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Lana Payne: A recipe for economic and political problems

Stingy.

That about sums up how many Canadians seem to be feeling about their bosses.

A survey by Indeed.com earlier this year found that 83 per cent of Canadians are not happy with their pay.

And you’d think if markets worked the way we are told they should that the lowest unemployment rate since 1976 should be producing some decent pay raises as employers sweeten pay packages in order to retain and recruit workers.

Instead, the average hourly wage rate for available jobs barely increased in 2017. Adjusted for inflation or real average wages between 2005 and 2015 grew by less than 1 per cent a year. In other words, hardly at all.

It’s tough to grow the economy past what business economist Armine Yalnizyan calls the “slowth” rate when wages are virtually stagnant, and women are still dealing with sexist wage discrimination.

The federal government made a step in the right direction during the federal budget this month when it announced a proactive pay equity law.

Lifting up women’s wages would make such a difference to the economy. But it is going to take time for this law to result in real change for women.

According to Yalnizyan, wages and salaries as a share of Canada’s GDP is at an all-time low, dropping to 43.6 per cent in 2017, compared to a high of 51 per cent in 1976.

At the same time, and partly because of low wage growth, household debt levels are reaching stratospheric levels. By the end of last year, the average household debt to income ratio had grown to a whopping 172 per cent. Canadians are spending way more than they are earning. But this consumer spending has been fueling the anemic economic growth. Yalnizyan notes that consumer spending now accounts for the biggest share of GDP since 1961 when such data began to be collected.

In the meantime, the OECD has found that Canada’s household debt to GDP ratio is now higher than any of the 35 nations it monitors, both developed and developing countries.

Accordingly, this leaves Canada’s economy especially vulnerable to shocks. Just last week, the Bank for International Settlements, a global central banker, said that Canada, China and Hong Kong are most at risk of having a banking crisis.

This when most working Canadians have not recovered from the last financial crisis.

The central banker has red flagged maxed-out credit cards and high debt levels as the reason for concern.

It combines for a bit of a perfect, or imperfect storm, for Canadian families.

Rising debt loads, rising interest rates, stagnant wages, but a red-hot job market.

This is a recipe for more than a few economic headaches including for governments seeking re-election.

Low unemployment numbers should be fueling some optimism among Canadians, but the mounting debt loads and crappy pay may be just the fuel needed to propel populist Conservative politicians.

We have seen this narrative unfold in other parts of the world.

It could happen in Canada, too.

Frank Graves, of Ekos Polling, has said that Canada must not be smug about the possibility of right-wing populism taking hold here. Too many Canadians are angsty. And politicians and Canadians who wish to build a more inclusive egalitarian society need to pay attention.

“This is a product of a period of economic stagnation for many and disappointment with the elite prescription that was supposed to make everything better but has left an awful lot of the population feeling very, very poor about their economic future."

For many decades in the developed world there was an unwritten social contract, one based in shared prosperity, but globalization changed the rules and eventually resulted in a reneging on that social contract.

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Ekos and The Canadian Press joined forces to work on what Graves calls the “populist project.”

He notes that “argument is that the end of progress and has been critical in fueling the rise of this recent expression of populism. The collapse of the middle-class bargain of shared prosperity and progress has produced profound shifts in the belief in the current economic model operating in upper North America. This shift has been reinforced by a growing consensus that the external world has become a more dangerous place and this, too, is fueling a greater apprehension about the merits of trade liberalization, globalization, immigration, and a general belief that those who have been running things are not really concerned about the public interest.”

This isn’t merely a political problem. It’s an economic one, too, and businesses need to also pay attention. Perhaps they could start with a pay raise.

Lana Payne is the Atlantic director for Unifor. She can be reached by email at lanapaynenl@gmail.com. Twitter: @lanampayne

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