With reports of labor shortages, will the recovery of the pandemic help raise wages?

As Canadians wait for Friday’s latest employment data, there are increasing reports that with the end of the COVID-19 pandemic, labor shortages will cause wages to rise.

Although the re-blockade has led to a recent slowdown in job growth, many observers say that just as the Toronto Stock Exchange touched 20,000 Expected economic rebound, People who work rigidly will eventually see the benefits of economic recovery.

After the sharp decline in the number of jobs in Canada last month- Lost more than 200,000 in April This reversed the trend of recovery-economists predict better results this week. According to the consensus of economists collected by the financial news service Bloomberg, the number of Canadian jobs contracted again in May, but only about 20,000 jobs were lost.

The United States will also release its employment data on Friday. According to Reuters, after a disappointing April, economists expect the number of jobs in May to more than double from the previous month to 664,000. But this consensus is based on very different forecasts from 400,000 to 1 million.

What is stifling wage growth?

Forecasts of job creation in Canada are also everywhere, making the forecasts unclear, but most people believe that the United States is leading the rise in wages.The widely cited is McDonald’s move to raise wages In company-owned restaurants, it ranges from $11 to $17 per hour.

In his humorous blog, Worthy of a Canadian initiativeStephen Gordon, an economist and professor of economics at Laval University in Quebec City, wrote an article about what stifled real wage growth in the mid-1970s.

In anticipation of economic recovery, the Toronto Stock Exchange hit a new high this week, and some believe that the new economic boom may reverse the long-term trend of falling wages. (Mark Brink/Reuters)

Generally speaking, wages, like prices, will rise with inflation. In economics, “real” wages refer to the change in people’s income after inflation has been deducted. In other words, if everything else from mortgages to food increases by 5% or more, then a 5% increase in your salary will not help much.

As Gordon and many others pointed out, the steady increase in real wages ended around 1975. He pointed out that this change occurred when the government implemented wage and price controls to combat sudden inflation. Others blamed the weakening of the union movement, coupled with the long-term shift of work to low-wage countries.

“Although there have been some ups and downs in the past few decades, today’s real average wages (that is, wages after inflation) are roughly the same as purchasing power 40 years ago,” said Pew Research Center report on U.S. wage trends This predates the current pandemic. “The wage increase there is mainly going to the working class with the highest income.”

According to Jacqueline Best, a political economist at the University of Ottawa who studies inflation, the trend of stagnant wages has continued to the present. She fears that premature attempts to raise interest rates to slow inflation may hinder much-needed measures to increase real wages.

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Wage increases without inflation

“You have a CEO [earnings] The stock market is going crazy right now,” Best said. “At that end you have a lot of wealth, and you don’t have that much at the working class and middle class ends, so there is still room for wages to rise if they do not increase in price. “

She pointed to a recent comment made by US President Joe Biden that wages are rising as the government injects funds into the economy for infrastructure and green growth. A feature, not an error.

“People are talking about labor shortages more and more,” Gordon said this week. “This usually puts pressure on wages.”

British Columbia Health Officer Dr. Bonnie Henry announced the province’s reopening strategy last month as the New Democratic Party government raised its minimum wage to the highest level in all provinces. But is $15.20 enough to live in a place like Vancouver? (Mike MacArthur/Canadian Broadcasting Corporation)

Before the pandemic, Jerome Powell, the governor of the US Central Bank, celebrated the fact that as the unemployment rate hit a new low, low-end wages began to climb.Last year he worried that the pandemic would mean This trend has reversed direction.

Statistics Canada’s data shows that although average wages have been on the rise, the increase in employment may have an adverse effect Lower average salary.

As Mikal Skuterud, an economist at the University of Waterloo, explained, this effect makes him doubt some of the more optimistic prospects for wage growth.

False signal

“At the beginning of this pandemic, [wages] Soaring,” Skutrud said. “The increase in average wages is something we have never seen in decades. “

As pointed out by the Bank of Canada and other institutions, Low-income people suffer the most, Lose their jobs, and higher-paid workers continue to work from home.

“It’s not hard to see what happened,” he said. “It’s not that the wages of individual workers are rising, but that our average population composition has completely changed.”

Although companies complain about the shortage of employees in certain industries and wage levels, Skutruder’s analysis shows that the return of low-paid workers in industries such as retail and hotels will once again lower average wages.

Jim Stanford, an economist and director of the Center for Future Work, said that a strong Canadian economy requires all workers to earn more than $20 an hour to achieve Canadian-style living standards. (Submitted by Jim Stanford)

Jim Stanford, director of the Vancouver Future Work Center, is an economist who still doubts that the recovery of the pandemic alone can reverse the long-term trend and put wages on the path to rising wages.

Stanford pointed out that even before the pandemic where the unemployment rate was at a 50-year low, wage increases remained modest-reflecting that the law continued to give employers too much bargaining power, but not enough bargaining power for workers.

“This shows that the weakening of institutional support for wages and fairer income distribution is the main explanation for weak wages,” he said in an email conversation.

Stanford, a long-time trade union economist, insists that a strong Canadian economy requires all workers to earn more than $20 an hour in order to achieve Canadian-style living standards.

“To do this, we must give workers the power to win their systems,” he said. “We can’t believe that supply and demand forces will do the job.”

Follow Don Pitis on Twitter @don_pittis

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