What Should The Minimum Wage Be? - January 18, 2026

I recently read an article that argued the minimum wage in the United States should be $25/hour.  If an employer were to pay that amount per hour to employees, who worked a full forty-hour work week, and worked year-round for 50-52 weeks, that would equate to an annual earnings of $50,000.  With over thirty years in business, having hired hundreds of staff during that time, ranging from clerical and admin staff, to professional engineers and vice president level staff, that number, the equivalent of $50,000 per year, struck me as very high, for a minimum wage.   This notion of $25/hour did get me thinking about what the minimum wage should be? And what should a minimum wage represent? 

Should it represent the minimum amount a person needs in order to live? ie - “a living wage”? Should it be enough for that one person to live off of, or should it be sufficient for that one worker to support a family of four? Or, in a purely capitalist sense, the minimum wage could be the least amount an employer has to pay in order to fill that job; and that minimum wage figure could vary across the country as the cost of living varies across different regions of Canada and the United States. The answer is “yes” to all of those questions…which is in part, why minimum wages vary from province-to-province and from state-to-state.  

While both the US and Canada have national minimum wages, each US state and Canadian province also has a stated minimum wage that supersedes the federally legislated minimum wage. The State-level / Provincial level minimum wages reflect the disparities in the cost of living across the different regions of the countries.  In Canada the federal minimum wage only applies to civil servants and federally regulated industries such as, banks and airlines.  In the United States the federal minimum wage represents a baseline hourly wage that employers across the country cannot fall below, while the state-level minimum wage takes into consideration regional disparities in the local cost of living.  ie - it’s more expensive to live NewYork City as compared to Des Moines, IA.  

Let’s explore the notion of a “living wage” by understanding what it costs to live in various parts of Canada and the United States. 

 Let’s start with Canada:

For a single person living in Canada, the cost of living can be in the range of C$3,000 per month, for a person living in a city such as Ottawa (population of one million),whereas the cost of living for a person living in Toronto (population of seven million) can reach over C$5,000 per month. I base these figures on my two sons, one of which lives in Ottawa and the other who lives in Toronto.  They both have gone through the exercise of paying rent and then transitioning to a mortgage.  This amounts to an annual cost of living of between $36,000 (Ottawa) and $60,000 (Toronto), for a single person.  For a family of four, these costs of living rise to C$6,000 per month or C$72,000 per year, in Ottawa, and as much as C$7,500 per month or C$90,000 per year, in Toronto.  *Source - Reddit, MovingWaldo, Wise, LivingCost, CareerBeacon.

The minimum wage in Ontario is $17.60 per hour, which equates to $35,200; *Source - Govt of Ontario; so, if you earn minimum wage, work full-time at minimum wage,  and live in Ottawa, you’re not earning enough to pay your living expenses.  If you earn minimum wage and live in Toronto, you’re even deeper under water. The minimum wage in Ontario is not a living wage.  So how do people manage?  The obvious answer is they share housing costs with roommates/housemates, or they live at-home with their parents.  

I’m sure readers of this article will argue that my cost-of-living figures noted above are inflated, and they’ll cite examples where the cost of living in Ontario is much less than $3,500-$6,000 per month. One could argue that the cost of living in Western Canada, in the Prairie provinces is much less than this; we’ll address regional disparities later in this article.  

Now let’s look at the United States:

For a single person living in the US, the cost of living can be in the range of C$1,900 per month, for a person living in a city such as Des Moines, IA (population - 213,000; Source - censusgov), whereas the cost of living for a person living in New York City (population of 8.5 million; Source - censusgov) can reach over $5,600 per month. This amounts to an annual cost of living of between just under $23,000 (Des Moines) and $67,200 (New York City), for a single person.  For a family of four, these costs of living rise to $4,300 per month or $51,600 per year, in Des Moines, and as much as $15,000 per month or $180,000 per year, in New York City.  *Source - CityCost, MoveBuddha, Apartments.com

The minimum wage in the state of Iowa is $7.25 per hour, same as the US Federal minimum wage, which equates to $14,500; *Source - myHRcounsel; so if you earn minimum wage, work full-time at minimum wage,  and live in Des Moines, IA, you’re earning $8,500 less than your living expenses.  In Des Moines people manage this, again, by sharing housing costs with roommates/housemates, or they live at-home with their parents.  

The minimum wage in NYC is $17/hour, which equates to $34,000; *Source - State of NY website; if you earn minimum wage, work full-time at minimum wage,  and live in New York City, you’re $33,200 under water for a year of living in The Big Apple.  Why would anyone do this?  A minimum wage of $25/hour wouldn’t be sufficient in New York City.   

In the United States the federal minimum wage has not changed since 2019; in Canada provincially-set minimum wages has been updated more regularly.  However, minimum wage has lagged behind the cost of living for the past several decades, particularly in the United States.  

 When adjusted for inflation, minimum wages have lost purchasing power during long periods. Increases tend to be irregular and political, while the cost of living rises continuously. Housing, healthcare, education, and childcare costs have risen much faster than minimum wages. In the United States the last time minimum wages matched real costs was in 1968.  In 1968, the US minimum wage was $1.60/hour. Adjusted to today’s dollars, that figure for minimum wages should be $13-14/hour.  As mentioned earlier, the US federal minimum wage, in 2026, sits at $7.25/hour.  Why is that? - Politics and corporate lobbying.  In the US corporate interests rule the day…forget about paying a living wages, the US has not even kept up with inflation since 1968, resulting in real buying power being below its peak by almost 50% ($14/hour as compared to $7.25/hour).  Housing price increases have far outpaced wage increases, and healthcare and education costs have also outstripped wage increases for several decades. 

In Canada, the situation is not as dire - in many provinces, minimum wages are indexed to inflation.  As noted above, minimum wages still do not equal a living wage in many provinces, but buying power has not eroded as severely as it has in the US.  Housing prices, in cities like Toronto and Vancouver, have exceeded wage increases, driving up the cost of living in those larger Canadian cities.  

So this brings us to our key question in this article - what is the purpose of a minimum wage?    

1. To Pay A Living Wage - one would think that society would want to reward individuals who want to work and earn a living by rewarding them for an honest day’s work with an honest day’s day…enough that at least covers their living expenses.  Paying a living wage would also lend itself to employees staying longer in their jobs, thus reducing turnover (which inevitably costs businesses money to constantly have to train new employees).  This practice would require an employer to remain current on what the cost of living is in the regions where they employ their staff.  In setting wage rates, with this philosophy, the employer always ensures their employees can pay their bills.

2. Pay Someone What Their Worth, Based On The Merits - this is a good business principle to follow in any event.  This practice generates goodwill and loyalty towards the organization by the employees.  This also incentivizes the team to work hard and deliver results, as they see their teammates being rewarded for their hard work.  This practice eliminates the concept of a “minimum” wage, but requires employers to remain apprised of what the local market is paying for comparable positions and remain knowledgeable of what their positions are worth. In setting wage rates, with this philosophy, the employer always ensures their employees feel they are valued by their employer.

3. Pay what is necessary to retain employees. - If an employer can achieve A) and B) above, they will achieve C) and retain their employees.  

In the end, if an employer does right by their team, treats them fairly and does not exhibit any biases based on gender, ethnicity or orientation, we don’t need a minimum wage. We need a living wage, but that living wage is not one-figure nation-wide. To get employers to pay a living wage, the wage rate needs to reflect regional differences in the cost of doing business.