Canada’s Wage Growth Falling Behind U.S., Adding To Mounting Debt Woes

Household debt is sustainable if wages are rising fast. But they’re not.

Amid all the talk about Canada’s escalating household debt burden, CIBC Capital Markets deputy chief economist Benjamin Tal says the real problem is wages:

“I don’t think that the issue in Canada – especially now, (and) over the past five, seven years – is debt. The issue is income. The debt-to-income ratio is rising not because of the fact that debt is rising to the sky, but because of the fact that income is not rising fast enough.”

Tal also noted that Canada’s wage growth is lagging behind wage growth in the US, as reported by BNN Bloomberg:

“It posits that Canada’s ability to manage its debt has been hampered by the lack of growth in both wages and disposable income compared to the U.S.

“It goes back to why [employers] are not raising wages, because they can,” Tal told BNN Bloomberg.

“If you have a situation in which we restructure the labour market in a way that it’s more optimal in terms of the mismatch in the labour market, then [employers] will be forced to raise wages and the cycle will come back to normal.”

Compared to the U.S., Canadians are also falling behind when it comes to other sources of income.

“Zooming in on gross personal income, just under one half of the widening in the gap is due to lower growth in rental and interest/dividend income in Canada, as well as faster growth in government transfers in the U.S.” Tal wrote in the report.”

One thing that is rarely mentioned when it comes to wages in Canada is our incredibly high level of immigration. Canada is taking in about 360,000 people per year, which is about 3 times the US rate of immigration adjusted for population.

That large influx is great for many companies, but it is terrible for workers, as it reduces the bargaining power of each individual worker and makes it easier for companies to find workers at far lower wages and far lower benefits.

Combined with tax hikes like the carbon tax that raises costs for both consumers and businesses, and economic policies that are pushing investment into the US, things are getting worse for Canadian workers and Canadian families.

Until these policies change, wages for Canadians will remain weak, and the debt burden will continue to take a larger toll on our economy.

Spencer Fernando

Photo – YouTube

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THOMAS TASS

All of which is why Canada once a sovereign and viable state is doomed.

NancyW

English Canada needs a government, like Quebec has in place to protect them, as we are left unprotected from their rulers. As they keep making very clear to us un-needed colonial Canadians, as new Canadians are not aware of yet, till we totally fail and will, so we should all be supporting Wexit, only for all of us English Canadians, people really do not see how divided and unfair it really is, they are using us all badly.

Sue

How true. I am seeing that the divorce papers should be on the table right about now.
We are no longer in Canada, Toto.

Helen

Leave it to a banker to say that debt isn’t the REAL problem; that it is wages. What will happen as automation continues to result in fewer jobs (and thus even less aggregate wages)? There is only one solution to this mess and it’s monetary reform. Take the money making function away from private banks and have society issue its own money. Distribute credit to each citizen in the form of a Dividend rather than have private banks burden us with debt. The REAL problem is the banking system. There is a solution: Douglas Social Credit.

Don Taylor

Solution is easy ! get rid of Turdeau

Brian Dougan

Spencer; you hit all of the main points. I had the same thoughts reading the article. Immigration/high taxes/the phony carbon tax/unemployment/the high cost of living. Basically; a country poisoned by Trudeau’s intentional malfeasance. Loosely speaking; stagnant wages can be explained away by economists. However; we know that the lion’s share of the problem lies at the feet of our enemy: The detestable Trudeau the Younger. Numbers don’t tell the real story.

Brian Dougan

I forgot to mention: Can employers even afford to increase wages? Canada has become so hostile to business; especially smaller ones. There’s nothing like a Liberal jackboot– on the throat of what remains of the Canadian economy.

Sue

Excellent points.

Kevin Walker

Along with legal immigration another biggest cause of skewed labour market is TFW & international students.
Canada takes in almost half a million international students per year & another 300,000 TFW. These international students are legally allowed to work 20 hr per week however, a majority (especially form India, Pakistan & Bangladesh) are working 60 to 80 hours per week largely on cash. In reality not more than 10% of international students actually come here to study. This international student policy is nothing more than a back door entry to permanent residency, it is the biggest sham.

old white guy

Not just wages are stagnating, look at investments. The purchasing power of what I saved for retirement has been reduce annually by inflation ever since I retired on my dime. One cannot even get a return that matches inflation so every year we have less to spend, I do not see how that helps the economy.