Wages Archives - Centre for Future Work

Happy Minimum Wage Day, Canada!

Jim Stanford — Thu, 02 Oct 2025 04:33:50 +0000

Half of Canada’s provinces all increased their minimum wage on October 1: Saskatchewan, Manitoba, Ontario, Nova Scotia, and Prince Edward Island. So this is a good occasion to celebrate the importance of higher minimum wages as a powerful tool for improving incomes and reducing inequality.

Four other provinces, the three territories, and the federal government also increased their minimum wages earlier this year. Unfortunately, Alberta is the exception, having frozen its minimum wage for 7 straight years (with no adjustment since October 1, 2018).

To mark the occasion, Centre for Future Work Director Jim Stanford joined Matt Galloway on CBC Radio’s national program The Current to discuss the economic effects of higher minimum wages. Their conversation is available here. He was also interviewed by Courtney Theriault on 880 CHED Radio in Edmonton, to discuss Alberta’s punitive minimum wage freeze, and its consequences. Listen to their conversation here.

Here are a few facts to consider as the latest minimum wage increases show up in paychecks for millions of low-wage Canadian workers:

B.C. is Best: After the 2025 increases, B.C. once again boasts the highest provincial minimum wage in Canada, at $17.85 per hour. Two territories (Nunavut and Yukon) have even higher minimum wages, in recognition of very high living costs.

Alberta, from Champ to Chump: With Saskatchewan’s 50-cent increase, Alberta now gains sole possession of last place in the interprovincial minimum wage sweepstakes. In the 7 years since its last minimum wage increase (which set the wage at $15), consumer prices in Alberta have grown 22%. A wage freeze combined with fast inflation has produced a dramatic reduction in the real purchasing power of incomes for low-wage workers in the province. Despite such a low minimum wage, Alberta has the second-highest unemployment rate of any province, and had the highest inflation of any province in 2024 – discrediting claims that keeping wages low somehow improves employment and reduces inflation (more on this below). The long freeze in the provincial minimum wage has been a major factor in Alberta’s fall from being the highest-wage province in Canada, to today barely matching Canada-wide average wages.

More than Keeping Pace with Inflation: Some provinces (like Ontario, Manitoba, and Saskatchewan) have tied minimum wage increases to changes in the provincial price level (measured by the provincial consumer price index, CPI). If sustained, that policy would mean the real purchasing power of the minimum wage would never increase. Given that minimum wages are far too low to support a decent living standard (more on this below), freezing minimum wages in real terms would lock in poverty-level incomes for the long term future. Thankfully, however, most provinces have done better in recent years than just keep up with the CPI. The following figure shows the change in the real value of the minimum wage over the last five years, by province. Most provinces increased minimum wages more than inflation in this period, giving low-wage workers a boost in their real income. That was especially important during the faster inflation experienced for a time after the COVID pandemic. Again, Alberta is the painful exception to this rule: its minimum wage has fallen 16.5% in real terms in the last five years.

Nova Scotia’s current minimum wage policy adjusts the wage each year by the annual growth in provincial CPI plus 1%. That ensures gradual increases over time in its real value. Other provinces should also raise minimum wages faster than inflation, in order to lift real incomes for the lowest-paid workers.

Canada in Middle of Global Pack: Minimum wages in Canada are not high by the standards of other industrial countries. The figure below illustrates national minimum wages measured as a share of median wages in each country. This is a common way to measure the “bite” of minimum wages as a tool for lifting up wages, in the context of general wage and price levels prevailing in each country. (This is more meaningful than simply comparing the nominal levels of minimum wages across countries.) Among the 30 countries in this comparison, Canada ranks 21^st, with minimum wages (averaged across provinces) equal to about 50% of the median wage. High-income countries with higher effective minimum wages than Canada include Germany, France, Portugal, Korea, Australia, and the U.K. The U.S. has by far the weakest minimum wage in the OECD: the federal minimum wage there is just $7.25 per hour, has not been increased since 2009, and is equivalent to just 25% of the median wage level. (Many U.S. states and even some cities have their own, higher minimum wages, to fill in the void left by the long federal wage freeze.) Several countries (including the Nordic countries and Switzerland) do not have a national minimum wage. Instead, they rely on sectoral collective agreements and generous income support programs to effectively set a floor under wages (since employers are compelled to offer more than those income benefits in order to attract workers).

Sea-Change in Economics: Old-fashioned free-market economists used to claim that minimum wages inevitably create unemployment, by lifting the wage above its natural market-clearing level. This view has been discredited by a historic about-face in economic research on the effects of minimum wages. Empirical evidence (including studies pioneered by Canadian-born economist David Card, who received the Nobel Prize in Economics for this work in 2021) shows negligible impacts of minimum wage increases on employment. Under some circumstances, higher minimum wages can even lead to higher employment. This can occur when aggregate demand conditions are very weak, and hence additional spending power from higher wages can stimulate growth and employment (an outcome called ‘wage-led growth’). It can also occur under ‘monopsony’ conditions in the labour market, whereby very large employers (like Amazon or WalMart) can suppress wages, unless a minimum wage prevents them from doing so.

Some Benefits for Business: Business lobbyists almost never endorse higher wages, since their individual bottom line is improved when labour costs are lower. But there are some ways higher minimum wages benefit business. They can enhance recruitment and retention of staff – highly relevant given business groups’ ongoing complaints about a supposed ‘labour shortage’ in Canada. And higher wages are often associated with higher productivity. These benefits offset some of the costs of higher minimum wages. And since a higher minimum wage applies to all employers (if properly enforced), this helps employers raise wages to recruit and retain staff, but without undermining their competitive position versus other firms.

Minimum Wage not a Living Wage: Despite real increases in most provinces in recent years, the legal minimum wage is not high enough to cover the costs of a basic standard of living. Various living wage projects across Canada (including Ontario and B.C.) have estimated that both wage-earners in a two-income two-kid family would need to earn at least $22-26 per hour, working full-time year-round, to meet basic living standards. This confirms that the minimum wage is not enough for workers to escape poverty.

Close the Loopholes: Another problem with existing minimum wage policies is inadequate and inconsistent enforcement. Some employers engage in under-the-table wage theft – paying below-minimum wages in cash, or demanding kickbacks from workers (especially targeting those in vulnerable positions, like non-permanent migrant workers). A bigger problem is the mis-use of independent contractor arrangements to justify below-minimum wage compensation, on grounds that the affected workers are not ‘employees’. This problem is rife in the platform or ‘gig’ economy, where hundreds of thousands of workers (again, disproportionately young, racialized, and immigrant) earn wages that frequently fall below legal minimums. Reforms in some provinces (like Ontario and B.C.) to guarantee a purported minimum wage for ‘engaged time’ do not solve this problem, since they ignore the many hours workers spend online waiting for instructions.

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Albertans’ Economic Hardship Reflects Provincial Policy Choices, not “Attacks” by the Rest of Canada

Jim Stanford — Fri, 30 May 2025 17:26:32 +0000

In this commentary, originally published in the Toronto Star, Centre for Future Work Director Jim Stanford rebuts claims that the living standards of Albertans have been harmed by “attacks” on the province’s oil industry (as claimed by Conservative leaders Andrew Scheer and Pierre Poilievre). In fact, the province’s oil output (and the profits of the oil industry) have never been higher. Citing previous research published with the Alberta Federation of Labour, the article documents the decline in real wages in Alberta and the role of provincial policies (like the 8-year freeze on the minimum wage) in suppressing family incomes in that province.

Alberta’s Economic Pie is Bigger than Ever. But Working Albertans Aren’t Getting their Share of It

By Jim Stanford

(Trigger warning: The author was born, bred, and educated in Alberta. Reader discretion is advised.)

Because the Liberal party won the most seats in a national election (the fourth time in a row), but most Alberta ridings went Conservative (for the umpteenth time in a row), Canada is now said to be facing a national unity crisis.

Premier Danielle Smith facilitates separatism (while claiming she doesn’t support it).

Alberta business leaders play the national unity card in demanding fast approval of more pipelines: unless the oil industry (assumed to proxy Alberta’s general interests) gets what it wants, national unity is in jeopardy.

Federal Conservatives, while disavowing explicit separatism, reinforce the claim Alberta has been mistreated by the country. Interim leader Andrew Scheer, on X, complains Ottawa has “attacked Canada’s oil and gas industry for 10 years.”

An aspiring Alberta MP-in-waiting, Pierre Poilievre, echoes that view. While saying he personally opposes separation, Poilievre complains “Albertans have a lot of legitimate grievances,” the result he says of a decade of attacks on oil. This rhetoric will excite the voters of Battle River-Crowfoot. Whether it helps Mr. Poilievre contest a future federal election, however, is a different question.

Many Albertans are indeed frustrated and angry — and with reason.

There is no province where real incomes and living standards have deteriorated more in the past decade than Alberta. According to StatsCan, Alberta has experienced the second-biggest increase in incidence of low income of any province since 2015.

Workers have endured a 10 per cent decline in real wages (adjusted for inflation) over the last decade, worse than any other province. Minimum wages haven’t budged in seven years.

Despite falling real wages, living costs remain among the highest in Canada, and Alberta suffered the highest inflation of any province last year. Electricity prices, auto insurance, and tuition fees — all governed by provincial rules — have soared faster than anywhere else in Canada.

But can any of these problems be blamed on the rest of Canada, or the federal government? In particular, does Alberta’s hardship stem from suppression of Alberta’s oil industry, as Mr. Poilievre claims?

This is an obvious attempt at diversion that Albertans should dismiss.

During this decade of relentless federal “attacks,” Alberta’s oil production grew by 52 per cent. Production records are being broken again in 2025, tracking more than 4.4 million barrels a day so far. The expanded TMX pipeline — bought and completed at federal expense — has boosted both output and prices, modestly reducing the long-standing discount on Canadian oil sales in the U.S Midwest.

Oil industry profits have also never been higher, thanks to record volumes, cost-cutting, and the 2022 oil price spike.

Petroleum producers and refiners pocketed after-tax profit of $192 billion over the last four years alone — four times more than in the entire 2010s. Corporate profits gobble up a huge slice of Alberta’s GDP: about 40 per cent of total output over the last five years, twice as much as the rest of Canada.

In short, there’s never been more oil wealth generated in Alberta, despite (or perhaps because of) the Liberals holed up in Ottawa.

Yet average Albertans aren’t getting their share of it.

The boom in oil production and profits certainly isn’t translating into jobs.

Oil extraction and service firms shed more than 30,000 jobs in the province over the last ten years, even as production boomed.

In 2014 the industry hired 128 workers for every million barrels of oil produced. Last year, thanks to self-driving trucks, automated facilities, and downsizing, that number halved to just 61.

So it’s no surprise residents of my home province are cranky.

Their economy produces more GDP per worker than any other. The economic pie they bake is bigger than ever. But the average Albertan’s standard of living is lower than a decade ago.

It wasn’t Ottawa that laid them off, cut their pay, froze the minimum wage, drove up electricity and insurance costs, and put their health care at risk. It was the enemy within.

Alberta’s oligarchs aren’t speaking for the province, they are speaking for themselves.

And the sooner the rest of the population can get past the phoney Alberta versus Canada narrative, the sooner they’ll start toward a genuine solution to their woes: namely, winning a fairer share of the abundant wealth they already produce.

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Three New Videos: Trump’s Trade War; Wages, Profits & Prices; and Defending Living Standards

Jim Stanford — Wed, 26 Feb 2025 04:36:07 +0000

President Donald Trump’s repeated threats against Canada’s economy have caused great alarm. Meanwhile, home-grown right-wing populist forces have been advancing similar arguments here at home: claiming all of Canada’s problems arise from big government, big unions, or high taxes.

To support trade unions and other progressive movements responding to these challenges, the Centre for Future Work has prepared three new educational videos, all posted on our YouTube channel. They are free for sharing or screening at local or community meetings, or in classrooms:

Trump’s Trade War: Debunking his Lies, Tallying the Cost, Building a Fightback: 30-minute video disproving Trump’s false claims about the Canada-US trade balance, highlighting the risks to Canada of his tariffs, and identifying the major elements needed in a strong economic response by Canada. This video draws on material in our recent report, Who’s Subsidizing Whom?

Wages, Prices, and Profits: Identifying the True Threats to Our Standard of Living: 15-minute video reviewing the rise and fall of inflation after the COVID pandemic, showing it was record-high corporate profits (not wages, not deficits, and not taxes) that caused this inflation. It identifies three key industries (energy, housing, and food) where companies took advantage of post-pandemic disruptions to jack up the prices of necessities. This video is an essential antidote against those arguing that all of Canada’s problems are due to ‘Justinflation’ and the carbon tax.

Fighting to Protect Our Living Standards: This is a longer 30-minute presentation providing more detail on the true causes of inflation after the COVID pandemic, and the record-high corporate profits that resulted from that inflation. It lists five key economic measures required to protect and enhance Canadians’ living standards after the last challenging years. It updates previous research on inflation, profits, and real wages published on our website.

These videos help inoculate against arguments that all of Canada’s problems stem from taxes, deficits, or ‘Justinflation’.

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Alberta Continues to Slip in National Wage Rankings

Jim Stanford — Tue, 28 Jan 2025 12:00:13 +0000

After a decade of declining real wages, Alberta continues to lag the rest of Canada in repairing wages and living standards for the province’s workers. That is the finding of new research released by the Centre for Future Work.

Alberta once boasted the highest wages and the strongest labour market in Canada. This was a key component of what was once caused the ‘Alberta Advantage’. Unfortunately, the economic tides have turned dramatically over the last decade. Once a promising place for workers to find jobs, earn decent wages, and support their families, Alberta has more recently demonstrated among the weakest labour markets in Canada. Unemployment is relatively high, wage growth has been far below other provinces, and yet the cost of living is among the highest in Canada.

Alberta is no longer the highest wage province in Canada: payroll data for hourly employees shows Alberta was passed by B.C. in 2023, and more recently by Quebec in 2024 (now ranking third). Average hourly wages in 2024 were under 2% higher than the Canada-wide average – whereas in 2013 they were 17% above the national average.

During 2024, when wages in most of Canada were finally recovering from the effects of post-pandemic disruption and inflation, average hourly wages in Canada continued to lag behind inflation. Average hourly wages, adjusted for inflation, fell by another 0.8%. That’s the fourth consecutive year, and ninth year in the last eleven, that average hourly real wages declined (with wages lagging behind inflation). In contrast, real wages in most of Canada were rebounding briskly in both 2023 and 2024.

Since 2019 (when the current UCP government came to power), real hourly wages have fallen by a cumulative total of 4.5%, by far the worst of any province. Including salaried workers, and adjusting for average working hours, real weekly earnings have also performed worse than any other province: falling 3.4% in inflation-adjusted terms since 2019. In fact, Alberta is the only province where average real weekly earnings were lower in 2024 than in 2019.

In sum, where wages are concerned, workers now face an ‘Alberta Disadvantage.’ Wages continue to go backward, and real living standards are in crisis. This is partly the result of economic challenges and disruptions beyond anyone’s control – like the pandemic, fluctuations in global energy prices, and inflation (which gripped all industrial countries after 2021). Ironically, that inflation was worse in Alberta in 2024 than any other province last year – despite the weakest wage growth of any province.

However, much of Alberta’s wage disadvantage is self-inflicted: the intended outcome of deliberate policies to suppress wages, and shift income to corporations and investors, away from workers. No single policy reveals that anti-wage bias than Alberta’s shameful freeze in the provincial minimum wage: now tied for lowest in Canada, having been frozen through 6 years of rapid inflation. The resulting 17% decline in real earnings for the lowest-paid workers in the province is economically destructive and morally bankrupt.

The effects of this cruel minimum wage policy are amplified by other wage suppression measures – including:

the most restrictive limits on trade unions and collective bargaining of any province;
uniquely austere provincial public sector wage settlements in 2020 and 2021 (which produced especially severe declines in real wages across health care, education, and public administration).

The new report updates earlier research published by the Centre for Future Work in 2024. Unfortunately, the conclusions of that earlier report are ratified in this update: Alberta workers still confront the weakest wage growth, the biggest decline in real earnings, and the most aggressive wage-suppressing policies anywhere in Canada.

Deliberate efforts to suppress wage growth in Alberta have resulted in a widespread decline in real living standards for millions of workers and their families. Wages have not kept up with inflation and Alberta’s high cost of living. While workers elsewhere in Canada are now experiencing robust improvements in real wages, wages in Alberta continue to go backwards. Meanwhile, corporations and investors in Alberta have been uniquely profitable – enjoying the highest share of profits in total GDP of any province.

To reverse these trends, the provincial government can take obvious measures to alleviate the downward pressure on wages, and support workers in rebuilding their real incomes. These include:

Immediately raising the minimum wage by 17% (to reverse the effects of inflation since 2018), and then increasing it in future years to at least match inflation.
Relaxing unique restrictions on union organizing and collective bargaining in the province.
Reaching fair settlements with workers in Alberta’s broader public sector, to repair real wage loses experienced since 2020 and protect against future inflation.

Please see the full report, The Alberta Wage Disadvantage: Evidence on Alberta’s Continuing Suppression of Wages and Salaries, by Jim Stanford. The report was published in collaboration with the Alberta Federation of Labour.

The post Alberta Continues to Slip in National Wage Rankings appeared first on Centre for Future Work.

Strikes Have Economics Benefits, Not Just Costs

Jim Stanford — Sat, 04 Jan 2025 21:27:25 +0000

In the tumultuous years since the COVID pandemic and the subsequent outbreak of inflation, Canada has experienced a large number of work stoppages. Canada experienced over 800 strikes and lockouts in 2023, resulting in 6.6 million days of work time lost. That’s much higher than in most recent years, but still lower than peak levels of industrial disputes experienced in the 1970s and 1980s. The year-end numbers for 2024 (which won’t be published for some months) will show a downturn in days lost (which will likely total about 2 million, including the recent postal strike).

Business lobbyists and commentators complain loudly about the economic costs and disruptions associated with these work stoppages, regularly calling on government to order workers back to their jobs (even violating labour rights guaranteed under the Charter of Rights). It is important to keep in mind, however, that occasional disputes (which in 2024 will have totaled just 0.05% of all person-days worked in Canada) are a healthy feature of a labour relations system that equips workers with enough bargaining power to win fair wages, benefits, and workplace protections. In this light, strikes have economic benefits, as well as costs.

Centre for Future Work director Jim Stanford explored these issues in a recent commentary, originally published in the Toronto Star:

The Cost of NOT Striking

By Jim Stanford

As a labour economist, I’ve been asked repeatedly by reporters about the economic costs of recent labour disruptions: ports, railways, airlines, and most recently postal workers (whose five-week strike was forcibly ended last week).

Reporters press me about the dire consequences for Canada’s economy. How many billions will be lost? Isn’t this the worst possible time for a work stoppage?

I point out that in most cases, major economic losses from work stoppages (whether strikes or employer lockouts) never come to pass. Yes, there are delays and inconveniences. Indeed, that’s ultimately the point of a work stoppage: to impose an economic cost on the other side, in hopes of pressuring them to compromise.

But once workers are back on the job, backlogs get cleared, and production and sales resume. It’s rare that the impacts of a work stoppage can even be detected in national economic data.

Curiously, I have never been asked about the economic costs of not going on strike – that is, the costs of an absence of labour disruptions. But I should be. Because apparent labour ‘peace,’ in its own right, does not automatically signify economic well-being. Instead, it can indicate deep problems in how the economy operates, and how its fruits are distributed.

Without the bargaining power that comes with having a union, including a viable choice to stop working, employers always have the upper hand in wage determination. Wages and conditions will trend toward legal minimums, profits will be higher, and inequality greater.

The wages and benefits won through union power, backed up when needed by strikes, contribute to a more balanced and inclusive economy. And most of the victories won on picket lines don’t only benefit those who walked off the job. Rather, they can spark important progress in all workplaces.

A timely example is a 42-day strike by postal workers in 1981, which won the first paid maternity leave provision in Canada. This right (broadened to both parents) is now enjoyed by most workers in Canada through the Employment Insurance system. Without that precedent-setting strike, it would have taken many more years to achieve parental leave – imposing major costs on families, and the economy.

A telling comparison can be made with Australia (where I have also worked), which has among the strictest limits on strikes of any industrial country. Among other barriers, an unelected commission can order an end to almost any strike deemed too damaging, with no back-to-work legislation or ministerial intervention needed.

Therefore, strikes are rare: relative to population, Canada lost 14 times more days to work stoppages since COVID than Australia. However, Canadian wages have rebounded much more strongly from recent inflation. Real (inflation-adjusted) hourly wages in Canada are now 5% higher than in 2019 – whereas in Australia, they are 5% lower. With less ability to defend wages against post-pandemic inflation, Australian workers have experienced a historic reduction in living standards.

That 10% difference in real wages translates into an extra $135 billion per year in workers’ wallets in Canada. That’s $135 billion more consumer spending power – and right now the economy needs every dollar of it.

To be fair, Australia has other policies (like strong minimum wages) to support wages, even though strikes are rare. But Canada’s system – replete with the occasional frustration of work stoppages – has more successfully protected workers’ purchasing power. Other international comparisons also confirm that when workers exercise real bargaining power, including strikes when needed, wages are higher, and income is distributed more evenly.

It may seem like Canadian workers have been strike-happy lately, as they fought to protect living standards against inflation. But in historical perspective, work stoppages are still relatively uncommon.

Even with the postal strike, work stoppages this year (both strikes and lockouts) will total about 2 million lost days of work: about 0.05% of all days worked. Back in 1976, a record 11 million days were lost – in a labour market half as large. Relative to population, strike frequency is down 90% since then.

Recent strikes have helped rebuild the purchasing power of Canadian workers after the tribulations of the pandemic. In so doing, they served an important economic function: improving incomes, spending, growth, and fairness. And without those strikes, we’d all pay a big cost.

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‘Vibecession’: Reconciling Positive Statistics with Negative Sentiment

Jim Stanford — Mon, 02 Dec 2024 20:29:03 +0000

There are encouraging signs that Canada’s economy and labour market are improving after a period of stagnation brought about by the Bank of Canada’s aggressive interest rate hikes in 2022 and 2023.

Newly released data for the third quarter of 2024 (July-September) shows the economy has continued to grow, albeit slowly. Consumer spending was the brightest light in the third quarter data: growing at an annualized rate of 3.5% (in real, inflation-adjusted terms), and constituting the largest single source of new demand.

Stronger consumer spending is being supported by continued rapid growth in wages. Average wages are continuing to advance at annual rates of 4-5% (depending on the specific wage measure chosen). Wages remain strong despite the rise in unemployment since 2022 (from 4.8% in July 2022 to 6.5% today), and the rapid slowdown inflation (now running at just 2% year-over-year).

This sustained strength in wages is surely causing much hand-wringing in both corporate boardrooms and at the Bank of Canada. It reflects the determined efforts of Canadian workers to win a fair share of the pie they produce: including through an upsurge in trade union action, and pressure (successful in most provinces) for significant increases in real minimum wages.

Wages have now been growing faster than prices for the last 18 months (and are currently growing more than twice as fast as the CPI). The resulting growth in the real purchasing power of wages has more than offset the decline in real wages that occurred during the initial outbreak of post-pandemic inflation.

Real wages are now about 5% higher than in 2019 (before the pandemic hit). Median wages have grown slightly faster than average wages, which indicates that proportional gains were somewhat stronger for lower-wage workers. (Please note that the 2020 peak in both series illustrated on the attached graph reflects a composition effect from huge job losses during the COVID pandemics, which disproportionately affected low-wage workers in retail, hospitality, and personal services; because of those job losses, the average wage for those who kept their jobs seemed to rise, but only until the return to work in those other industries pulled the average back down.)

The more-than-complte recovery of real wages in Canada after the pandemic is among the most successful of any industrial country. The U.S. is another country where real wages have recovered, even more strongly than in Canada – and, again, the strongest gains were received by lower-income workers. In contrast, real wages in most European countries and Australia remain several percentage points below pre-pandemic highs.

Thanks mostly to rapid growth in wages, household incomes have increased significantly in Canada in the last year: up by 7.5% in nominal terms, and over 4% in per capita terms. Again, that is significantly faster than inflation. That growth in incomes, combined with lower interest rates (which the Bank of Canada has now cut 4 times, for a total of 1.25 percentage points) and improving confidence, underpins relatively strong consumer spending. Barring another major global shock, it is likely these results will continue strengthening in coming months. (Unfortunately, there are many candidates for potential global shocks, ranging from Donald Trump’s threatened tariffs to escalation of war in the Middle East or Ukraine.)

These improving economic results stand in contrast, however, to a continuing sense in media and popular discourse that Canadians are angry and pessimistic about the economy. Political polls indicate the federal government is very unpopular (similar to incumbent governments in many other countries), with economic concerns seemingly top of mind for voters. Hyper-polarized social media, and the generally conservative bias of commercial mass media, reinforce the Conservative Party’s mantra that “Canada is broken” due to taxes, deficits, and general economic mismanagement.

This dissonance between positive economic indicators and persistent negative sentiment (especially expressed around politics) remains a puzzle to economists. Some traditional explanations do not hold water:

- Some argue that even if the average real wage has increased, that doesn’t imply that all workers experienced the same gains. Of course that is true – but the nature of an average is that there are almost as many people who got even better wage increases, as who received below-average gains. And the stronger growth in the median wage confirm that the gains, if anything, were even stronger for lower-wage workers.
- Some argue the consumer price index (CPI) used to compute real wages isn’t a ‘true’ measure of inflation. There are certainly some living costs (particularly housing) that are imperfectly captured by the CPI. But, again, there are also ways in which the CPI overstates true inflation (by ignoring the impact of quality improvements or substitution effects by consumers).

I believe the portrayal of rising real wages and strong household incomes above is an accurate depiction of what is happening in Canada’s economy. But as an economist, I cannot explain the contrast between those numbers and apparent sentiment. This negativity is especially visible in political surveys. In contrast, surveys of consumer economic sentiment (such as the Conference Board of Canada index) show gains in confidence this year.

A similar puzzle bedeviled the Democratic side in the recent U.S. election. U.S. economic performance since the pandemic was by far the strongest of any industrial economy (thanks in large part to very strong fiscal stimulus), and wide swaths of society experienced documented economic gains. But anger over the economy (perhaps fostered by negative reporting in the media, and virulent social and alternative media) was the major reason identified by researchers for gains in Republican support. (Claims of a Republican landslide, of course, are far-fetched: Trump received 50% of the presidential vote compared to 48.4% for Kamala Harris. Only in the U.S., with its byzantine electoral system, could this be construed as a “clear victory”.)

Two interesting journalistic reports have tried to make sense of the gap between economic outcomes and mass psychology. Ontario opinion pollster David Herle addressed the economic and psychological dimensions of the ‘affordability’ crisis in a recent episode of his influential podcast, The Herle Burly. The podcast featured Centre for Future Work Director Jim Stanford, and progressive economist Armine Yalnizyan. Listen to their full discussion here.

In response to popular concerns about the cost of living, the federal government recently announced a temporary two-month ‘holiday holiday’ on GST payments on a selected range of products (including some prepared foods and children’s toys). In promoting this measure, Finance Minister Christia Freeland described it as an effort to combat the so-called ‘vibecession’: that is, persistent negative sentiment that, if it restrains consumer spending, could actually hold back the economy. (As noted above, consumer spending and reported sentiment are both growing, suggesting again that the ‘vibecession’ may be more of a concern in the political arena than in the actual economy.)

CBC journalist Abby Hughes pursued this idea of ‘vibecession’, including an interview with the U.S. economist who coined the term. She also interviewed Jim Stanford on the gap between economic and political indicators. Please see Hughes’ interesting feature article here.

Without being complacent about the challenges many workers face surviving in Canada’s harsh and unequal economy, the successes of Canada’s labour market institutions (like strong trade unions and higher minimum wages), which repaired real wages better & faster than most other OECD countries, should be acknowledged and, indeed, celebrated.

Defending and strengthening those institutions (which are now being targeted by Conservatives, and their “Canada is broken” mantra), and fighting for other policies to address bigger material challenges facing workers (especially the housing crisis, which needs a mass non-market strategy to resolve), may be more progressive response to ‘vibecession’ than either temporary tax cuts or a simple-minded crusade to “throw the bastards out”.

The overarching task for trade unions and progressive political movements is to ratify the legitimate anger of working class people over their constrained life prospects (even if they are getting somewhat better, on average!), help them identify the main culprits for that situation (corporate power and greed), and then channel that anger in directions that will make life better for workers – rather than feeding a burn-it-to-the-ground mentality that is feeding right-wing populism here, and around the world.

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Yes, Public Sector Jobs Count, Too

Jim Stanford — Sun, 15 Sep 2024 18:34:35 +0000

B.C.’s unemployment has been among the lowest in Canada for several years, economic growth and business investment have been among the strongest, and the province now has the highest hourly wages for employees of any province. Yet some business commentators try to debunk that record, claiming it’s all due to public sector spending and hiring.

Yes, public sector jobs have been important in B.C.: not just for the essential services those workers provide, but also for the all-round economic stimulus that results from growing health care, education, and other public services. Moreover, this growth clearly benefits the private sector, through several channels – which explains why capital investment and private sector GDP growth have also been among the best of any province.

In this commentary, originally published in BiV, Centre for Future Work Director Jim Stanford challenges the simplistic ‘private good, public bad’ mindset of business lobbyists, and sets the record straight about the value of a balanced and inclusive economic growth strategy. For more evidence on the strength of B.C.’s recent economic performance, see also his submission to the recent B.C. labour code review, “Growth With Inclusion.”

Public Sector Jobs are as Valuable as Private Sector Jobs

by Jim Stanford

Imagine an industry that created 100,000 new jobs in British Columbia over ten years, paying over $60,000 per year on average, and mobilizing advanced technology and skills. You’d think a success story like that would be celebrated by economists and business commentators.

Well, there is such an industry in B.C. It’s called health care. It’s the biggest employer in the province. And it created over 100,000 new, decent jobs in the last decade.

Curiously, however, instead of popping champagne corks, some commentators view the creation of health care jobs as a bad sign, not a good sign. And they express equally negative attitudes toward other public sector jobs – like education, community services, and child care.

For example, business economists Ken Peacock and Jock Finlayson recently complained that private sector employment in B.C. was growing too slowly. They studiously ignored thousands of new jobs in health care, education, and other essential services. It’s as if they don’t count.

But those jobs do count – just as much as private sector jobs. They employ people. They add to GDP. They generate incomes. They support taxes. They produce services that are vital to quality, healthy living.

Directly and indirectly, they also sustain private sector jobs, through multiple channels. Public institutions (like hospitals and schools) buy billions of dollars of inputs from the private sector. Their workers patronize private businesses with their own household spending – from retail to construction to transportation. And by building a healthier, better-skilled workforce, good public services facilitate private investment and innovation.

It’s a myth that strong public service employment somehow squeezes out private sector jobs. In the last year, the number of private sector employees in B.C. grew 1.6% – significantly faster than in Canada as a whole. And B.C. is one of only three provinces where self-employment is higher this year than in 2017, despite the pandemic and its aftermath. It turns out that securely employed public workers also make good customers for small businesses.

This virtuous combination of public and private job-creation explains why B.C.’s overall labour market consistently beats national averages. B.C. currently has the third-lowest unemployment rate of any province, and has enjoyed consistently below-average unemployment since 2017.

Thanks to lower unemployment, combined with wage-boosting labour policies (including the highest minimum wage of any province), wages in B.C have done better than elsewhere in Canada. In fact, in 2023 B.C. took the title of highest average hourly wage for employees in Canada (previously held by Alberta). Business economists might not be thrilled about that. But people who work for a living certainly are.

Overall economic growth hasn’t been hurt by B.C.’s strong investments in health care and other public services – to the contrary, it’s been helped. B.C. had the second-fastest growth in real GDP of any province in 2023, and the second-fastest since 2017 (in both cases bested only by booming PEI). Even counting just the private sector, B.C.’s GDP growth still ranks second-fastest (again, behind PEI).

Real business investment in both non-residential capital and intangible innovation (like research and software) has grown faster in B.C. since 2017 than any other province. A well-educated and healthy workforce is key for attracting incoming investment – especially in talent-dependent industries like B.C.’s booming tech sector.

Another myth is that private sector industries create wealth, while public sector industries spend it. That’s also false. The jobs, incomes, and taxes supported by quality public services contribute as much to prosperity as any private jobs – indeed, more so than the insecure, low-wage jobs that are typical of too many private-sector industries. It can just as reasonably be argued that private sector industries couldn’t exist without the infrastructure, human capital, and cohesiveness that public services provide.

In short, a simplistic “private sector good, public sector bad” perspective leads to flawed economic conclusions. It misunderstands the past performance of the provincial economy, and misdiagnoses the policies needed to make it even stronger.

B.C.’s overall labour market and economic performance in recent years rank consistently among the strongest in Canada. And the province’s strong investments in health care, education, and other essential services have been an essential part of that success.

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New Data on Link Between Profits and Inflation

Jim Stanford — Sun, 23 Jun 2024 06:21:02 +0000

The following commentary is based on a presentation, titled Distributional Conflict and Inflation: Data, Theory, and Outcomes, presented by Jim Stanford at the recent meetings of the Canadian Economics Association at Toronto Metropolitan University in May 2024. The full presentation is available here. The presentation was part of a panel on the role of profits in recent inflation, organized by the Progressive Economics Forum.

By Jim Stanford

Consumer price inflation has decelerated in Canada in the last year, as rapidly as it accelerated in the 2021-2022 period (sparking high interest rates which in turn caused a painful economic slowdown). At last reading (for April 2024), year-over-year CPI inflation had slowed to 2.7% (down from 8% less than two years earlier). That’s within the Bank of Canada’s target range (2% plus or minus a cushion of 1%). And low enough that the Bank cut its policy rate for the first time in this cycle in June.

Many credit the Bank of Canada’s tough monetary medicine for this quick slowdown in inflation. But that assumes that the initial driving force of inflation was too much spending power in the hands of average Canadians. High interest rates, by sucking tens of billions of dollars of purchasing power out of households with debt (like mortgages), reduce spending power and hence (in that theory) solve inflation that resulted from assumed ‘excess demand’.

However, empirical evidence suggests that other factors drove that dramatic but ultimately temporary acceleration in inflation, and hence high interest rates (and the financial challenges they have caused for millions of Canadians) might have been neither appropriate nor necessary to bring inflation down. Both the rise and fall of inflation have been closely correlated with unusual trends in corporate profits in Canada (see figure).

Businesses took advantage of the unique circumstances of the post-lockdown economic re-opening (including disrupted global supply chains, shortages of many strategic commodities, temporary shifts in consumer demand, and a global oil price shock in 2022) to increase their prices far higher than costs, adding substantially to inflation. After mid-2022, when supply conditions began to normalize, corporate profits normalized as well – and so did inflation. There is a very strong correlation between profits per unit of real output in Canada (unit profit cost) and the rate of inflation, but no apparent correlation between unit labour costs (typically held up as the culprit for higher costs and prices) and inflation.

Canadian workers have been ambitious and largely (but not universally) successful in recuperating the real value of their wages, damaged by the initial surge of inflation in 2021 and 2022. Demands for higher wages, backed up with a surge in union organizing and work stoppages, contributed to a modest acceleration in wage growth. By 2023 wages were growing at 4-5% per year (depending on which measure is used), faster than inflation. As a result, real wages have started to grow again – and there is no sign of that trend stopping yet, despite high interest rates, higher unemployment, and a slowing economy.

Indeed, by end-2023, the shift in national income distribution away from wages (and other factor incomes) toward corporate profits that resulted from the burst of post-pandemic profit-led inflation had been largely reversed (see figure). Measured as a share of nominal GDP, workers won back (between mid-2022 and end-2023) almost all of the slice of the economic pie they had lost in the initial inflationary outbreak. The decline in corporate profits (in both absolute terms, and as a share of GDP) since mid-2022 has also largely reversed the increase in the profit share that occurred in the first two years of the pandemic.

This surprisingly quick restoration of factor shares of GDP, alongside the rapid deceleration of inflation in the last two years, attests to the unique and ultimately temporary circumstances that sparked post-COVID inflation (and corresponding distributional shifts). It is also testament to the labour market institutions (including real minimum wage increases in most provinces, sustained trade union density, and an upsurge in work stoppages) that have backed up workers’ defense of their real wages.

Things are not fully back to ‘normal’. Profit margins remain elevated as a share of total revenues. And real wages in some parts of the economy have still been damaged – especially in education and other public services, where intrusive wage suppression efforts by some governments made recent real wage losses all the worse. Real wages in Alberta (where the government has not increased the minimum wage for six years) have fallen faster than any other province. Meanwhile, the macroeconomy continues to stagger under the weight of high interest rates: a monetary policy response that did not address the true causes of post-pandemic inflation, but nevertheless suppressed spending power and aggregate demand.

However, the most recent data suggests that Canada’s structural income distribution is relatively robust. The rapid repair of real wages, and rapid restoration of pre-pandemic factor shares, indicates that workers have power to defend their economic interests – and they have successfully used it. While there’s still work to do to fully repair real wages, that’s something to celebrate.

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Alberta’s Disappearing Advantage for Workers

Jim Stanford — Sat, 18 May 2024 12:46:31 +0000

Alberta once boasted the highest wages in Canada. It was known as a place where working people could find a job, earn decent wages, and build a good life for themselves and their families.

Unfortunately, this “Alberta Advantage” has mostly disappeared. Average wages have declined by 10% relative to inflation over the last decade, far more than in any other province. This negative result was not an accident: provincial policies in Alberta have worked to deliberately suppress wages, through measures like a six-year freeze in the minimum wage (now tied for lowest in Canada), restrictions on union organizing and collective bargaining, and very austere wage gains for public sector workers.

Last year, Alberta lost its title as Alberta’s wage leader – to neighbouring B.C., where wages have grown steadily thanks to pro-wage policies (like a higher minimum wage and stronger collective bargaining). Alberta’s deliberate wage suppression has distorted the structure of the provincial economy: corporate profits have skyrocketed as a share of provincial GDP, while labour compensation and small business income have eroded. And contrary to old-fashioned “trickle-down” rhetoric, this one-sided pro-corporate strategy has not sparked faster growth, job-creation, and wider prosperity. To the contrary, by most measures Alberta’s growth, investment, innovation, and productivity have lagged most or all other provinces.

Centre for Future Work Director Jim Stanford has prepared a detailed overview of Alberta’s Disappearing Advantage: a 50-page paper with comprehensive data describing the decline in real wages, falling real household incomes, and other indicators of Alberta’s relative decline over the past five years.

To reverse the ongoing decline in real wages, and recapture an Alberta Advantage for workers, the paper recommends the provincial government explicitly welcome higher wages as a sign of economic progress – rather than a danger to be kept down. And then implement specific policies to achieve that goal, including:

An immediate increase of at least 15% in the provincial minimum wage, and further increases in subsequent years that match and exceed inflation.
Reforms in labour laws to give workers more ability to form unions and negotiate better wages and conditions.
Free collective bargaining for public sector workers (in major bargaining rounds occurring in the province this year).
Stronger enforcement of basic labour standards for workers in insecure, temporary, or gig positions.

The paper was prepared for delegates at the Alberta Federation of Labour’s 20204 Midterm Forum in Calgary, May 18. Please see the full paper:

Alberta’s Disappearing Advantage: The Crisis in Alberta Wages, and How to Fix It

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Submission to B.C. Labour Relations Code Review

Jim Stanford — Sat, 11 May 2024 06:20:35 +0000

The B.C. government is undertaking a regular five-year review of its labour relations code, that governs labour standards, union activity, and collective bargaining. As part of this review, Centre for Future Work Director Jim Stanford was invited to appear before the review panel as an expert witness.

His presentation, titled Growth With Inclusion: An Overview of B.C.’s Recent Economic and Labour Market Performance, reviewed numerous indicators of recent trends in employment, growth, and productivity in the B.C. economy. It found that by several metrics, B.C.’s economy has performed better than any other Canadian province.

This data is an important counter to complaints from business lobbyists (including stated in business submissions to this review) that B.C.’s economy is weak and getting weaker. These arguments are invoked to justify business calls for weakening labour standards (such as reversing recent B.C. reforms around union certification procedures, and abandoning B.C.’s prohibition against replacement workers in work stoppages).

Stanford’s submission noted that thanks in part to these and other wage-friendly policies, wage growth in B.C. has been stronger than any other province in recent years, and average wages there have increased over the past five years despite the COVID-19 pandemic and subsequent rise of inflation. Indeed, B.C. now boasts the highest wage for hourly employees in the country, displacing Alberta from that position in 2023.

B.C. is Now Canada’s Wage Leader

While business groups may bemoan this achievement as proof that labour costs are “too high,” Stanford’s testimony also showed that business profits have grown strongly in B.C., business investment in capital and innovation has been stronger than any other province, and the share of total labour compensation in overall provincial GDP has declined, despite healthy wage growth.

While Stanford’s presentation highlighted the progress achieved on wages and poverty reduction, he also stressed that many workers are not achieving adequate compensation or job security (especially those in precarious or non-standard positions, including digital platform roles). That makes it important for provincial labour laws to be strengthened further, with measures (like sectoral bargaining) to extend collective bargaining rights to more workers.

Indeed, as part of his presentation, Stanford also summarized key findings from his research paper on the Economic Benefits of Sectoral and Broader-Based Bargaining. That paper was presented to the review as part of the B.C. Federation of Labour’s submission.

Please see Stanford’s full presentation, Growth With Inclusion: An Overview of B.C.’s Recent Economic and Labour Market Performance.

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