The buying power of Canadians’ paycheques is eroding, as wage gains fail to keep pace with inflation at a time when domestic spending is key to countering the effects of a deteriorating global economy.
Wages are growing at the slowest rate in nearly two years, new figures from Statistics Canada show, as the most populous provinces grapple with a weak job market that is making it more difficult for workers to demand pay raises. Meanwhile, the spike in global commodity prices that started in the spring is translating into unusually high energy and food costs.
The national figures mask a widening divide between the new have and have-not regions – the resource-rich West, where more and more workers are benefiting from the commodities boom and a scramble by companies to attract skilled labour, and the old manufacturing powerhouse of Central Canada, where entire one-horse towns are dying.
Average weekly earnings in Canada are highest in Alberta, while Saskatchewan has moved up quickly, Statscan numbers showed Thursday. At $906.22, weekly earnings in Saskatchewan in September were higher than in Ontario for the first time, and well above the national average of $872.75.
Nationwide, Ontario is more indicative of the drop in the purchasing power of Canadians.
The national increase in average weekly earnings from a year earlier was just 1.1 per cent, the slowest since November, 2009, and a far cry from the 4.1 per cent pace in April. With inflation close to 3 per cent, real wages fell.
The weekly take of Saskatchewan workers was nearly 7 per cent higher in September from a year earlier. Earnings in Ontario were lower, by 1.3 per cent.
Bank of Canada Governor Mark Carney says inflation will fall to as low as 1 per cent by mid-2012, as the higher food and energy prices that have vexed households since the summer ease.
But consumer spending, which accounts for about half of the economy, is already slowing because so many households are preoccupied with trimming their elevated debt loads.
The booming economy in Saskatchewan, centre of the global potash market and Canada’s No. 2 oil producer, helped Premier Brad Wall cruise to re-election this month and is forcing companies to raise salaries amid fierce competition for workers that is spreading to all sectors. Ontario, meanwhile, is losing ground against jurisdictions all over North America in terms of per capita economic output, and, last month, employment in manufacturing fell to the lowest on record.
Mr. Wall is the first to acknowledge that Saskatchewan has lucked out, as its commodities help underpin rapid growth in emerging markets like China. Still, he also touts his efforts to cut taxes, spend cautiously and provide incentives for investments in the resource sector.
“We’ve always credited a lot of good fortune for what’s happening economically in the province,” he said Thursday. “No government can claim responsibility or credit for this, but our growth agenda has sought to stay out of the way of this kind of development and facilitate it through infrastructure investments, and through competitive taxes.”
Potash and oil are undoubtedly the key drivers, he said, but the services, retail and construction sectors are surging, too. The Premier noted there are currently 10,000 openings on a provincial jobs website, underscoring Saskatchewan’s skilled-labour shortage.
Camile Baillargeon and his wife Carol operate a grain farm and tiny oil-field service company called Camcar Enterprises, about 200 kilometres northwest of Saskatoon.
Mr. Baillargeon needs two full-time employees year-round, and peaks at eight employees during harvest. Right now, those positions are vacant.
“It is hard to attract and retain talent,” he said. “The Occupy Wall Street movement doesn’t hold much water out here, because if you want to work, the world is your oyster.”
Ontario, of course, would love to have this problem.
The decline in the factory sector is a key reason why the Canadian economy shed a surprising 54,000 jobs in October – the most since February, 2009, in the depths of the recession – and the jobless rate edged up two notches to 7.3 per cent.
Mr. Baillargeon said he has posted jobs on a Saskatchewan employment site and 50 to 60 per cent of the applicants come from Ontario. Camcar, though, has to compete against oil and gas companies for labour. Large firms like Husky Energy Inc. and Devon Energy Corp., for example, operate in this northwest slice of the province, and their presence means local service outfits have also popped up, pushing the Baillargeons to pay salaries reminiscent of Alberta’s oil-sands boom.
“We’re paying close to oil field wages,” he said. “We have to be competitive.”
With a report from Carrie Tait in CalgaryReport Typo/Error