The silent majority

Most households worse off economically since the Great Recession

According to our most recent research, a majority of those employed in Atlantic Canada did not receive a wage increase in 2017. This is perhaps not that surprising given the continued weakness in the economy in much of the region, with the exception of Prince Edward Island, where the economy has actually performed near the national average for much of the past decade.

For much of the past decade since the Great Recession in 2008, wage growth in Atlantic Canada has been exceptionally weak.

Indeed, since 2008, at least 40 per cent of workers each year have not received a wage increase over that period.

More worrisome, fewer workers have received wage increases over the last fiveyear period. In the last five years, at least 50 per cent of workers have not received a wage increase in each of those years.

The cumulative impact of no or low wage increases since 2008 has left most households worse off economically since the Great Recession. Discretionary spending power at the household level has been significantly compromised over that period of time. Even with relatively low levels of inflation, spending power has been eroded for most households in Atlantic Canada.

Since 2008, economic growth has been the weakest in Newfoundland and Labrador among the four Atlantic provinces. Real GDP growth for Newfoundland and Labrador has averaged -0.5 per cent annually since 2008 (compared to 1.8 per cent nationally).

One of the key reasons that Newfoundland has underperformed the rest of the region relates to the province’s over-dependence on the oil and gas sector, which has been highly volatile in recent years as a result of the fluctuating price of oil.

Newfoundland has enjoyed generally higher wage increases since the Great Recession than the rest of the region despite having the weakest economic performance since 2008 (the province’s real GDP declined in five of the last nine years). It is almost like the economic reality has been ignored when considering wage increases in the province.

Nonetheless, only 40 per cent of those employed in the province received a wage increase in 2017 (the same portion as those receiving a wage increase regionally). Average wage increases rebounded in 2017 to 1.4 per cent (a figure that includes those not receiving a wage increase) from only 0.3 per cent the previous year, when only 31 per cent of those employed received a wage increase. Among those receiving a wage increase, the average increase was 4.1 per cent. This was the highest wage increase in Atlantic Canada, despite the economy being the weakest in the region last year.

Since consumer spending represents about two-thirds of GDP growth, consumers have been compromised in their ability to support higher economic growth in Newfoundland and Labrador as a result of low or no wage growth at the household level. This is particularly an issue in Newfoundland, where consumer confidence trails the rest of the region by a significant margin.

One of the challenges for the economy in Atlantic Canada generally relates to two important structural problems that have held the region back for decades relative to the remainder of the country.

The first structural problem relates to the geographic distribution of our population base. Across the region, Atlantic Canada has more than twice as many people, proportionally, living in smaller rural communities than the country as a whole.

Many of these smaller rural communities do not have the economic base to provide full-time employment opportunities to their residents. As a result, there is an over-dependence on seasonal work, which means there is a portion of the workforce not contributing full-time to economic growth.

The second structural problem relates to a proportionately smaller percentage of private sector workers in our economy. It essentially means Atlantic Canada is playing a man short when it comes to expanding the economy relative to the rest of the country.