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Information on the family status of workers earning minimum wage is also provided in table 4. Nearly 60 percent of young women earning minimum wage were identified as living at home with parents. Since 55.5 percent of all women earning minimum wage were classified as young, 33.3 percent of all women working for minimum wage (independent of age) were living at home. Meanwhile, only 9.2 percent of young women working for minimum wage lived alone; hence, only 5.1 percent of all women working for minimum wage were young women living on their own.

Older women are more heavily represented than older men among those of their sex earning minimum wage: 44.5 percent of women working for minimum wage were between 24 and 63 years of age. Furthermore, 42.4 percent of older women earning minimum wage were identified as wives with or without children. These women make up 18.87 percent of all women working for minimum wage. Conversely, only 22.1 percent of older women earning minimum wage were classified as living alone or as single parents. Expressed as a proportion of all women working for minimum wage, this statistic falls to 9.83 percent. In other words, relatively few older women earning minimum wage could be classified as either single women living alone or single parents.

Other characteristics of low-wage employment

Tables 5 and 6 provide additional information about the characteristics of employment at minimum wage from the 1986 Labour Market Activity Survey. Table 5 presents information on coverage of jobs by union contracts and minimum-wage employment in 1986. Not surprisingly, while jobs covered by union contracts constituted 34 percent of all paid employment in 1986, only 6 percent of minimum-wage positions were occupied by a worker who had employment covered by a union contract. Furthermore, while 17 percent of all covered employment went to young workers aged 16 to 24, young workers in covered employment occupied only 4 percent of minimum-wage positions. Hence, the majority of young workers earning minimum wage are “outsiders” and do not fall within the union establishment.

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The data displayed in table 6 show that the incidence of employment at minimum wage is larger in smaller firms than in larger firms (the total number of employees measures firm size). Furthermore, the incidence of work at minimum wage is highest among jobs of fairly short duration. This is not surprising considering that a large proportion of employment at minimum wage is directed to students seeking summer work.

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Hence, the data seem to support popular a priori beliefs about the characteristics of jobs offering minimum wage. According to the 1986 Survey of Labour Market Activity, the incidence of employment at minimum wage was highest in short-term employment and among smaller firms. Furthermore, relatively few positions at minimum wage were covered by a union contract.