Recently, I have been looking through some wage data, and I found one fascinating fact about the difference in wage rates between different skill categories (from skilled to unskilled).  In Ontario, the difference in wage rates (weighted by the available jobs) between large metropolitan cities (Toronto) and smaller towns (Windsor-Sarnia, Ontario) is minimal for the most unskilled jobs. There is a premium for working in large metropolitan cities for most jobs, but the % difference is quite small (less than 5%).  In smaller towns, there exists a significant disincentive for skilled labour to attend to. In this example, Windsor-Sarnia has a 12% lower wage rates for similar work in other places in Ontario.

Why is this important? It pays for low skilled labour to live in smaller cities in Ontario as the difference in wages would be non-existent while the cost of housing is much lower. Paying less rent while receiving almost identical income as compared to a big city like Toronto is quite the incentive.

The opposite is true for skilled labour. The premium is not as much as I would have expected given the magnitude of Toronto economic region (ER) compared to the next closest economic region (Toronto ER is about five times bigger than the next closest one Kitchener-Waterloo-Barrie).

Here is the summary table of the finding:

Wage difference (%) from Ontario’s average
Skill level Toronto Windsor-Sarnia
Skilled (A) 3% -12%
Less skilled (B) 5% -4%
Almost unskilled (C) 0% 0%
Unskilled (D) 3% 0%

Actual wage rates see below:

Average wage rates (weighted by the # of available jobs)
Skill level Ontario (average) Toronto Windsor-Sarnia
Skill levels A  $  32.79  $  33.77  $ 28.69
Skill levels B  $  19.72  $  20.63  $ 18.94
Skill levels C  $  14.51  $  14.46  $14.50
Skill levels D  $  12.37  $  12.74  $12.33
All skill levels  $19.07  $20.77  $16.74

Source: Statistics Canada. Table 285-0003 – Job Vacancy and Wage Survey (JVWS), Q2-2016.

Notes:

(1) Toronto defined as Toronto Economic Region by Statistics Canada in the Economic Regions – Variant of SGC 2011.

(2) Windsor-Sarnia defined as Windsor-Sarnia Economic Region in the Economic Regions – Variant of SGC 2011.

(3) All occupations within a skill category have been weighted by the number of job vacancies to account for the difference in demand and supply conditions in each occupation type.