Economy at Work

Economic growth The Canadian economy avoided a recession in 2023, but growth slowed in the second half of the year. A stronger than expected US economy

In 2023, the average worker in Canada earned $1,205 each week. When we take inflation into account, this is only an increase of $39 per week since 2013.

You might have heard economists on the news saying that workers’ wages increased in 2023 and wondered why their numbers were so different from what you saw on your paycheck.

Distinguishing between real labour shortages and employers who just want cheaper workers can be challenging. One sign of a true labour shortage is when the wages offered for vacant positions rise, with employers being forced to offer more money to attract and keep qualified workers.

Employment rose slightly in January, after remaining mostly stable during the final three months of 2023. Although this increase is encouraging, new jobs have not kept pace with the growth in the number of workers aged 15 and up. Over the past year, while 345,000 new jobs were added, the working-age population expanded by 1 million.

Families and businesses seeking relief from the pressures of high interest rates would love to know when the Bank of Canada is going to start lowering rates. Despite a slowdown in price increases compared to 2022, core measures of inflation, including the Consumer Price Index (CPI), remain above the Bank of Canada’s target range of 1-3%.

A recent study by the Canadian Centre for Policy Alternatives shows that the average income of Canada’s top 100 CEOs hit $14.9 million in 2022, 246 times higher than the average worker’s salary.

A new CCPA report, “At What Cost? Ontario hospital privatization and the threat to public health care”, has found that increasing privatization in Ontario’s health care system will likely increase surgery wait times and the cost to the public. The report used Freedom of Information requests, financial and statistical analysis, and international research to evaluate the costs and benefits of the Ontario provincial government’s plan to increase the use of private, for-profit surgical facilities.

The federal government’s Fall Economic Statement included a new Canadian Mortgage Charter. The Charter is meant to alleviate concerns from the estimated 2.2 million households who will be renewing their mortgages over the next two years. These mortgages were negotiated when mortgage rates were substantially lower, and so many borrowers will see rate increases between 2% to 3.5%. The mortgage stress test has been in place since January 2018, so all these loans were stress-tested to their current rate plus 2%.

The average first year wage settlement increased for both public and private sector unions in the third quarter of 2023. Unions have been able to bargain an average 6.3% wage increase in the public sector, and a 7.2% wage increase in the private sector.

In the current macro-economic environment, the Bank of Canada and others are encouraging the federal government to limit spending increases, suggesting that any increase in spending would be inflationary. But some types of spending help lower prices and ease overall inflation. A great example of this is $10/day childcare, especially if it’s delivered by the public or not-for-profit sector.

There’s growing public debate about corporate profits – how much is too much? During the pandemic, large corporations made record gains while households and smaller businesses struggled. And as inflation surges, corporate profit-seeking is contributing to the upsurge in prices.

As the Bank of Canada increases interest rates to bring inflation back down, it’s encouraging governments to ensure that that their spending doesn’t make inflation worse. Sometimes governments will use this as an excuse to keep wages low for workers, or to avoid making much needed investments in public services.

Housing prices, already high across Canada, skyrocketed during the pandemic. Prices rose by more than 30% between the end of 2019 and the end of 2021.

Inflation in 2022 is much higher than expected. This is due to the war in Ukraine, climate impacts on food production, and ongoing supply chain issues. We have data for four months of 2022 and a good understanding of the immediate trends in prices. This means inflation forecasts for 2022 are more reliable now than they were in January.

Canada has a shortage of purpose-built rentals that are affordable for working people. Housing is increasingly out of reach for minimum-wage workers and people who rely on social assistance. Inflation and higher interest rates will only make things worse.

When the pandemic began, Canada was hit with a wave of job losses. The labour market recovered these jobs by the end of 2021. Very quickly, however, economists who had been concerned about pandemic-related unemployment started to raise concerns about the opposite problem – labour shortages.

The financial situation for the provinces improved dramatically over the past year. When added together, 2021 provincial budget forecasts estimated a total deficit of $76 billion for the 2021 fiscal year. But the 2022 provincial budgets revealed that actual deficits for 2021 were only $24 billion.

The Labour Force Survey, carried out monthly by Statistics Canada, recently expanded the demographic data they collect to improve our understanding of employment equity, and specifically to address gaps for Black and racialized workers.