-
CBC’s The Current Looks at Inflation and Food Prices
The sharp acceleration of food prices (up over 11% in the last 12 months) has sparked anger and hardship in Canadian families struggling to pay the bills of day-to-day life. It has also raised troubling questions about the corporate power of the major supermarket chains, which control a dominant share of the overall food retail industry. Centre for Future Work Director Jim Stanford recently joined Matt Galloway, host of CBC’s national radio program The Current, for an in-depth conversation about food prices, why they’re so high, the role of corporate profits in driving up prices for food and other necessities – and, most important, what we can do about it.…
-
Who Wins, Who Loses in the Fight Against Inflation
The Centre for Future Work recently co-published with the Canadian Labour Congress a major new report on inflation: its causes, consequences, and how it could be tackled in a more balanced and fair manner (rather than throwing the whole economy into recession, which seems the inevitable outcome of the Bank of Canada’s current strategy). The report has generated considerable attention in print, broadcast, and social media. CBC’s daily political podcast, Front Burner, published a feature-length interview with report author Jim Stanford (Director of the Centre for Future Work) on why the Bank of Canada’s current approach is punishing workers for inflation they clearly did not cause. He discusses the options…
-
Orthodox Cure for Inflation Will Be Worse than the Disease
Evidence is growing that Canada’s economy, and most other OECD nations, is heading into recession. Dramatic increases in interest rates around the world, motivated by a desire to clamp down inflation that broke out after the COVID pandemic, is undermining investment, job creation, and household spending power. The Centre for Future Work has jointly released a major new report with the Canadian Labour Congress documenting the flaws in the Bank of Canada’s diagnosis of current inflation, and the risks in its one-sided approach to solving the problem. The report, titled A Cure Worse than the Disease? Toward a More Balanced Understanding of Inflation and What to Do About It, was…
-
Podcast: Inflation, Recession, and Fairness
Centre for Future Work Director Jim Stanford recently joined renowned political analyst and opinion researcher David Herle, on his Herle Burly podcast, to discuss the rising risk of recession in Canada, why the Bank of Canada is raising interest rates so aggressively, and whether there is a fairer way to manage post-COVID inflationary pressures. Stanford warned of the dangers of applying 1970s-vintage inflation theories and remedies to the unique combination of supply disruptions, energy price shocks, and oligopolistic market power than explain the current upsurge in inflation. He also emphasized that governments have ample fiscal room (given rapidly shrinking deficits) to support jobs and economic activity in months if the…
-
Slowing Economy Should Give Bank of Canada Pause … But It Won’t
New GDP data released last week confirm that higher interest rates and other headwinds have already slowed economic growth in Canada to a crawl. This should give the Bank of Canada pause to reconsider its schedule of aggressive interest rate hikes. That inflation was never attributable to overheated domestic economic conditions. Instead, statistical evidence indicates that current inflation is mostly the result of several unique post-pandemic factors: supply chain disruptions, higher energy prices, and a catch-up of consumer spending from depressed pandemic levels. Moreover, those largely temporary forces are already abating: several key global price indicators have fallen substantially in recent months (including petroleum, food, and shipping costs). By undercutting…
-
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…
-
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…
-
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,…
-
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…
-
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…