Skip to main content
tax and spend

Average wages have risen since the onset of the pandemic, most particularly for women, closing the gender wage gap sharply in the past seven months.

“Normally, when you see the wage gap close, that’s good news,” Wilfrid Laurier University economics professor Tammy Schirle says.

But these are anything but normal times, and this is not good news. The rise in wages and corresponding drop in the gender wage disparity actually stem from two disturbing trends in the labour market, Prof. Schirle points out. “When we look at 2020, we have to think a bit harder about how these statistics come together.”

First, lower-wage workers have been disproportionately hurt by the coronavirus downturn, with that group much more likely to have lost jobs or hours. That has the effect of bumping up the average wage, since the lower pay of those laid-off workers is no longer part of the calculation.

Second, those employment losses at the bottom end of the labour market have hit women harder, since they make up a larger proportion of those low-wage earners than men. In reality, that’s a problem for policy-makers, not to mention a personal hardship for those affected. But on paper, the disappearance of all of those low-paid women – proportionately higher than men – in calculating the average wage for each gender has the effect of closing the gender wage gap.

But that doesn’t mean that the workers who remain employed are necessarily better off. It’s as if a coach cut the slowest sprinters from a team: the average speed of the remaining runners would be higher, even if none of those athletes actually ran a faster race.

In its most recent labour-market survey, Statistics Canada highlighted the “particularly severe” impact on lower-wage workers (defined as making less than two-thirds of the median wage of $24.04 an hour). In September, employment was down one-fifth in that group, or 761,000, compared with a year earlier. (Those figures are not seasonally adjusted.)

Exclude those lower-wage workers, and employment has actually increased slightly year over year, by 295,000.

So, in calculating average wages, there are far fewer lower-paid workers, and additional higher paid workers. It’s that dynamic that has created a spike in the average hourly wage since February, as the chart below shows.

The high-water mark of that surge in wages was in May, when the average wage for core-aged workers, between 25 and 54, was 5.9 per cent higher than in February. By September, the average wage had retreated a bit, but was still up 3.3 per cent from February.

Although the average wage has risen for both men and women, that increase was not consistent between genders, as this second chart shows.

The average wage for men rose 2.3 per cent between February and September, but that gain was outstripped by that of women, whose average wage jumped 4.3 per cent in the same period. With the average wage for women rising faster, the gender gap narrowed significantly, as this third chart shows.

In February, the average wage for women was 87.9 per cent that of men. By September, that ratio had risen to 89.6 per cent. An increase of 1.7 percentage points may not seem like much of a jump. But that ratio typically moves at a glacial pace.

Prof. Schirle notes that it took a quarter century for the wage gap to narrow by 10 percentage points, between the early 1980s and mid-2000s. In that context, a gain of nearly 2 percentage points in just seven months counts as a surge. “It’s a noticeable movement,” she says.

Beyond the quirky statistics, there is a labour-market problem waiting to be addressed – how to get all of those unemployed low-wage earners back into the workplace. That challenge is made all the greater by the continuing struggles of the retail and hospitality sectors amid the ongoing coronavirus pandemic.

Prof. Schirle suggests that retraining programs would be useful in helping those workers transition to other jobs in other sectors, with the salutary side-effect of diluting gender concentrations in certain occupations.

However, that would require a conscious shift in the design of training programs, says Katherine Scott, senior researcher with the Canadian Centre for Policy Alternatives. One obvious gap: recipients of the Canada Recovery Benefit do not have access to the same quantity and quality of training programs as those receiving Employment Insurance benefits. Ms. Scott says there are other programs jointly funded by Ottawa and the provinces, but their designs, mandates and coverage vary widely.

“It’s a total patchwork on the training side,” she says.

Ms. Scott raises one other cautionary note. Many current programs have reinforced gender biases, streaming women into training for service occupations such as hair styling and men into male-dominated roles such as construction work. Designing training programs to prevent the gender wage gap from widening as the economy recovers will mean casting aside those outdated approaches, she says.

Tax and Spend is a weekly series that examines the intricacies and oddities of taxation and government spending.