A new Statistics Canada report reveals that in 2022, Canadians experienced a significant increase in inflation, with the Consumer Price Index rising by 6.8 percent on average. This was the highest peak inflation rate since 1982, when it reached 10.9 percent. Despite this apparent rise in wages on paper, when adjusted for inflation, median annual wages actually decreased in most provinces and territories. Tax filers reported a median wage of $45,380 in 2022, reflecting a 1.6 percent decline from the previous year. The report highlights that this inflation hike had a substantial impact on real annual wages, salaries, and commissions for tax filers in 2022.
The decline in wages coincided with a recovery of employment in lower-wage sectors in 2022, following pandemic-related shutdowns in 2020 and 2021. Sectors such as arts, entertainment, recreation, accommodation, and food services saw increases in employment, but their wages remained the lowest across all sectors. The report notes that even though these sectors experienced wage increases, they were still the lowest-paying. Despite signs of easing inflation, the Bank of Canada held its benchmark interest rate steady at five percent for the sixth consecutive decision. However, the central bank indicated that a rate cut might be a possibility at the next meeting in June if progress towards the two percent inflation target is sustained.
In 2022, Canadians working in sectors less affected by the pandemic also saw significant declines in their inflation-adjusted median annual wages, with the largest decreases seen in educational services and public administration at around five percent. Transportation, healthcare, agriculture, and construction workers also experienced decreases of two to three percent. The Northwest Territories had the largest decline in median annual wages, with a drop of 7.2 percent after adjusting for inflation. Other provinces and territories, such as Yukon, Alberta, Saskatchewan, and Manitoba, also saw decreases in inflation-adjusted median wages.
Despite the overall decline in wages from 2021 to 2022, wages for low-wage workers actually saw an increase, with a 10.9 percent rise at the first wage decile and a 5.5 percent increase at the second decile. Conversely, higher-wage earners experienced a decline in wages. Workers in the upper-middle range of the earnings distribution were hardest hit when adjusted for inflation. The report points out that even with the decline from 2021 to 2022, inflation-adjusted annual median wages were still higher in 2022 compared to 2019, which was the last complete pre-pandemic year. This was attributed to strong wage growth and low inflation observed in 2021.
Some regions in Canada saw increases in median annual wages in 2022, such as Nunavut, Quebec, and New Brunswick. Despite the challenges posed by peak inflation rates in 2022, low-wage workers saw an increase in earnings, while higher-wage earners experienced a decline. The impact of inflation on wages varied across different sectors and regions, with some experiencing more significant decreases than others. Overall, the report paints a picture of the complex interplay between inflation, wages, and economic recovery in Canada in the aftermath of the COVID-19 pandemic.
