Graphic Truth: Canada is winning the real wage war

Real wages (nominal wages minus inflation) in the United States have been stagnating for decades, a consequence of policy changes, automation, and lower geographical mobility. Even when real US wages were starting to rise in the wake of the pandemic, high inflation rates quickly wiped out those gains.

But north of the border, it’s been a different story in the last few years, as Canadian wages have started to outpace inflation — helped, in part, by Ottawa’s decision to reestablish a federal minimum wage and index it to price growth. That hourly wage currently stands at $17.75. The US federal minimum wage, meanwhile, has been stuck at $7.25 per hour since 2009, though some states have set wages higher than that.

With Canada’s unemployment at 6.7%, the country’s labor market is far from perfect, but the recent real-wage growth there is bound to make some of its southern neighbors envious. These charts take a look at the recent relationship between nominal wages and inflation in both the US and Canada.