It isn’t the 1970s; evidence does not point to a wage-price spiral. So why is Tiff Macklem now warning about wages rather than corporate profiteering?
By Bea Bruske, as published in the Toronto Star
The spotlight has shone brightly on Canada’s Bank Governor this year. Tiff Macklem’s starring role has put him centre stage in Canada’s ongoing inflation drama. As expected, Macklem has been the face of the Bank as they set monetary policy and raised interest rates. More surprisingly, Macklem has also played a recurring role as Pierre Poilievre’s gatekeeping villain in the Conservative leadership race. What the labour movement didn’t expect was for the Governor to seek out a cameo role, supporting employers, as they sit down at the bargaining table to negotiate with workers.
The day after the Bank of Canada raised interest rates by 100 basis points, Macklem went to a business lobby group and urged them to hold the line on wage costs. Despite wages lagging far behind inflation, he warned the Canadian Federation of Independent Business (CFIB) not to build higher wages into contracts with their employees. This shocked many – as surely it is not the role of the Bank of Canada to undermine the collective bargaining power of workers. Just as it is not the role of Canadian unions to weaken the Bank Governor’s ability to set monetary policy.
It appears Mr. Macklem has been taking advice from Bay St. and bank economists who have spent months raising the menacing spectre of a wage-price spiral. An idea that seems to haunt them like a sign of the apocalypse.
But the fact is, this is not the 1970s and evidence does not point to a wage-price spiral. In 2022, labour costs continue to lag well behind inflation and are dampening, not driving, it. In fact, wages have lagged behind inflation now for decades. In the public sector, some employees haven’t seen a wage increase for years, as bargaining negotiations are running years behind the expiry of their collective agreements. Security employees at Mr. Macklem’s own workplace are at the bargaining table this year. Is the Governor signalling that their employer should ignore their calls for wage increases?
While wages lag, corporate profits have surged. We have seen growing indications of large corporations taking advantage of the current crisis to raise prices and greatly boost their profits, serving to further feed inflation. So why is Mr. Macklem now warning about wages rather than the problem of corporate profiteering?
The Bank of Canada Governor is apparently telling businesses that their employees won’t be able to sustain current wage demands, so don’t give in to them. Is the Bank of Canada predicting – or promising – that unemployment will rise and workers’ bargaining power will diminish?
I know a lot about collective bargaining, having sat at the bargaining table for years. And I know that employers competing for workers – instead of workers competing just to find a job – has major social and economic benefits. Our communities can reduce inequality as low-wage, vulnerable and marginalized workers see greater gains when labour markets tighten.
I know that when workers are strong and act collectively, we see better opportunities, a higher quality of life and a growing middle class. And I know that siding with employers over employees displays a clear bias in approach.
While we expect some businesses to argue in favour of lower wages for workers and higher profits for their companies, we absolutely do not expect the Bank of Canada to back them up. It is critical the Bank of Canada immediately cease using messaging that undermines the collective bargaining power of workers. Workers and their unions must have the right to bargain for fair agreements without undue influence being brought to bear by powerful external forces. Mr. Macklem, kindly keep the Bank of Canada in its own lane – and away from the bargaining table.
The Bank of Canada played an important role helping to blunt the impact of the fiscal crisis at the start of the pandemic. Let’s not lose the plot now.
Bea Bruske is president of the Canadian Labour Congress. Follow her on Twitter @PresidentCLC
To arrange an interview, please contact:
CLC Media Relations