Manufacturing AUTOMATION

Canadian wage gains continue to fall, workers falling behind inflation: report

November 27, 2011
By Julian Beltrame The Canadian Press

Canadian workers are failing to keep up with the rising cost of living as real wages continue to fall dramatically, new data from Statistics Canada shows.

The agency reported that average weekly earnings for non-farm payrolls fell 0.3 percent in nominal terms in September to $872.75. When the 3.2 percent inflation rate for the month is taken into consideration, the drop in real wages was more dramatic.

On a year-over-year basis, the increase in earnings was a mere 1.1 percent, the lowest level of growth since November 2009.

Average weekly earning gains have been dropping steadily since the spring, when they were as high as 4.1 percent in April, well above the inflation rate.


With income from investments also soft because of the volatility in equity markets, analysts said it is fair to assume Canadians’ average standard of living is also dropping.

“The nominal wage gains being as soft as they are has created a condition where the average Canadian isn’t keeping up with the cost of filling their grocery carts, filling their cars and heating their homes,” said Derek Holt, a senior economist with Scotiabank.

Holt speculated that the threat of weakening economic conditions, particularly fears of a second global recession, could be depressing wage demands by workers.

“With all the shocks happening to the world economy, many people are just happy having a job as opposed to going to their boss and demanding a wage gain,” he said.

The sharp decline belies what is often presented as a relatively healthy labour market in Canada, which has added about 600,000 jobs since the recession.

The job creation record, however, gives only half the picture.

About one million more Canadians have entered the workforce since the recession, meaning there are close to 400,000 more unemployed, contributing to the still high 7.3 percent unemployment rate.

CIBC economist Benjamin Tal noted that the recent downward trend in wages also coincides with weak jobs growth over the past four months. His own research suggests many of the jobs recovered since the recession have been of the low-paying variety.

“The composition of jobs is getting worse, namely you have more jobs in low-paying jobs,” he explained.

“There’s clearly a movement from high-paying professionals, public sector and construction jobs to low-paying service and retail. Even within manufacturing, there’s a movement from high-paying manufacturing jobs to lower-paying.”

Aside from how weak income growth affects individual Canadians, the trend is a worrying signal for the economy overall, the analysts said. Consumers represent a major component of the Canadian economy and any slowdown in spending will depress growth.

Tal said Canadians can always dip into savings to compensate, but that is also problematic because household debt is already at record levels relative to disposable income.

“The consumer is starting to slow down and we also see consumer credit is softening,” he said. “What we are going to see is that business investment is the only (driver) of the economic expansion.”

The Statistics Canada data puts in context a new outlook by the Conference Board and the Business Development Bank of Canada that projects industries dependent on consumer spending will experience sluggish growth and profits over the next five years.

The industries analysed were retail sales, accommodation, food and beverage manufacturing, restaurants and catering, transportation and warehousing, and wholesale trade.

“Several industries profiled in this outlook have recovered from the 2008-09 recession, but the prospects for continued growth are muted because of weak consumer and business confidence, as well as high household debt levels,” explained Michael Burt of the Conference Board’s industrial economic trends division.

The Bank of Canada has projected growth in the economy overall will slow to 1.9 percent next year, after expanding by 2.1 percent in 2011 and 3.2 percent in 2010.

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