Monday, May 23, 2022
No Result
View All Result
  • Media
Support Us
Macdonald-Laurier Institute
  • Home
  • About
    • Who We Are
    • Who Makes MLI Work
    • Tenth Anniversary
    • Jobs
  • Experts
  • Issues
    • Domestic Policy Program
      • Agriculture and Agri-Food
      • Canada’s Political Tradition
      • Economic policy
      • Energy
      • Health Care
      • Justice
      • Social issues
      • Social licence
    • Foreign Policy Program
      • Foreign Affairs
      • National Defence
      • National Security
    • Indigenous Affairs Program
  • Projects
    • COVID and after: A mandate for recovery
    • COVID Misery Index
      • Beyond Lockdown
    • Provincial COVID Misery Index
    • Centre for Advancing Canada’s Interests Abroad
      • Dragon at the Door
      • The Eavesdropping Dragon: Huawei
    • An Intellectual Property Strategy for Canada
    • Speak for Ourselves
    • Canada and the Indo-Pacific Initiative
    • DisInfoWatch.org
    • The Transatlantic Program
    • Indigenous Prosperity at a Crossroads
      • Aboriginal Canada and Natural Resources
    • Talkin’ in the Free World with Mariam Memarsadeghi
    • Past Projects
      • Justice Report Card
      • Munk Senior Fellows
      • A Mandate for Canada
      • Confederation Series
      • Fiscal Reform
      • The Canadian Century project
      • Fixing Canadian health care
      • Internal trade
      • From a mandate for change
      • Size of government in Canada
  • Events
    • Upcoming Events
    • Past Events
      • MLI Dinners
      • Great Canadian Debates
  • Latest News
  • Libraries
    • Inside Policy Magazine
      • Inside Policy Back Issues
      • Inside Policy Blog
    • Papers
    • Columns
    • Books
    • Commentary
    • Straight Talk
    • Video
    • Multimedia
    • Podcasts
    • Leading Economic Indicator
    • Labour Market Report
    • MLI in the Media
  • Home
  • About
    • Who We Are
    • Who Makes MLI Work
    • Tenth Anniversary
    • Jobs
  • Experts
  • Issues
    • Domestic Policy Program
      • Agriculture and Agri-Food
      • Canada’s Political Tradition
      • Economic policy
      • Energy
      • Health Care
      • Justice
      • Social issues
      • Social licence
    • Foreign Policy Program
      • Foreign Affairs
      • National Defence
      • National Security
    • Indigenous Affairs Program
  • Projects
    • COVID and after: A mandate for recovery
    • COVID Misery Index
      • Beyond Lockdown
    • Provincial COVID Misery Index
    • Centre for Advancing Canada’s Interests Abroad
      • Dragon at the Door
      • The Eavesdropping Dragon: Huawei
    • An Intellectual Property Strategy for Canada
    • Speak for Ourselves
    • Canada and the Indo-Pacific Initiative
    • DisInfoWatch.org
    • The Transatlantic Program
    • Indigenous Prosperity at a Crossroads
      • Aboriginal Canada and Natural Resources
    • Talkin’ in the Free World with Mariam Memarsadeghi
    • Past Projects
      • Justice Report Card
      • Munk Senior Fellows
      • A Mandate for Canada
      • Confederation Series
      • Fiscal Reform
      • The Canadian Century project
      • Fixing Canadian health care
      • Internal trade
      • From a mandate for change
      • Size of government in Canada
  • Events
    • Upcoming Events
    • Past Events
      • MLI Dinners
      • Great Canadian Debates
  • Latest News
  • Libraries
    • Inside Policy Magazine
      • Inside Policy Back Issues
      • Inside Policy Blog
    • Papers
    • Columns
    • Books
    • Commentary
    • Straight Talk
    • Video
    • Multimedia
    • Podcasts
    • Leading Economic Indicator
    • Labour Market Report
    • MLI in the Media
No Result
View All Result
Macdonald-Laurier Institute

The labour market’s bargaining power is eroding: Nazareth in the Globe and Mail

January 9, 2018
in Columns, In the Media, Latest News, Linda Nazareth
Reading Time: 3 mins read
A A

Linda Nazareth, educational gapAll of a sudden there is buzz that the Bank of Canada needs to tighten monetary policy – and soon – to keep wage pressures under control, writes Senior Fellow Linda Nazareth in the Globe and Mail.

By Linda Nazareth, Jan. 8, 2017

If the labour market is as tight as the numbers suggest why do governments need to raise minimum wages? After all, as of December Canada’s unemployment rate was 5.7 per cent, the lowest since comparable data became available in 1976. All of a sudden there is buzz that the Bank of Canada needs to tighten monetary policy – and soon – to keep wage pressures under control. Surely under the circumstances employers should be bidding wages up for all workers, no legislation required.

In reality of course, a fierce debate is raging over provincial measures to raise minimum wages. In Ontario, where the government is implementing a new $14 wage (an increase of over 20 per cent from the prior $11.60), employers are unabashedly unhappy.

The poster child for bad publicity is donut-and-coffee chain Tim Hortons, where some stores have attempted to offset the rise in labour costs by cutting back on paid employee breaks and other perks. Clearly the debate is not closed.

The reality is that the market for minimum-wage labour is simply not as robust as the figures would suggest. The overall unemployment rate may be the lowest in 40 years, but there is a huge variation between the rates for those with different levels of educational achievement.

For those who only have some high school, the 2017 unemployment rate was 13 per cent, in contrast to 4.5 per cent for those with a bachelor’s degree. Given that the first group is disproportionately in minimum-wage jobs (and that the second group is sometimes in competition with them for those jobs) it is clear that workers’ bargaining power is not nearly as high as it seems on the surface.

Actually, labour’s lack of bargaining power is pretty evident from the data on wage inflation. As of 2017, the average hourly wage in Canada was about $26, which while above the minimum wage is still only 1.7 per cent higher than it was in 2016. In fact, that is the lowest level of wage inflation we have seen since 1998. That wages are growing so slowly tells you a lot about why employers cannot just pass on wage hikes to their customers. Under the circumstances, there is only so much more that people are going to be willing to pay for a Timbit.

It is also telling that the Bank of Canada seems not at all worried about the inflationary effect of minimum-wage hikes. Its recent paper on their economic impact made waves because of the assertion that those hikes would cost 60,000 jobs, which is actually a relatively small number for a labour force of almost 20 million.

What few seemed to note is the Bank of Canada’s conclusion that there would be little to no impact on inflation from raising the minimum wage. By their estimates, the total impact for 2018 should be 0.1 to 0.2 percentage points. To put that in perspective, adding that to the November, 2017, inflation rate would take it from 2.1 per cent to 2.3 per cent, hardly a huge increase.

And so we have the reality that the labour market is not nearly as strong as it looks for all the reasons that have been becoming apparent in recent years. People may be employed, but they are a lot more likely to be working a series of part-time jobs than a full-time one. The gig economy is happening more quickly than people or policies can adjust. Robots are not exactly taking over, but automation is eroding the bargaining power of labour. Under the circumstances the unemployment rate seems like a pretty poor measure of how well the economy is doing.

Enticing as the notion may be, the record-breaking unemployment rate is clearly not enough to automatically give workers a raise that will elevate their standard of living. Telling business to take care of things by absorbing costs or passing them on is clearly not a solution either. Until we acknowledge both those realities, the needs of both minimum-wage workers and businesses are going to be at odds and the outcomes to the economy are going to be far from what was intended.

Economist and author Linda Nazareth is the Senior Fellow for Economics and Population Change at the Macdonald-Laurier Institute. Her fourth book, Work Is Not a Place: Reimagining Our Lives and Our Organizations in the Post-Jobs Economy, will be published in 2018.

Tags: LabourLinda Nazareth
Previous Post

Can’t fault Tim Hortons heirs for cutting worker benefits after wage hike: Cross on BNN

Next Post

Why the time has come to block Offshore Pirate Websites in Canada: Hugh Stephens for Inside Policy

Related Posts

Putin’s biggest achievement in Ukraine: Strengthening and uniting global democracies
Foreign Affairs

Putin’s biggest achievement in Ukraine: Strengthening and uniting global democracies

May 20, 2022
MLI experts available to comment on Canada’s ban on Huawei from 5G
Latest News

MLI experts available to comment on Canada’s ban on Huawei from 5G

May 19, 2022
The least-cost path to net zero needs oil and gas: Jack Mintz in the Financial Post
Energy

Ottawa’s “just transition” needs to be challenged for encouraging fantasy around oil and gas: Heather Exner-Pirot in the Calgary Herald

May 18, 2022
Next Post
Macdonald-Laurier Institute

Why the time has come to block Offshore Pirate Websites in Canada: Hugh Stephens for Inside Policy

Macdonald-Laurier Institute

323 Chapel Street, Suite #300
Ottawa, Ontario
K1N 7Z2 Canada

613.482.8327

info@macdonaldlaurier.ca
MLI directory

Follow us on

Newsletter Signup

First Name
Last Name
Email Address

Support Us

Support the Macdonald-Laurier Institute to help ensure that Canada is one of the best governed countries in the world. Click below to learn more or become a sponsor.

Support Us

Inside Policy Magazine

  • Current Issue
  • Back Issues
  • Advertising
  • Inside Policy Blog
  • Privacy Policy

© 2021 Macdonald-Laurier Institute. All Rights reserved.

No Result
View All Result
  • Home
  • About
    • Who We Are
    • Who Makes MLI Work
    • Tenth Anniversary
    • Jobs
  • Experts
  • Issues
    • Domestic Policy Program
      • Agriculture and Agri-Food
      • Canada’s Political Tradition
      • Economic policy
      • Energy
      • Health Care
      • Justice
      • Social issues
      • Social licence
    • Foreign Policy Program
      • Foreign Affairs
      • National Defence
      • National Security
    • Indigenous Affairs Program
  • Projects
    • COVID and after: A mandate for recovery
    • COVID Misery Index
      • Beyond Lockdown
    • Provincial COVID Misery Index
    • Centre for Advancing Canada’s Interests Abroad
      • Dragon at the Door
      • The Eavesdropping Dragon: Huawei
    • An Intellectual Property Strategy for Canada
    • Speak for Ourselves
    • Canada and the Indo-Pacific Initiative
    • DisInfoWatch.org
    • The Transatlantic Program
    • Indigenous Prosperity at a Crossroads
      • Aboriginal Canada and Natural Resources
    • Talkin’ in the Free World with Mariam Memarsadeghi
    • Past Projects
      • Justice Report Card
      • Munk Senior Fellows
      • A Mandate for Canada
      • Confederation Series
      • Fiscal Reform
      • The Canadian Century project
      • Fixing Canadian health care
      • Internal trade
      • From a mandate for change
      • Size of government in Canada
  • Events
    • Upcoming Events
    • Past Events
      • MLI Dinners
      • Great Canadian Debates
  • Latest News
  • Libraries
    • Inside Policy Magazine
      • Inside Policy Back Issues
      • Inside Policy Blog
    • Papers
    • Columns
    • Books
    • Commentary
    • Straight Talk
    • Video
    • Multimedia
    • Podcasts
    • Leading Economic Indicator
    • Labour Market Report
    • MLI in the Media

© 2021 Macdonald-Laurier Institute. All Rights reserved.

IDEAS CHANGE THE WORLD!Have the latest Canadian thought leadership delivered straight to your inbox.
First Name
Last Name
Email address

No thanks, I’m not interested.