Canadian Wages Plummet

[August1991]

Seems this thread is full of posts about how "trickle down economics hasn't worked", "Free Trade hasn't worked" and of course "It's all Harper's fault!" which implies that things were just peachy before Harper was elected.

I'm wondering if this is all untrue. Perhaps they HAVE worked except there's a factor so big that it masks out all the others and makes their beneficial effects trivial.

Reading this thread, that's the impression you would have.

According to this thread, it appears that Canada has become Brazil where there are a wealthy few, and impoverished multitudes.

The average income in Canada from 1976 to 2009 increased by 17%, inflation adjusted. Sounds great right? Well...no. Median income, the stat that would show what the middle class is making, only grew by 5.5% over 34 years. Why's that??? It's because despite enormous productivity gains over the last 30 years, the wealthy have been pocketing those gains and the middle class, despite improved efficiency, has not seen much benefit at all. I'm not sure how I'd feel if I worked for 30 years straight and I got a 0.16% raise per year. What about you?

http://www.conferenceboard.ca/hcp/hot-topics/canInequality.aspx#anchor3

That's a good link, and it's based on a Conference Board link to Statscan data. It's not clear if the income data refers to before tax or after tax.

----

It's wrong to say that poor people are worse off now than in 1976. They are (marginally) better off. The tide has lifted all ships - but some more than others.

It's an interesting question. Why? I would look at 1) demographics, 2) immigration, 3) government policies and 4) innovations. For example, consider how many hundreds of millions of Chinese are now seeing their incomes rise while other Chinese remain poor. IOW, Chinese income distribution is probably widening too.

Incidentally, 0.16% annual real growth is remarkable in human history - and certainly when applied to the median income. When it comes to questions of economic growth, one is better to take a long view.

=========

Last point: the OP is about very recent data. We are in a recession and it's normal that real wages are falling. It's even a good thing since it means that unemployment will stay low.

Edited November 27, 2011 by August1991

[August1991]

Actually high savings rates are the nuclear scenario in our system. Both saving and paying off debt would quickly shrink the monetary base and lead to deflation and depression.

You are taking a simplistic, short run Keynesian view of this question.

Countries such as Japan (1950-1980), China (now) and US/Canada earlier all enjoyed high growth rates because of high savings rates. It makes sense. To be rich, a country must accumulate physical capital. It requires building roads, bridges, schools, houses and so on. This infrastructure means forgoing current consumption. It means saving.

[cybercoma]

I don't now that the tide has raised all ships. There are so many service fees and administrative fees on everything from banking to phone service. These fees didn't exist in the 70s, which are nickel and diming people to death. People now have to pay for their television signal (very few get their television "over-the-air"). We have a new expensive via the internet. Telephones are no longer assigned to households, but individuals in the form of cellphones. Cellphones in the last 10 years have gone to "smartphones", which cost well over $50/month for people that own them. Food and fuel have gone up disproportionately to other expenses as well. While it may seem that people are "marginally better off," it seems to me that whatever minimal increase they may have seen (some have argued that there has actually been a loss in real wages) is only further eroded by these costs, effectively wiping out any disposable income or ability for the middle-class to save any money.

[August1991]

I don't now that the tide has raised all ships.

Hundreds of millions of Chinese, and even poor Canadians, are better off now than in 1975.

The world is a better place.

[tducey82]

The rest of the world is in poor shape at the moment. I think what's happening here in Canada is the same thing that is happening throughout the rest of the world. As a matter of fact I think Canada's in far better shape than a lot of other countries.

[WWWTT]

Hundreds of millions of Chinese, and even poor Canadians, are better off now than in 1975.

The world is a better place.

Chinese yes,Canadians no.

The world outside the traditional G7 yes,the G7 no.

WWWTT

[August1991]

The rest of the world is in poor shape at the moment.

On the contrary, billions of people live better now than in 1980.

Many ordinary people in China and India have more choices.

Chinese yes,Canadians no.

The world outside the traditional G7 yes,the G7 no.

WWWTT

Did we Canadians, some 30 million, sacrifice our freedom/wealth so that billions in India/China could live better?

Did we send our good, unionized, civilized jobs overseas?

-----

Forget China and India.

Instead, imagine how many jobs that we could have if the Sun did not shine.

Without the Sun, we would require more electricity, more generators and more light bulbs. Without the Sun, we would need more heating, and more tanning salons. Millions of people would have jobs!

Because of the Sun, we have less work and more unemployment. And since the Sun's heat and light is free, it reduces the wage of everyone. It's a race to the bottom.

The Sun's light and heat, like workers in China and India, impoverish all Westerners.

Edited November 29, 2011 by August1991

[Michael Hardner]

According to this thread, it appears that Canada has become Brazil where there are a wealthy few, and impoverished multitudes.

Canada hasn't become Brazil, but it is becoming more like Brazil and that's what we're talking about.

It's wrong to say that poor people are worse off now than in 1976. They are (marginally) better off. The tide has lifted all ships - but some more than others.

It's an interesting question. Why? I would look at 1) demographics, 2) immigration, 3) government policies and 4) innovations. For example, consider how many hundreds of millions of Chinese are now seeing their incomes rise while other Chinese remain poor. IOW, Chinese income distribution is probably widening too.

Especially 3) and 4)

Government tax policies, free trade and corporate dominance have created an economic situation that works for them. At what point will that trend stop ? Corporations reduced wages, used economies of scale to crush smaller businesses and increase profits, and used those profits to lobby government for more advantages.

Politicians used their campaign contributions to fund expensive television ad campaigns to get them re-elected. Many of these political ties are not commonly known. For example, Hillary Clinton had close ties to Wal Mart (served on their board) and was quiet about their influence when many liberals expressed concerns about that company.

Incidentally, 0.16% annual real growth is remarkable in human history - and certainly when applied to the median income. When it comes to questions of economic growth, one is better to take a long view.

This means nothing when you don't compare it with productivity growth. Productivity is growing at a higher rate than wage growth.

Countries such as Japan (1950-1980), China (now) and US/Canada earlier all enjoyed high growth rates because of high savings rates. It makes sense. To be rich, a country must accumulate physical capital. It requires building roads, bridges, schools, houses and so on. This infrastructure means forgoing current consumption. It means saving.

High savings rate causing growth ? How about high debt rates fueling spending which also caused growth ? The US was using Keynesian economics under Eisenhower, Kennedy, and Johnson and growing too.

The world is a better place.

It is indeed. The same advances in communication that allows corporations to reach around the world have allowed us to communicate with each other and shrink the global village even more, at least in some respects.

Democracy, freedom of expression, and the pursuit of happiness are all growing... as long as you are happy happy happy with a slimmer paycheck every year.

Did we Canadians, some 30 million, sacrifice our freedom/wealth so that billions in India/China could live better?

Not our freedom, but some of us sacrificed wealth. The losers of trade agreements are a necessary factor of these kinds of economic improvements.

Did we send our good, unionized, civilized jobs overseas?

Yes.

Instead, imagine how many jobs that we could have if the Sun did not shine.

Without the Sun, we would require more electricity, more generators and more light bulbs. Without the Sun, we would need more heating, and more tanning salons. Millions of people would have jobs!

Because of the Sun, we have less work and more unemployment. And since the Sun's heat and light is free, it reduces the wage of everyone. It's a race to the bottom.

The Sun's light and heat, like workers in China and India, impoverish all Westerners.

You continue to circle around the point - that economic improvements are not distributed equitably. Whether or not they should be is beside the question. They aren't. The economic losers realize that they aren't doing well, and they aren't happy with that.

If we lost the sun, to follow your analogy, and needed to build a great number of nuclear plants would the country stand for it if the corporations engaged to build them started generating great profits for their shareholders while demanding lower wages and higher electricity rates for those who worked for and consumed the electricity ?

Certainly, it would be within their power to demand concessions, and to charge what they wished for "their" electricity. Certainly they would have cornered the marked on a scarce resource so the market should simply allow them to pursue their advantage, right ?

In this example, I imagine that the citizens would actually learn from history and rejig the system as they did in Russia in the early 20th century. Again, there's no morality about it. Why be moral about seizing the property of corporations, or overthrowing governments when we don't have to be moral about downsizing, destroying communities, and forcing competitors out with predatory pricing ?

[blueblood]

Canada hasn't become Brazil, but it is becoming more like Brazil and that's what we're talking about.

Especially 3) and 4)

Government tax policies, free trade and corporate dominance have created an economic situation that works for them. At what point will that trend stop ? Corporations reduced wages, used economies of scale to crush smaller businesses and increase profits, and used those profits to lobby government for more advantages.

Politicians used their campaign contributions to fund expensive television ad campaigns to get them re-elected. Many of these political ties are not commonly known. For example, Hillary Clinton had close ties to Wal Mart (served on their board) and was quiet about their influence when many liberals expressed concerns about that company.

This means nothing when you don't compare it with productivity growth. Productivity is growing at a higher rate than wage growth.

High savings rate causing growth ? How about high debt rates fueling spending which also caused growth ? The US was using Keynesian economics under Eisenhower, Kennedy, and Johnson and growing too.

It is indeed. The same advances in communication that allows corporations to reach around the world have allowed us to communicate with each other and shrink the global village even more, at least in some respects.

Democracy, freedom of expression, and the pursuit of happiness are all growing... as long as you are happy happy happy with a slimmer paycheck every year.

Not our freedom, but some of us sacrificed wealth. The losers of trade agreements are a necessary factor of these kinds of economic improvements.

You continue to circle around the point - that economic improvements are not distributed equitably. Whether or not they should be is beside the question. They aren't. The economic losers realize that they aren't doing well, and they aren't happy with that.

If we lost the sun, to follow your analogy, and needed to build a great number of nuclear plants would the country stand for it if the corporations engaged to build them started generating great profits for their shareholders while demanding lower wages and higher electricity rates for those who worked for and consumed the electricity ?

Certainly, it would be within their power to demand concessions, and to charge what they wished for "their" electricity. Certainly they would have cornered the marked on a scarce resource so the market should simply allow them to pursue their advantage, right ?

In this example, I imagine that the citizens would actually learn from history and rejig the system as they did in Russia in the early 20th century. Again, there's no morality about it. Why be moral about seizing the property of corporations, or overthrowing governments when we don't have to be moral about downsizing, destroying communities, and forcing competitors out with predatory pricing ?

Curses an essay!!!

Having Brazil's situation wouldn't be bad. High growth and millions of people just joined the middle class. THat country as a whole is becoming richer.

No, that would be big government and their proposterous regulations that have created an economic situation that favors extremely big companies, the ones that can afford to pay to comply with said regulations while the little guy has to shut down. What is the gov't doing having that kind of influence for sale in the first place?

Productivity is good, that means more goods get made which results in lower prices for consumers.

Keynesian economics of the 40's to the 70's didn't work. It was a false utopia that came crashing down and we're still paying for it. It led to the rise of Japan, then the rise of China and the rest of Asia. Do you know what solved 70's stagflation, our bitter friend high interest rates.

That depends on where you are in the country. Western Canadians are enjoying larger paychecks because we have more customers for our products. Talk in the barber shop is not how bad the job situation is, its how easterners shot themselves in the foot.

Now for the electric power situation. Consumers are going to try and demand as low a price as possible, unless they are fools and are advocating for a carbon tax. That means the companies have tight margins to work with to make money otherwise they shut down. You also have to remember who the shareholders are, and a lot of regular folk are shareholders and don't want to see their savings/retirement raided.

If the citizens in your scenario got pissed off like what they did in Russia, they did nothing but screw themselves. Those companies are just people trying to make money, when those companies voluntarily exchange wages for labour to make more money it makes more people richer. You have to realize that its a two way street when discussing economics, and that proceeds are divided fairly not equally, which benefits everyone.

A big problem is when people try and equate corporations with the aristocracy. Corporations got their money because of voluntary exchanges, that means the corporation gave a usefull product in return for money. Aristocrats got rich because government decided that they should be rich and those aristocrats got to amass their wealth through force.

[Bonam]

Democracy, freedom of expression, and the pursuit of happiness are all growing... as long as you are happy happy happy with a slimmer paycheck every year.

Except the data doesn't show it getting any slimmer... in fact it shows growth, even when adjusted for inflation.

[Michael Hardner]

Except the data doesn't show it getting any slimmer... in fact it shows growth, even when adjusted for inflation.

Graph

ok

[Michael Hardner]

Having Brazil's situation wouldn't be bad. High growth and millions of people just joined the middle class. THat country as a whole is becoming richer.

Growth is good, yes, but the rest of it - rampant poverty, and poor infrastructure... no.

No, that would be big government and their proposterous regulations that have created an economic situation that favors extremely big companies, the ones that can afford to pay to comply with said regulations while the little guy has to shut down. What is the gov't doing having that kind of influence for sale in the first place?

...

A big problem is when people try and equate corporations with the aristocracy. Corporations got their money because of voluntary exchanges, that means the corporation gave a usefull product in return for money. Aristocrats got rich because government decided that they should be rich and those aristocrats got to amass their wealth through force.

I cut these two paragraphs together because they seem somewhat at odds.

Keynesian economics of the 40's to the 70's didn't work. It was a false utopia that came crashing down and we're still paying for it. It led to the rise of Japan, then the rise of China and the rest of Asia. Do you know what solved 70's stagflation, our bitter friend high interest rates.

Please explain why it didn't work and why it led to the rise of Asia.

That depends on where you are in the country. Western Canadians are enjoying larger paychecks because we have more customers for our products. Talk in the barber shop is not how bad the job situation is, its how easterners shot themselves in the foot.

"shot themselves in the foot" ?

Because we signed up for trade agreements that helped the country as a whole ?

Didn't Alberta reject the "Canada first" energy policy of the Trudeau era, so maybe they shot us in the foot ?