• Commentary,  Employment & Unemployment,  Inflation,  Macroeconomics

    Don’t Make Monetary Policy on Twitter

    The Bank of Canada has been under attack from all sides for its actions (or, in some critics’ eyes, inaction) in response to rising inflation. To reinforce public support for its actions, the Bank has launched a communications offensive to explain – and justify – its actions. The Bank even posted a lengthy thread on Twitter arguing that since inflation hurts “all Canadians,” its efforts to bring inflation down through rapid interest rate hikes will benefit us all. This attempt to dumb-down monetary policy making was not just ineffective in its tone. It inadvertently revealed major flaws in the Bank’s economic reasoning. In this commentary, originally published in the Toronto…

  • Commentary,  Inflation,  Macroeconomics,  Trade Unions,  Wages

    Podcast: Rising Inflation Creates Tension in Collective Bargaining

    With year-over-year inflation topping 8%, far in advance of nominal wage gains, workers in all parts of Canada’s economy are struggling to protect their real living standards. Real wages have declined by more than 3% in the last 12 months alone, with further erosion pegged in the months ahead. Collective bargaining tables in both the private and public sectors have been roiled by the acceleration in inflation. Workers are determined to try to keep up with inflation. And that determination is only heightened by the fact that corporate profits have increased so strongly alongside the rise in consumer prices. Some major strikes have already occurred (such as in Ontario’s construction…

  • Inflation,  Macroeconomics,  Research,  Wages

    Wage Growth Picking Up, but Shows Important Differences Across Categories

    There are some signs of a modest acceleration in nominal wage growth in Canada. This is not surprising, given both relatively tight labour markets and the impact of accelerating inflation on the wage demands of Canadian workers. Average hourly wages paid across the labour market grew 3.9% in the 12 months ending in May (latest data). That is an increase from year-over-year growth rates of 2.5% to 3% recorded in late 2021 and early in 2022. Wages are still growing at only about half the pace of consumer prices, which grew 7.7% (according to the Consumer Price Index) over the same period. Since wage growth is weaker than price inflation,…

  • Commentary,  Employment & Unemployment,  Inflation,  Macroeconomics

    Taking Away the Punchbowl

    Central banks in Canada and around the world have begun an aggressive cycle of monetary tightening: lifting interest rates quickly to undermine domestic employment and spending, in hopes of brining inflation back down toward their preferred targets (2% in Canada). Already, this shift in policy is having major impacts on forward-looking asset markets: stock markets, debt trading (especially for emerging economies), cryptocurrencies, and housing prices are all falling sharply. Many forecasters expect a worldwide recession to result from these measures. History suggests they are likely right: never before in Canada, and rarely anywhere else, have central banks succeeded in disinflating their economies to the extent now planned without experiencing a…

  • Employment & Unemployment,  Inflation,  Macroeconomics,  Research

    Corporate Power and Post-Pandemic Inflation: A Deeper Dive

    There is abundant research (including from the Centre for Future Work, here here and here) showing that corporate profit margins have expanded significantly in the course of the current acceleration of inflation. It is not solely a process of companies passing along higher input and labour costs to consumers through higher prices. Rather, corporations have used their market power and disruptions in normal supply channels to widen their profit margins.  In Canada, after-tax corporate profits have increased to their highest share of GDP ever, coincident with the sharp rise in consumer prices. Since it’s corporations who literally set those prices, perhaps this shouldn’t be surprising. Labour costs, meanwhile, have lagged…

  • Commentary,  Inequality,  Inflation,  Macroeconomics,  Wages

    New Video: Profits, not Wages, are the Driving Force Behind Inflation

    What’s causing the current surge in inflation? And what should be done about it? In this new video, the latest in our “Debunkers’ Academy” series, Jim Stanford from the Centre for Future Work shows it’s not higher wages driving higher prices — in fact, wages are lagging far behind prices, and falling in real terms. The real culprit is corporations, who have taken advantage of the disruptions of the pandemic to jack up their prices (and their profits). This inflation is different than the 1970s, and it needs a different solution. Watch and learn! https://www.youtube.com/watch?v=8DgwM7nruQg

  • Commentary,  Inflation,  Macroeconomics,  Wages

    Business Profits from Inflation, but Workers Will Pay to Bring it Down

    As the Bank of Canada announced another increase in its trend-setting interest rate today, new data from Statistics Canada confirms businesses have pocketed record-breaking profits from accelerating inflation, while workers’ wages lag far behind. Centre for Future Work analysis of national income accounts released yesterday by Statistics Canada indicate that after-tax corporate profits reached their highest share of GDP ever in the first quarter of 2022, as inflation surged. After-tax profits grew 11% in the quarter (compared to the fourth quarter of 2021), to an annualized total of over $500 billion. That represents the highest share of total GDP (18.8%) since Statistics Canada began collecting GDP data. Meanwhile, workers’ wages…

  • Commentary,  Inflation,  Macroeconomics,  Wages

    Don’t Make Workers Pay for Inflation they Didn’t Cause

    The gap between inflation and wage growth for Canadian workers is exacting a punishing toll on real living standards. In the last 12 months alone, consumer prices increased more than twice as fast as wages. The gap between the two translates into a substantial reduction in real living standards for workers. In this commentary (which originally appeared in the Toronto Star), Centre for Future Work Director Jim Stanford provides evidence that the current surge in inflation cannot possibly be attributed to labour costs. Business profits have widened as inflation picked up steam. Lifting wages (for both private and public sector workers) to protect against the effects of inflation does not…

  • Commentary,  COVID,  Inflation,  Macroeconomics,  Wages

    Inflation: Causes, Consequences, and Cures

    The surge in inflation in recent months has generated great concern and debate in Canada. This inflation is clearly the result of unique and often external factors related to the COVID pandemic and subsequent recovery: including disruptions in global supply chains (such as the chaos in superconductor markets), energy shocks (made worse by the war in Ukraine), and shifts in consumer demand away from services and towards goods products (due to restrictions on many service activities during the pandemic). Despite the unique nature of this inflation, anti-inflation hawks are now dusting off their old policy recipes to restrain domestic demand and employment, and wrestle inflation back to the ground. The…

  • Commentary,  Inflation,  Macroeconomics,  Wages

    Wages Gain Steam, But Not Enough to Keep Up With Inflation

    The latest employment data from Statistics Canada confirm that Canada’s post-COVID recovery remains strong. The unemployment rate in March fell to 5.3%, the lowest since Statistics Canada began its monthly labour force survey in 1976.  Another positive sign was an uptick in the growth of average wages. Hourly wages grew by 3.4% in the year ending in March, and weekly wages grew by 3.9% in the same period (weekly wages grew faster than hourly wages thanks to increases in full-time work and average hours of work). That represents a modest acceleration in wage growth from recent months. However, the pace of wage growth has really just returned to normal pre-pandemic…