Income, meet inflation

A look at Canadians’ income levels and the cost of living

Recently-released data from the 2021 Census on Canadians’ income levels from 2015 to 2020 showed a rise in income for many Canadians, but against the looming backdrop of the rising cost of living and several months of the COVID-19 pandemic.

First, some highlights: the median after-tax income of Canadian households in 2020 was $73,000, up nearly one-tenth (9.8%) from 2015, after accounting for inflation.

There was also an increase in the median income in 8 of the 10 largest urban centres in Canada, and the period from 2015 to 2020 saw the largest five-year decline in the low-income rate since 1976. Families with children saw median after-tax income grow by over one-tenth (10.5%) during that same period.

However, the cost of living has also grown significantly.

The Consumer Price Index (CPI) rose 3.4% on an annual average basis in 2021—the fastest pace since 1991—following an increase of 0.7% in 2020, which also saw a pandemic-fuelled real-estate boom that drove up shelter costs.

Most of the major COVID-19 support programs had ended by the fall of 2021; the Canada Emergency Response Benefit ended in September 2020, while the Canada Recovery Benefit ended in October 2021.

Given that more than two-thirds of Canadian adults received income in 2020 from one or more pandemic relief programs, this represented a significant change for what income might look like in the next two years.

Looking ahead – 2021 and 2022

Though employment had recovered to pre-pandemic levels by September 2021 alongside a strong economic recovery, recent Statistics Canada analysis of wage changes reveals further details about this gap in income versus the cost of living.

From April 2019 to April 2022, average hourly wages grew 12.5% compared with a 10.1% increase in the CPI over the same period.

However, consumer prices rose faster than average hourly wages on a year-over-year basis from October 2021 to April 2022, meaning Canadians experienced a decline in purchasing power. The latest data show that from July 2021 to July 2022 there was a 7.6% increase in consumer prices, while average hourly wages rose 5.2%.

Additionally, the difference depended on the industry sector. For example, in accommodation and food services, which took a major hit during the pandemic due to health and safety restrictions, growth in average hourly wages lagged behind CPI growth from March 2019 to March 2022.

Conversely, most of the highest-wage industries—topped by professional, scientific and technical services—have seen strong employment growth over the past three years.

Economy-wide, analysis further shows that the offered wages associated with vacant positions grew more slowly than the CPI.

This suggests limits in the ability of some employers to pay more, even in the face of upward pressure on wages and high vacancy rates in many industries.

Stay tuned—over the coming months, Statistics Canada will release additional data from the more detailed long-form census questionnaire on topics such as income statistics for First Nations, Métis, Inuit, and other racialized groups. Other topics such as education, labour and work activity characteristics will also be analyzed.