The raising of the minimum wage above $15 an hour in Quebec has captured attention. Especially since this 7% increase masks a broader impoverishment expected in 2023.
First the good grades. In its 2023 analysis, the Chair in Taxation and Public Finance at the Université de Sherbrooke points out that with the $1 increase in the general rate, Quebec is maintaining its position, namely that it is in 4e position among the provinces with regard to the hourly minimum wage and that it continues to show the best rate of coverage of basic needs. This year, Quebec (107%) and New Brunswick (101%) are the only two places where this rate exceeds 100%. Quebec owes this first place to the lower cost of the basket of basic products and services in Montreal, as defined by the Consumer Basket Measure (MBM), however, we take care to specify.
In addition, the proportions of the minimum wage increase retained by households are very high, ranging from 88% to 187%, including 91% for a single person. The increase in the minimum wage, but also and above all the Quebec tax cut, the enhancement of the solidarity credit and strong indexation of the Quebec and federal tax systems “have increased the disposable income of all the households considered” in the ‘analysis. Not to mention the benefits related to measures aimed at mitigating the effects of the sharp increase in the cost of living, excluded here because they are one-off measures.
The authors of the analysis therefore wish to underline that “the exercise carried out here does not consist in pronouncing on the optimal level of the minimum wage, and does not indicate that the current situation is ideal”.
Living income
On this aspect, the Institute for Socioeconomic Research and Information (IRIS) opposes the MPC, which establishes the official poverty line in Canada, with its calculation of viable income. We are talking here about a decent income making it possible to meet broader basic needs and to free up room for maneuver to improve one’s situation. A viable income making the demarcation between poverty and its absence, which takes into account in particular the presence of public services (mainly a public transport network), government transfers and credits and the cost of living, which is different from one locality to another.
This year again, despite the 7% increase in the minimum wage, “a single person living in Montreal and working full time at the minimum wage barely manages to cover his basic needs and receives an income equivalent to only 78% of the income viable. To ensure that ‘working’ no longer rhymes with ‘poverty’, there should be a minimum wage of at least $20 an hour,” says IRIS.
The rising cost of living means that “the income needed to achieve a poverty-free standard of living has risen faster than inflation this year”. This is the case for 15 of the 21 situations examined. While the official inflation rate is 6.7% in Quebec in 2022, the basket of goods and services used to calculate the viable income of a household made up of two adults and two young children has increased by 8% to 12% depending on the localities studied, adds the Institute.
On an average annual basis, the consumer price index (CPI) increased by 6.8% (by 6.7% in Quebec) in 2022, says Statistics Canada. However, the prices of basic necessities, which are more heavily felt the further down the income scale, recorded the strongest increases last year. That is an increase of 10.6% in transport, 8.9% for the average price of food (9.8% for the price of food purchased in stores) and 6.9% in housing.
In 2023, the viable income calculated by IRIS for a single person varies between $27,047 (Saguenay) and $37,822 (Sept-Îles). In Montreal, it is $32,252 for a single person, up $2,676 (9%) compared to 2022, while it is $71,161 for two adults with two children in CPE, up $6,129 (9.4%) compared to 2022.
Poverty and bankruptcies on the rise
Data from the Quebec Institute of Statistics indicates that in 2020, before the distortions caused by the pandemic and the surge of inflationary fever, 45.9% of households lived with an after-tax income of $59,999 or less. Even more sensitive data recorded in February 2023 indicates that the annual benefits offered by last-resort financial assistance programs can vary between $9,240 and $29,544 for the so-called reference family, depending on the status of the beneficiary.
In a broader sense and at the Canadian level, Statistics Canada warns that the observed changes in the CPI and disposable income “suggest that the poverty rate will return in 2022 to a level close to its mark of 10.3% recorded before the pandemic”. It was 7.4% in 2021.
This is all against the backdrop of rising defaults and bankruptcies due to the impending recession and a Canada-wide unemployment rate expected to rise from the current 5% to 6.6% in by the first quarter of 2024. There is talk of an increase of more than a third of defaults on mortgage loans compared to current levels in the next year. And of a similar jump in the consumer insolvency rate over the next three years, back to pre-pandemic levels, warns Robert Hogue, Royal Bank’s deputy chief economist.