Chal­leng­ing times

In P.E.I., ma­jor­ity of those em­ployed did not re­ceive a wage in­crease in 2015

The Guardian (Charlottetown) - - OPINION - BY DON MILLS Don Mills is chair­man & CEO of Cor­po­rate Re­search As­so­ciates Inc.

As we en­ter a new year, At­lantic Cana­di­ans are fac­ing con­tin­u­ing eco­nomic chal­lenges as­so­ci­ated with a weak eco­nomic en­vi­ron­ment that has led to a pro­longed pe­riod of weak job growth and wage growth across the re­gion.

It has been more than seven years since the Great Re­ces­sion. The re­gion has strug­gled, along with most of the rest of the coun­try, to re­gain a nor­mal pat­tern of eco­nomic growth. The last seven years have been any­thing but nor­mal. Av­er­age real GDP growth in Prince Ed­ward Is­land has been 1.4 per cent over this seven year pe­riod (20082014). Keep in mind, At­lantic Canada has trailed the rest of the coun­try for most of the past fifty years or so and that trend con­tin­ues.

That has led to fewer eco­nomic op­por­tu­ni­ties for both those liv­ing in the re­gion and those in­ter­ested in liv­ing in the re­gion. P.E.I. has done bet­ter than the rest of the re­gion eco­nom­i­cally mainly due to the fact that it is the only prov­ince in At­lantic Canada that has steadily grown its pop­u­la­tion, al­though that eco­nomic growth has still been rel­a­tively weak.

There has been grow­ing pres­sure on in­di­vid­ual house­holds in Prince Ed­ward Is­land and across At­lantic Canada as a con­se­quence of low wage growth. In­deed, our lat­est data in­di­cates that the ma­jor­ity of those em­ployed in the re­gion had no wage in­crease in 2015. This is the seven straight year where a min­i­mum of at least 40 per­cent of those em­ployed had not re­ceived a wage in­crease. And while in­fla­tion has mod­er­ated dur­ing this pe­riod, the in­crease in the cost of goods and ser­vices has left the vast ma­jor­ity of house­holds worse off fi­nan­cially and with less dis­cre­tionary in­come than prior to the Great Re­ces­sion.

This in turn has re­strained con­sumer spend­ing, fur­ther hurt­ing eco­nomic growth in P.E.I.. Over the last cou­ple of years, we have seen the di­rect con­se­quences of this pat­tern in the hous­ing sec­tor where the com­bi­na­tion of a stag­nant and ag­ing pop­u­la­tion and weak wage growth has damp­ened the hous­ing mar­ket across the re­gion. The hous­ing mar­ket will take a long time to re­cover from the cur­rent sit­u­a­tion.

In P.E.I., the ma­jor­ity (57 per cent) of those em­ployed did not re­ceive a wage in­crease in 2015. In fact, six per cent ac­tu­ally had their wages re­duced. The over­all av­er­age wage in­crease for all those em­ployed was a rather mod­est 1.2 per cent. The good news was that, for the first time in nearly seven years, the av­er­age wage in­crease on the Is­land ex­ceeded the rate of in­fla­tion.

Less dis­cre­tionary house­hold in­come changes con­sumer be­hav­iour. Con­sumers spend­ing on dis­cre­tionary items like en­ter­tain­ment, travel and cloth­ing is most likely to be neg­a­tively im­pacted in the cur­rent en­vi­ron­ment, as con­sumers fo­cus on the ne­ces­si­ties of life ( food, shel­ter, trans­porta­tion) which are all in­creas­ing in costs, leav­ing much less spend­ing for dis­cre­tionary items or the fun part of life.

Less money for the “fun parts of life,” go­ing on a va­ca­tion, go­ing to a movie or out to eat tends to make peo­ple less happy and more crit­i­cal of large in­sti­tu­tions in­clud­ing govern­ment. It is one rea­son for the re­cent volatil­ity in change of govern­ment provin­cially, where few gov­ern­ments are given a se­cond man­date that do not meet the ex­pec­ta­tions of the pop­u­la­tion.

In gen­eral, At­lantic Cana­di­ans earn about 15 per cent less than the av­er­age Cana­dian. With the ex­cep­tion of hous­ing, the cost of liv­ing in At­lantic Canada is ei­ther the same or higher than the rest of the coun­try, while taxes are among the high­est.

P.E.I. must fo­cus on strate­gies that will grow the econ­omy and thus lead to pop­u­la­tion growth and larger tax bases to pay for pub­lic ser­vices. It is es­pe­cially im­por­tant that the prov­ince in­crease its ex­port busi­nesses, nat­u­ral re­sources sec­tor and knowl­edge in­dus­tries. This re­gion needs to be more en­tre­pre­neur­ial and less de­pen­dent on govern­ment. We need much more re­search and de­vel­op­ment across the re­gion, more in­no­va­tion and cer­tainly a lot more pro­duc­tiv­ity im­prove­ment.

Don Mills

The Silent Ma­jor­ity

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