Can anything be done about stagnant pay?
Zoning, education and taxes can play a role in helping lift wages
Arguably the major concern of economists in the West today is laggard wage gains, not trade wars, volatile cosm-modity prices or the worrisome practices of erratic governments (such as Brexit).
The Canadian jobless rate is at a 42-year low, and the country has more than 500,000 job vacancies, according to the Bank of Canada. That wage and GDP growth rates rise or fall in tandem practically defines modern economics.
Yet wage growth, at 2.5 per cent rather than an expected 3 per cent given the strength of leading economic indicators, is barely keeping pace with inflation and, in that sense, is actually stagnant.
That is a disturbing phenomenon across all Western economies, not just Canada.
Weak wage growth not only suppresses consumer spending, but keeps Canadians from more quickly retiring record levels of household debt.
Culprits in the weaker-than-expected wage gains include industry consolidation that has reduced pressure on the smaller number of big employers competing for talent. Automation continues to kill jobs outright and depresses wages for remaining workers. And high housing prices dampen labour mobility. Winnipeggers think twice about taking higher-paying jobs in Vancouver and Toronto, where shelter costs have skyrocketed.
What to do? Two relatively short-term fixes include municipal zoning adjustments and federal and provincial tax incentives to encourage developers to shed their fixation with luxury condos and start providing serious amounts of affordable housing. And higher education remains out of sync with workplace demands for selected vocational skills.
That challenge — better coordination among employers and colleges and universities — would have been met by now, save for the balkanized curricula among the 13 provinces and territories with jurisdiction in education. Relief from U.S. tariffs The trade deal to replace NAFTA looks increasingly like a dead letter unless U.S. President Donald Trump lifts the U.S. tariffs on Canadian and Mexican steel and aluminum exports he imposed last year.
Canada is the U.S.’s largest supplier of imported steel. Several of the Democratic lawmakers who now control the U.S. House of Representatives are demanding that the tariffs be lifted before they consider the proposed United States-Mexico-Canada Agreement (USMCA). And some U.S. senators of Trump’s Republican Party are making the same demand. For many Democrats and Republicans, the tariffs are a punishment inflicted on U.S. businesses and consumers. For instance, the U.S. beer industry estimates that the steel tariffs have raised their expenses by about $347 million (U.S.), a cost they are trying to pass on to consumers. And many U.S. metal fabricators, underpriced by non-North American firms unaffected by tariffs, are losing market share to offshore rivals and have been forced to lay off U.S. workers.
For Republicans, traditionally America’s free-trade party, the failure of the Trump administration to honour its promises to lift the tariffs once a NAFTA replacement was agreed on means the U.S. can’t be trusted in negotiating any international treaties.
And for disgruntled freemarket ideologues, Trump’s post-agreement demands that Canada and Mexico consent to quotas on their U.S. metals exports debases genuine free trade. The quota demand “is politically managed trade that responds to lobbying in Washington,” The Wall Street Journal has editorialized, “not free trade that responds to market supply and demand.”
The U.S. metals-supply lobbies are delighted with Trump’s tariff protectionism, but few other Americans appear to be.
Canadian oil and Venezuela
Recently applied U.S. sanctions against Venezuelan oil imports threaten to exacerbate the Alberta crisis in getting its oil to market.
U.S. demand for Athabasca crude has soared due to the supply gap caused by the Venezuela disruption at a time when Alberta producers are scrambling to secure railtanker cars to move their product, and Edmonton has purchased its own rail cars for that purpose.
As Bloomberg reports, U.S. oil imports from Canada hit a record 4.06 million barrels a day in the third week of January while Venezuelan shipments fell by 13 per cent. Under normal conditions, the extra demand would benefit Alberta. Instead, given the pipeline and other supply constraints on Alberta producers, the additional demand could pose a logistical nightmare.
Meanwhile, Chrystia Freeland, the Canadian foreign minister, has convened a meeting in Ottawa, Monday, of the 12 members of the so-called Lima Group to pressure Venezuelan strongman Nicolas Maduro to step down from the presidency in favour of Venezuela national assembly leader Juan Guaido.
Guaido, who declared himself his country’s legitimate president Jan. 23, enjoys wide support among the 11 Latin American Lima Group members. Canada isn’t quite spearheading this unusual endeavour. But as a founding member of the Lima Group, created two years ago, and as the only nonLatin American member, Canada commands broadbased Latin American support.
Resolving the Venezuelan presidential crisis would relieve demand pressures on Alberta, which has cut its production to ease storage constraints. Longer term, Ottawa’s Venezuelan strategy could help lay the groundwork for more extensive Canadian free-trade access beyond Mexico in Latin America, conspicuous as one of the few regions with which Canada has yet to forge strong trade ties.