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Canadian minimum wages vary by province, and all are higher than the United States where the federal rate is $7.25 an hour (wages in some states and U.S. cities are higher than the national level).Deborah Baic/The Globe and Mail

Ontario's Liberal government is set to unveil a plan to hike the minimum wage and index it to inflation in future, as Premier Kathleen Wynne seeks to burnish her social justice credentials without alarming businesses.

The increase, which sources said will be announced this week, will be calculated based on the Consumer Price Index since 2010, the last year the wage went up. That means the current rate will rise from $10.25-per-hour to at least $10.82; it could go up slightly more depending on the exact formula the government uses.

While the government can raise the wage without the approval of the legislature, tying it to inflation in future will require a new law, a government source said. Such legislation could be held up in the oft-gridlocked minority assembly, and become a central issue in a possible spring election.

Ensuring the wage rises automatically – rather than at politicians' whims – is part of Ms. Wynne's "fair society" package of social policy. But she rejected a call from anti-poverty groups and health-care workers to immediately bump the minimum wage to $14. Such a dramatic increase, businesses warned, would make it hard for them to hire.

"We really want to move away from an ad-hoc system," she said while campaigning in a Toronto-area by-election on Monday. "I know that there's a call for $14. We have to move very carefully because this is about making sure that we retain and create jobs."

A government panel led by business professor Anil Verma recommended Monday that future wage hikes be tied to inflation. The new minimum wage should be announced every year on Dec. 1 and take effect four months later, its report said.

Indexing based on CPI is already used in other jurisdictions. Asked why Ontario required a panel to decide to adopt it, Labour Minister Yasir Naqvi said the government had to find out what policy the public would support. "One important thing that has come out of the report is consensus," he said. "Consensus between business, labour, anti-poverty groups and youth as to what should be a fair and predictable way of determining wage."

The Retail Council of Canada praised the idea of indexing, saying it "provides the element of predictability" for business owners.

Canadian Federation of Independent Business president Daniel Kelly said tying the wage to inflation in future is not necessarily bad, but that back-dating it to 2010 might be too much for businesses to bear. "Small firms would likely support indexation, but not if there is a large retroactive hike," he wrote in an e-mail.

Groups campaigning for a $14 wage, meanwhile, said indexing is not enough. The province must first raise the minimum wage high enough to pull those earning it out of poverty, the Workers' Action Centre said in a statement.

The panel, made up of representatives from business, labour and students, spent six months holding consultations across the province. Mr. Verma was paid an honourarium up to $19,250; the youth panelist received $5,500. The others served for free.