Wage Stagnation in Alberta: Are Albertans Falling Behind?

Alberta has long been a beacon of economic opportunity in Canada, renowned for its robust job market and high wages. However, recent data paints a concerning picture of wage stagnation in the province, raising questions about its economic future and the financial well-being of Albertans. This report delves into the intricacies of wage growth trends in Alberta, comparing them with other Canadian provinces and analyzing the factors contributing to this worrisome trend.

Wage Growth in Alberta

While Alberta still holds the position of having the third highest average wages in the country, the province has seen the second lowest wage growth over the past decade. This slowdown in wage growth is particularly concerning when considering the rising cost of living. In fact, when adjusted for inflation, Albertans have experienced a real wage cut of more than 5% over the last 10 years 1. This means that despite nominal wage increases, the actual purchasing power of Albertan workers has declined. To put this into perspective, if wages had kept pace with inflation, the average Albertan worker would be earning $8.02 more per hour today, translating to an annual difference of approximately $15,398.40 1. This disparity between wage growth and inflation has significant implications for the financial stability of individuals and families in Alberta.

Examining the trend of real wages in Alberta over the last 10 years provides a more granular understanding of this issue. Data from April 2012 to March 2022 reveals a concerning pattern 2. While there have been periods of growth, the overall trend indicates a decline in real wages, further emphasizing the challenges faced by Albertan workers.

Adding to this concern is the finding that average incomes in Alberta have fallen considerably over the past five years, although they remain 13% above the Canadian average 3. Notably, this decline is primarily driven by losses among high-income earners, while low- and middle-income earners have experienced slower income growth 3. This suggests a potential shift in Alberta's income distribution, with high earners experiencing a disproportionate impact from wage stagnation.

Wage Growth in Other Canadian Provinces

In stark contrast to Alberta's sluggish wage growth, other Canadian provinces have experienced more favorable trends. British Columbia, in particular, stands out with the most significant wage increases over the past decade. The average worker in British Columbia has seen their hourly wage increase by over $5 more than in Alberta, a difference that highlights the diverging economic realities between the two provinces 1.

A broader look at wage growth across Canada reveals a concerning trend for Alberta. A study by the Fraser Institute found that between 2010 and 2022, only British Columbia ranked in the top half of earnings growth among Canadian provinces, with a $7,732 increase in earnings per person 4. Prince Edward Island and Quebec followed with increases of $5,824 and $5,611, respectively 4. Alarmingly, seven Canadian provinces, including Alberta, ranked near the bottom in terms of earnings growth, with Alberta ranking last with a decline of $1,555 – the only jurisdiction to experience a decline in earnings growth 4.

To provide a more comprehensive overview of wage trends in different provinces, it's essential to examine data on average hourly and weekly wage rates in Canada over the past 5 years 5. This data, while not providing specific figures for each province, offers valuable insights into the overall wage landscape in Canada and allows for comparisons between provinces.

Furthermore, understanding the average annual percentage adjustment in wages across different sectors in Canada provides valuable context for wage growth trends across the country 6. This data reveals variations in wage adjustments between the private and public sectors, as well as across different industries, shedding light on the dynamics of wage growth in Canada.

Looking at economic forecasts for other provinces, such as British Columbia, can offer a point of comparison for Alberta's economic performance 7. These forecasts provide insights into projected economic growth, employment trends, and other key indicators that can help assess Alberta's relative economic standing.

Comparing Alberta to Other Provinces

Historically, Alberta held the distinction of having the highest average wages in Canada. However, this is no longer the case. In 2023, Alberta's average wages were only 3% higher than the Canadian average, a significant drop from a 17% advantage in 2013 8. This decline in relative wages underscores the severity of wage stagnation in Alberta and raises concerns about the province's ability to attract and retain skilled workers.

Furthermore, Alberta now has the slowest wage growth among all provinces, despite facing a higher inflation rate than the national average 9. This means that the purchasing power of Albertan workers is eroding at a faster rate compared to workers in other provinces. The average annual wage increases for hourly employees in Alberta from 2018 to 2023 were just 2%, compared to the national average of 3.4% 9. This disparity in wage growth further emphasizes the challenges faced by Albertan workers in maintaining their standard of living.

Factors Contributing to Wage Stagnation in Alberta

The reasons behind Alberta's wage stagnation are multifaceted and complex. Several key factors contribute to this concerning trend:

• Economic Downturn: The decline in oil prices since 2014 has had a profound impact on Alberta's economy, leading to job losses and slower economic growth. This downturn has put downward pressure on wages, particularly in the oil and gas sector, which has traditionally been a high-paying industry in the province 10. The reliance on the energy sector has made Alberta vulnerable to fluctuations in global energy prices, and the recent downturn has exposed this vulnerability.

• Minimum Wage Freeze: The United Conservative government's decision to freeze the minimum wage has been a significant contributor to wage suppression in Alberta 9. While minimum wages across Canada have increased by an average of 27% from 2018 to 2023, Alberta's minimum wage has remained stagnant. This policy has not only impacted minimum wage earners but has also created downward pressure on wages for other workers. By suppressing wages at the lower end of the income spectrum, the minimum wage freeze has potentially limited overall wage growth in the province.

• High Personal Income Tax Rates: Alberta's shift from a single personal income tax rate of 10% to a five-bracket system with a top marginal rate of 15% in 2015 has made the province less competitive in attracting and retaining high-skilled workers 11. This change in tax policy, coupled with the economic downturn, has contributed to a decline in employment earnings relative to other jurisdictions in North America 11. High personal income tax rates can discourage economic growth by reducing the incentives for work, investment, and entrepreneurship.

To illustrate this point, comparing personal income tax rates between Alberta and Ontario provides a concrete example of how Alberta's tax system may be impacting its attractiveness to workers 12. In Ontario, the tax rate for the first $49,231 of taxable income in 2023 is 5.05%, while in Alberta, the tax rate for the first $142,292 is 10%. This difference in tax rates, particularly for lower income brackets, could make Ontario a more appealing option for some workers.

• Lack of Diversification: Alberta's economy remains heavily reliant on the oil and gas sector, making it susceptible to fluctuations in global energy prices. This lack of diversification has limited job creation and wage growth in other sectors 13. While Alberta has a presence in various industries, such as agriculture, forestry, and technology, the dominance of the energy sector has hindered the development of a more diversified economy. This over-reliance on a single sector has made Alberta more vulnerable to economic shocks and has limited opportunities for wage growth in other industries.

Cost of Living in Alberta

While Alberta generally enjoys a lower cost of living compared to provinces like Ontario and British Columbia, primarily due to the absence of a provincial sales tax, certain expenses can be significant. Housing costs, while generally more affordable than in major cities like Toronto and Vancouver, can still be a considerable expense for Albertans 14. The average monthly cost of rent and utilities in Alberta is $1,279, the highest in Canada 15. This high cost of utilities can offset the savings from lower taxes and impact the overall affordability of living in Alberta.

To provide a more nuanced understanding of cost of living variations within the province, it's important to consider the cost of living in different cities within Alberta 16. For example, Red Deer has a cost of living that is 13% below the Alberta average, while Grande Prairie has a slightly higher cost of living. These variations highlight the importance of considering location when assessing the cost of living in Alberta.

Furthermore, examining specific costs, such as utilities, groceries, and transportation, provides a more complete picture of living expenses in Alberta 17. The average monthly utility cost for a single person in Alberta is approximately $194, while the average monthly food expense is around $165. Calgary and Edmonton have monthly public transport costs of around $102, and gasoline prices are generally lower than in other provinces. These specific examples provide a more concrete understanding of the costs associated with living in Alberta.

Major Industries and Employment Sectors in Alberta

Understanding the major industries and employment sectors in Alberta is crucial for analyzing wage trends and identifying potential areas for economic growth and diversification. The following table provides an overview of the key sectors in Alberta:

Sector

Number of Workers

% of Total Employment

Healthcare and social assistance

319,700

13.38%

Retail trade

354,500

14.84%

Construction

229,800

9.62%

Professional, scientific, and technical services

228,900

9.58%

Energy (Forestry, fishing, mining, quarrying, oil & gas)

138,300

5.79%

This table highlights the dominance of the healthcare and social assistance and retail trade sectors in terms of employment. However, it's important to note that other sectors, such as construction and professional services, are also significant contributors to Alberta's economy and are consistently adding jobs 13.

While the energy sector has declined in recent years, it remains a significant employer in Alberta, accounting for 5.79% of total employment 18. However, the province is actively seeking to diversify its economy and promote growth in other sectors. Alberta's key advanced technology sectors, including clean technology, information and communications technology (ICT), life sciences, and nanotechnology, represent potential areas for future growth and job creation 19.

In addition to the sectors listed in the table, it's important to consider the sectors that contributed most to Alberta's GDP and employment in 2024 20. This data provides a more detailed and up-to-date picture of Alberta's economic landscape and can help identify emerging trends and opportunities.

Impact on Albertans

The stagnation of wages in Alberta has tangible consequences for individuals and families. The real wage cut experienced by Albertans translates to an annual difference of $3,200 for the average worker 1. This loss of purchasing power can make it challenging for families to meet their basic needs, save for the future, and maintain their standard of living. The rising cost of living, particularly for essential expenses like housing and utilities, further exacerbates this challenge.

Recent Policy Changes and Economic Events Impacting Wages

In addition to the factors discussed above, several recent policy changes and economic events may have contributed to wage stagnation in Alberta:

• Changes to the Alberta Labour Code: The United Conservative government has introduced changes to the Alberta Labour Code that have weakened worker protections 9. These changes could potentially contribute to wage stagnation by reducing the bargaining power of workers and making it more difficult for them to negotiate fair wages.

• The COVID-19 Pandemic: The COVID-19 pandemic has had a significant impact on Alberta's economy, leading to job losses and business closures 9. While the economy has begun to recover, the long-term effects of the pandemic on wages remain uncertain. The pandemic has disrupted various sectors of the economy, and its full impact on wage trends in Alberta will likely unfold over time.

Conclusion

Wage stagnation in Alberta is a complex issue with significant implications for the province's economy and the well-being of its residents. While Alberta still maintains a relatively high average income compared to other Canadian provinces, the slowdown in wage growth, coupled with a higher-than-average inflation rate, is eroding the purchasing power of Albertan workers. This trend is driven by a confluence of factors, including the economic downturn in the energy sector, the minimum wage freeze, high personal income tax rates, and a lack of economic diversification.

The decline in Alberta's economic standing and the erosion of purchasing power for Albertan workers underscore the urgency of addressing wage stagnation 1. To ensure the long-term prosperity of Alberta and its residents, policymakers need to prioritize economic diversification, support job creation in high-paying sectors, and implement policies that protect workers and promote fair wages.

Policy Recommendations:

Based on the findings of this report, the following policy recommendations are suggested to address wage stagnation in Alberta:

• Invest in Diversification: Promote economic diversification by supporting the growth of non-energy sectors, such as technology, agriculture, and tourism. This can be achieved through targeted investments, tax incentives, and initiatives that foster innovation and entrepreneurship.

• Review Minimum Wage Policy: Reassess the minimum wage freeze and consider implementing a minimum wage that keeps pace with inflation and the cost of living. This would not only benefit low-wage earners but could also stimulate economic activity and potentially lead to broader wage increases.

• Optimize the Tax System: Review the current personal income tax system and explore options for making Alberta more competitive in attracting and retaining high-skilled workers. This could involve adjustments to tax rates, deductions, or other incentives that encourage investment and economic growth.

• Strengthen Worker Protections: Ensure that labor laws and regulations provide adequate protection for workers and support fair wage negotiations. This could involve strengthening collective bargaining rights, enhancing workplace safety standards, and addressing issues related to precarious employment.

By implementing these policy recommendations, Alberta can take proactive steps to address wage stagnation, improve the economic well-being of its residents, and build a more resilient and prosperous future.

Works cited

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