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.

Every year, governments across the globe miss out on an estimated $240 billion USD in revenue due to companies avoiding or evading taxes. Prominent tax economist Gabriel Zucman estimated that corporations shifted more than $25 billion USD in profits out of Canada in 2019 by reporting income earned in Canada in another tax jurisdiction. This cost us an estimated $4.5 billion CAD in corporate income tax revenue for 2019 alone.

Since the Bank of Canada started increasing interest rates in April 2022, there’s been talk of a possible recession. Normally, rapid increases in interest rates lead to job losses and decreased economic activity. Canada has dodged a recession so far due to factors like global commodity prices and a strong US economy. Still, some signs suggest our economy might weaken.

High interest rates are making it harder to afford a home. In July 2023, the Bank of Canada increased its interest rate to 5%. This is the highest it’s been since 2001. The bank is raising rates to fight inflation. The idea is that since higher interest rates make loans more expensive, people will spend less and businesses will make fewer investments, creating fewer jobs. Less spending in turn is supposed to help slow down rising prices.

Like workers, small businesses in our communities have faced challenges in recent years. COVID-19 restrictions that applied to small businesses, but not to big box stores, made it tough. Rising costs due to supply chain problems and high interest rates have added to the struggle. In response, CUPE members voted at our 2021 convention to support buying locally.

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.

We’ve heard it throughout the COVID-19 pandemic: while we’re all in the same storm, we’re not all in the same boat. Nothing has made that clearer than skyrocketing corporate profits. Some companies, like Zoom, did better in the pandemic because they were well placed to respond to changing needs. But other corporations have taken advantage of the pandemic to sneak in higher prices.

Income inequality has fallen across all provinces and territories, according to recently released data from the 2021 Census. There are several ways to calculate income inequality. Each of the methods provides different insights. Statistics Canada tracked income inequality in the census data using two of the most common measures: the P90/P10 ratio and the Gini index.

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.