Oct 16, 2026
Got a raise this year? If your raise was around 2.3%, then it’s right in line with the national average. Congratulations. Unfortunately, that boost in income works out to more of a small pay cut when you take that boost to your cheque and go to the checkout.
According to the latest Statistics Canada jobs data, average hourly wages rose 2.3% year over year in September. But consumer prices climbed 3% over the 12 months to August — the most recent inflation reading available. Even with a raise, the typical paycheque now buys a little less than it did a year ago.
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The timing stings. The job market just posted its second straight month of losses, which makes it harder to push for more money just as everyday costs keep creeping higher.
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How big is the gap between pay and prices?
Statistics Canada reported in its Labour Force Survey released Oct. 9 that average hourly wages rose $0.86 — to $37.64 in September — a 2.3% increase, up from 2% in August.
Meanwhile, the Consumer Price Index (CPI) rose 3% year over year in August, matching July’s pace.
Roll back a month — so timelines match — and it looks worse. The gap between wage and cost of living is a full percentage point with wages up 2% in August and prices up 3%. When you adjust for inflation, this means the average worker’s purchasing power slipped by roughly 0.7%.
Just to keep up with the cost of living, that average hourly wage needs to be closer to $37.88 — roughly 24 cents an hour more than the average hourly pay, even with the most recent raise.
So, what does a 2.3% raise actually buy you?
To illustrate, consider a worker earning $60,000 a year. A 2.3% raise adds $1,380 before tax. Simply keeping up with 3% inflation would take $1,800, leaving that worker about $420 short in buying power — and that’s before income tax and payroll deductions take a bite out of that slightly higher income.
Based on your own earnings and living costs, that gap could be bigger or smaller.
The impact of fuel costs on this equation
Gasoline did a lot of the heavy lifting in the headline number, which means if gas were excluded from the inflation data then prices only rose 2.4% in August — dropping that extra cost to daily living costs. For Canadians who drive less, that average raise of 2.3% may be closer to breaking even. On the flip side, if you spend a large share of your budget on transportation fuel costs, then you may be falling further behind.
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Why is it harder to negotiate a bigger raise right now?
Leverage matters when you ask for more money, and right now workers have less of it.
In September, the economy shed 68,000 jobs — and that was after losing 42,000 in August. As a result, Canada’s unemployment rate edged up to 6.5%, according to Statistics Canada. The job-finding rate — the share of unemployed people who landed work within a month — fell to 30.6%, down from 32.8% a year earlier and well below the 36.5% average from 2017 to 2019.
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And job losses weren’t spread evenly. Youth aged 15 to 24 lost 48,000 jobs, core-working-age women lost 28,000 and public sector employment fell by 70,000, led by educational services. Quebec alone shed 49,000 jobs.
“There’s no way to sugar coat it,” Robert Kavcic, senior economist at BMO Capital Markets, told The Canadian Press, though he noted the job market looks steadier when you smooth out month-to-month swings.
How jobs data impacts interest rates
Weak employment data also shifted the interest rate outlook.
The Bank of Canada has held its target policy rate at 2.25% for nearly a year. Given the weak job data, the market odds of a hike at the BoC’s next rate decision, on Oct. 28, fell to about 25% from roughly 40%, according to LSEG Data & Analytics, a financial data provider.
What Canadian can do now
You can’t control inflation, but you can control how much of your raise is eaten by higher costs. Here are seven strategies to help:
- Find your personal inflation rate with StatCan’s calculator before your next pay review
- Bring data to the conversation: if your raise trails 3%, you’re asking to stand still, not to get ahead
- If a bigger raise isn’t on the table, negotiate for training, flexible hours or a title change that sets up a stronger ask later
- Target the spending categories rising fastest for you, not the national averages
- Top up your emergency fund — a lower job-finding rate means a job search could take longer
- Check that your savings outpace inflation — a high-interest savings account (HISA) or tax-free savings account (TFSA) paying less than 3% is losing ground in real terms
- Watch the Oct. 28 rate decision if you carry variable-rate debt
A 2.3% raise isn’t nothing. But it only counts as real progress once it beats your own cost of living — and the next test comes later this month, when Statistics Canada releases September’s inflation numbers, a week before the BoC rate announcement on Oct. 28.
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Romana King, Senior Editor at Money.ca, also writes for various North American publications and the RKHomeowner blog. Her book, House Poor No More, is an Amazon bestseller and five-time award winner, including the 2022 New York CPA Society's Excellence in Financial Journalism (EFJ) Book Award.
