Workers and the economy need a raise

Canadian workers have been waiting eight long years for a decent pay increase. Better wages are well overdue – and are necessary to get the economy growing and reduce inequality.

Base wages in collective agreements have increased at an average of less than two per cent a year since 2009. This has meant real wage losses in most years since then, as the rising cost of living outpaces wage gains.

Other wage measures show an equally sorry trend. In the first four months of 2017, average hourly wages increased by only 1.1 per cent. This is the slowest annual rate of growth in at least 20 years and well below the 1.9 per cent increase in the cost of living to date this year.

Public sector austerity, wage freezes and cuts have been especially harmful. Public sector wage increases have lagged behind private sector wages in all but one of the years since 2009, with annual average increases of just 1.4 per cent since 2009. These increases have been below inflation, with the result that most public sector workers across Canada have had no improvement in their standard of living since 2009 – and instead have suffered from ongoing real wage losses.

Most provinces have imposed wage freezes of at least two years on public sector workers. And now Saskatchewan Premier Brad Wall is demanding public sector workers take a 3.5 per cent wage cut followed by three years of wage freezes. This will mean at least a 10 per cent cut in real wages. Meanwhile Wall is cutting tax rates for corporations and personal incomes, which will benefit top income-earners the most.

In Manitoba, the Pallister government is threatening public sector workers with another two-year wage freeze followed by maximum wage increases of 0.75 and one per cent in years three and four. This would mean a real wage cut of six per cent in four years, if inflation averages two per cent annually as forecast.

These attacks on public sector workers are unfair and likely unconstitutional. They’ll also do serious damage to the economy. While business lobby groups and some politicians like to sow division between workers, public and private sector wages are linked. Suppressing public sector wages will eventually drive down private sector wages. Keeping wages down is one of the worst things to do to our economy.

Labour compensation and household spending are responsible for well over half of our country’s national income and spending and for more than 60 per cent of our economic growth since 2009. If labour compensation and consumer spending don’t increase at a decent and sustainable pace, then our economy won’t grow at a decent pace either.

Households have maintained consumer spending by increasing their debt to record levels and leveraging equity in their homes as house prices have escalated. This has been affordable with low interest rates, but won’t be sustainable as interest rates rise and real estate prices plateau or decline.

Governments have used low interest rates and infrastructure spending to try and get the economy to grow. These have helped, but we need a stronger foundation to establish stronger growth. It’s time to grow our economy from the bottom up with decent wage increases and a fairer share going to workers.