Inevitably when I’m discussing increasing worker wages, someone will come along and talk about how if we increase worker wages, then the price of everything will increase.
I’ve already shown how that doesn’t seem to be the case for increasing the minimum wage, at least in Alberta, but I was curious if it worked for wages across the board, too.
I found a Statistics Canada dataset for wages between 1997 and 2020. Here’s a graph of full-time wages in Alberta for unionized and non-unionized during that time.
The first thing you might notice is a huge discrepancy between unionized workers and non-unionized workers. This gap averaged $3.44 an hour over this 23-year period, ranging from a low of $2.55 in 2008 to a high of $4.96 in 2017.
Another thing you might notice is that you can barely make out the graph line for “union members and/or covered by CBA”. That’s because they were neck and neck with those who were union members without a collective agreement. The difference between those two groups was never more than 24¢ an hour, and averaged just 4¢ an hour.
To measure how much wages have grown during this 23-year period, I averaged the wages of all three groups. The average hourly full-time wage in 1997 was $16.97. In 2020, it was $36.07.
That’s a 112.6% jump, with an average increase of 3.34% a year.
Now what about inflation? Well, according to the inflation calculator, inflation increased at an average 2.18% per year during the same period. What cost $100 in 1997 now costs $164.25. Conversely, $100 in 2020 was worth only $60.88 in 1997.
So, while the average hourly wage for a full-time worker went up by 112.6% during that 23-year period, we have to remember that things cost more now, which means the effective wage increase is much lower.
If $100 in 2020 was worth $60.88 in 1997, that means making $36.07 an hour in 2020 was the same as making $21.96 an hour in 1997. That means in reality, the average full-time wage has increased by only $4.99 an hour.
That’s only a 29.4% increase.
But there’s something else we need to consider when comparing wages and inflation.
In 1997, Alberta’s gross domestic product was $194 billion. GDP is the total market value of all the finished goods and services produced within a geographic boundary—in this case, Alberta.
By comparison, Alberta’s GDP in 2020 was $319.71 billion. That’s a 64.8% increase from 1997. Sound familiar? Inflation also increased by about 64% (64.25% to be more precise).
The GDP numbers are based on 2012 dollars, so there’s no need to adjust for inflation.
So, while GDP increased by nearly 65% when adjusting for inflation, wages increased by only 29.4% when adjusting for inflation.
Clearly, it’s not wage increases that are driving inflation.