Bank of Canada governor Tiff Macklem has announced that unemployment needs to rise if inflation is to be checked. Bank chiefs and corporate CEOs practically tripped over each other as they rushed to agree with him.
A few months ago, the guv was imploring businesses to not bargain cost of living increases into collective agreements. So, he doesn’t even think that working people should keep up with inflation, let alone get a raise.
Macklem’s argument is that businesses are struggling to find workers and are “bidding up” wages, leading to inflation.
This makes absolutely no sense.
First of all, average wage increases in Canada have consistently been between markedly below the rate of inflation. In October, for example, inflation was 6.9 percent while average wage increases were just 5.6 percent. More importantly, average disposable household income remained flat, as people felt the pressure of increased prices for food, fuel and rent.
This fact should prompt Mr. Macklem to ask, “if wages aren’t driving higher prices, then what is?”
He won’t ask that question, but we will. The answer lies in corporate profiteering. While workers’ wage increases may be below the rate of inflation, profits are running way higher. In the first quarter of 2022, corporate profits jumped to 18.8 percent of GDP – that’s the highest level ever recorded. According to date from Statistics Canada, total corporate profit in Canada was $151.7 billion in the second quarter of 2022 – that’s up over $25 billion from the same period last year, an increase of over 20 percent.
We defy Macklem to identify any group of workers whose pay increased by 20 percent this year.
StatsCan reported this month that over 35 percent of adults in Canada are in households which are finding it “difficult or very difficult to meet their financial needs—in other words, to pay for transportation, housing, food, clothing and other necessary expenses.” Two years ago, this figure was 20 percent.
Officially, there are over one million people in Canada who are officially out of work. They are joined by millions more who left the labour force in the wake of the pandemic and economic meltdown.
Macklem’s words will surely bring them comfort – they may not have money to buy bread, but at least they’ll know the Bank of Canada wants them to have plenty of company.
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