The sources of growth and low wages

Les sources de la croissance médiocre des salaires

Photo: Adrian Wyld, The canadian Press
The first vice-governor of the Bank of Canada, Carolyn Wilkins, has presented the growth of the wages as an “essential element” to the success of a business, addressing the business community in Toronto Thursday.


Wages do not increase as much as they should, and the problem could not be arranged before long.

Carolyn Wilkins had chosen a theme very special for her speech Thursday in front of business people from the Chamber of commerce in Toronto : why the shortages of labour which constantly complain about companies don’t increase wages in Canada ?

With an unemployment rate at a historic low (5,6 %), a rate of participation in the labour market to a record 87 % of workers in the prime working-age (25 to 54 years) and a growing proportion of companies who say that they are hampered in their development due to lack of manpower, one would think that the country has arrived at full employment, noted the first vice-governor of the Bank of Canada. In this case, economic theory would dictate that wages increase at least as much as inflation (2 %) plus productivity gains of the economy (1 %), for a total of around 3 % per year.

However, the rise in wages stopped at 2.5% in 2018 after being maintained at 2% during the previous five years. Part of the delay is explained by the fact that this canadian average cache smaller increases (2 %) in the provinces of oil which go wrong and stronger (about 2.7 %) in Quebec and Ontario, but even then, it remains short. This is all the more surprising that the bulk of the new jobs created by 2018 are in the service sector, where wage increases have been higher (2.8 percent) than in goods (1.8 percent).

Tracks explanation

Canada is not the only one struggling with this as its central bank calls itself ” the growth of wages poor “, on which she has recently published several studies. The OECD reported this summer that wage growth in rich countries is now two times less than at the time when the unemployment rate was the same before the crisis and that this stagnation affects mostly the lower-paid workers.

“As far as I know, nobody has found any explanation to be conclusive, but there are at least a few tracks serious,” said Carolyn Wilkins to his audience. Still traumatized by the last crisis, many workers are reluctant to leave their jobs to find better pay elsewhere. Increasingly, older workers are particularly attached to their professional stability. It is also estimated that in this period of scarcity of labor, a post in ten is held by a worker who is not really in its place.

Other problems are more structural and therefore could stay longer in the portrait. One of them is the weakening of the strength of the workers. The advances in technology and the globalization of the place today as well in competition with the robots with the workers of the four corners of the world. The decline of trade unions in the developed countries, reports the OECD, the fact that the working conditions of only one-third of workers are still governed by collective agreements, or less than half thirty years ago. The shrinkage of the social safety net makes the loss of his job, more risky and expensive.

The interest of companies

Companies, for their part, were increasingly resorting to placement agencies and sub-contractors, in addition to sign up to their employees ‘ contracts preventing them from going to work for a competitor. These competitors are also more rare with the phenomenon, particularly marked in Canada, concentration of industries around a few giants. “When a small number of firms dominate a given industry or a company becomes the only big employer in town, the workers must cling to their jobs, no matter the conditions, salaries and others “, noted Carolyn Wilkins Thursday.

One solution often put forward in this context is to promote the continuous education and training of workers to improve their employability and their ability to adapt. It is also recommended to invest in the improvement of productivity as a primary source of both the success of the companies and the increase of the wealth to share.

Wage growth will eventually accelerate, believes Carolyn Wilkins. But she had a message for the members of the Chamber of commerce of Toronto still wondering, at the end of his speech, if the improvement of the lot of their employees would be a good deal. “It is an essential element to the success of your business, reminded them of the banker plant. If you offer occupations precarious and poorly paid, the demand for your products and services will suffer. “

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