You might have heard economists on the news saying that workers’ wages increased in 2023 and wondered why their numbers were so different from what you saw on your paycheck. These economists are basing their claims on growth in total worker compensation. Total worker compensation includes the combined wages, salaries and benefits received by all employees in the economy. Statistics Canada data shows that total compensation for employees grew by 6.5% in 2023. However, this doesn’t mean that the average worker’s wages increased by that amount.
Three main factors drive growth in total compensation: an increase in average per-worker wages, an increase in the number of workers and an increase in the average number of hours worked. In 2023, the number of employees in Canada increased by 476,000 while the number of hours worked increased only slightly. Considering the growth in the number of workers, the average worker’s compensation growth in 2023 was 3.6%, below the inflation rate of 3.9% as measured by the year-over-year change in the Consumer Price Index (CPI). This means that total compensation growth in 2023 was largely driven by an increase in the number of workers rather than an increase in hours or real wages.
Looking at provincial breakdowns, only British Columbia and Nova Scotia had average compensation growth higher than the increase in CPI. The biggest gap between total compensation growth and growth in average per-worker wages was in Prince Edward Island. While PEI boasted an impressive total compensation growth of 8.2%, the average worker only saw a 1.5% increase in wages, falling far short of inflation. Saskatchewan reported the lowest average per-worker wage increase, at only 1.1%.
The growth in your paycheck might be significantly different from the overall average of 3.6% because compensation growth varies across different income levels. For example, the average annual compensation for employees in the lowest income families increased from $11,000 in 2022 to $13,000 in 2023, or 18.6%. However, for workers in the middle of the income distribution, the average annual compensation only increased by 1.5%, or just over $1,000.
There are large differences in compensation changes across occupations and industries as well. For example, the average compensation for workers in professional, scientific and technical services increased by 8.4% in 2023, compared to a decrease of 3.2% for workers in information and cultural industries.
We also see big differences in compensation growth when we take into consideration the increase in the number of workers. For example, total compensation grew by 9.7% in utilities, but average compensation growth per worker was much lower at 5.1%.
Union members should be aware that despite the increases in total compensation discussed in the media, average per-worker wages are still lagging behind inflation. Total compensation numbers can be used to manipulate workers and get them to accept less. Workers should feel confident asking for higher wage increases.