Registered vacancies show that the business is on the verge of revenge. Victory may be bittersweet.
For three decades, owners and chiefs have often gone their own way. Wages and salaries peaked at about 50 percent of Canada’s GDP in the 1970s. It has generally fallen since then, falling to 42.4 percent in the second quarter, the lowest level since 2005, according to Statistics Canada.
We almost know why this happens. Union militancy faced a political backlash that Margaret Thatcher faced in the UK and Ronald Reagan in the US in the 1980s, the rate of women’s participation in the economy accelerated dramatically and China joined the World Trade Organization in 2001, introducing North America, Japanese and European factory owners into a no-supply Resists of cheap labor.
These changes were good for profits, but they were also good for prices – after jumping to double digits in the 1970s, inflation has been stable at around 2 percent since the early 1990s. We are starting to buy more goods and services than ever before. Household consumption steadily represented about 50 percent of GDP until the mid-2000s, then a higher fraction. Household consumer spending reached 57 percent of GDP in the second quarter, the highest in records up to 1961, according to Statistics Canada.
Whether all this is beneficial to the community is open to debate. Significant evidence suggests that the balance may have skewed too much in favor of bosses, a group of digital entrepreneurs who found themselves in the right place at the right time, and anyone who happened to own property in major cities around 2010. Income and wealth inequality widened as employment declined. industrial, fueling the resentment that characterizes contemporary politics; Household debt has risen, as many of us have turned to credit to maintain a certain standard of living; And many North American communities are gripped by an opioid epidemic that kills more than 20 Canadians a day, compared to eight people a day in 2016, according to Public Health Canada.
It is too late for a generation of workers who have the misfortune to join the workforce amid a perfect storm of wage-suppressing forces. But those headwinds are starting to recede, and the business is in the process of reclaiming its traditional share of the economic pie. The median wage offered was $24.05 in the second quarter, an increase of 5.3 percent from the same period a year earlier, a significant increase according to recent Canadian history. The average has been scaled back by employers in the health and social assistance industry, where the wages offered are only 3.6 percent higher; Wages offered in transportation, warehousing, mining and oil and gas increased by about eight percent, while vacancies for managers and technology jobs were offering salaries about 11 percent higher than they were in the second quarter of 2021.
The average annual increase for workers aged 15 and over since the late 1990s has been about 3 percent, according to Statistics Canada’s monthly workforce survey. Wages have been pulled out of their decades-old stalemate by one of the most notable macroeconomic stories of the pandemic: the surge in job vacancies. In the spring of 2020, everyone was talking about the price of wood. The reopening brought tales of restaurants running at reduced capacity because they couldn’t find enough servers, and renovations fell back because overworked contractors couldn’t be bothered with small jobs.
Much of what happened during the pandemic has proven to be ephemeral. Peloton Interactive Inc. shares are publicly traded. Now at about $10 compared to about $160 at the end of 2021 and Canada’s largest sawmill companies are cutting production amid lower prices. But the severe shortage of labor has persisted. There were 1 million job vacancies in the second quarter, the most since at least 2015, the time Statistics Canada began tracking it.
Demand for workers has remained strong because recovering from the COVID recession has been unlike anything else. Central banks and governments in the world’s richest countries responded to the pandemic with monetary and fiscal stimulus that inspired shock and awe. They probably got over it, as the authorities are now struggling to control the tide of inflation. Bank of Canada Governor Teff McClem, who has identified job vacancies as a symbol of excess demand, raised the benchmark interest rate by three percentage points between March and September, and may not be over yet. That’s more than what happened during the decade that separated the Great Recession and the start of the pandemic.
Economists at the Royal Bank of Canada believe that the speed with which the Bank of Canada raises interest rates will lead to a recession. Recognizing the possibility, McClem argues, there is an opportunity to avoid the worst case because companies may simply stop hiring instead of firing people. This may represent a soft landing from increased demand rather than the hard one that Royal Bank is expecting.
But there are good reasons to believe that the large numbers of labor shortages are here to stay.
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The Peloton deluxe stationary bikes were a bit of a fad, and sawmills simply needed time to keep up with the demand for wood. What happens in the labor market is different. Vacancy rates were rising before the pandemic because the post-war baby boom that created a glut of workers are now retiring at increasing rates. China’s population is also aging, and the productivity increase that came with its rapid rise over the past few decades is slowing as it becomes a mature economy driven by consumption rather than exports and investment. There are simply not enough workers, even in an economic recession. This means that the shortage will continue, which will continue the upward pressure on wages.
For the first time in a generation, workers will have bargaining power. Whether this translates into a stronger economy or a better quality of life remains to be seen. Employers who are accustomed to cheap labor can be reluctant to pay higher salaries, and so the unemployment rate can rise.
Perhaps the biggest concern is inflation. If it persists, workers will seek larger wage increases to offset the higher cost of living. Employers who are unable or unwilling to invest in becoming more productive are likely to charge higher prices to offset larger labor bills. This should maintain upward pressure on interest rates as the Bank of Canada struggles to keep inflation close to its 2 per cent target.
Workers will demand a greater part of the pie, but will they be better off than they were when their wages were suppressed?
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