Economy is healthy, so Canada should share the wealth

Lana Payne
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Corporate profits are soaring, CEOs are taking home millions in pay, stock options and shares, and yet Canadian workers are stuck in the past at least when it comes to the size of their paycheques.

A recent report by the Canadian Centre for Policy Alternatives (CCPA), an independent public-policy think- tank, examined Canadian wages and profits over the past 30 years, and its findings reinforce why so many people are falling behind or standing still.

The conclusion: far too many people have not benefited from Canadas wealth or from its economic expansion.

Despite unprecedented economic growth and a significant increase in productivity over the past three decades, average real wages, after taking inflation into account, have remained stagnant. As the report points out, in the normal scheme of things, increased economic growth and productivity should translate into higher wages.

Yet they have not. So, where is all that money going? Who is reaping the benefits from all that economic growth and productivity?

According to the CCPA report, corporations are taking more and more of the economic pie and failing to share it with the workers whose longer hours and increased productivity have helped produce this wealth.

In fact, for some Canadian workers, their share of the economic pie has been steadily dwindling. Real wages for the lowest-paid workers, such as those earning at or close to minimum wage, have actually decreased since 1975.

We know this from our own province. In 1976, for example, the minimum wage in Newfoundland and Labrador was $2.50 an hour. It would have had to have been $8.90 an hour in 2006 just to have kept pace with inflation, significantly more than the $6.75-an-hour minimum wage workers were earning before it edged up to $7 in January.

This low wage floor contributes to Canadas growing income inequality, but it also makes it tough for families to maintain a decent standard of living.

Falling or stagnant wages and reduced spending on public services have both impaired the distribution of wealth in the country. Strong public services have always been one important way of ensuring the countrys economic growth is shared more equitably among citizens.

But with government spending as a proportion of gross domestic product (GDP) on the decline and public services more regionalized and often less accessible, the overall well-being of Canadians suffers as they are forced to use credit cards or go more into debt just to keep up.

According to the CCPA study, if Canadian workers earned what their productivity was worth between 1991 and 2005, their incomes would have been, on average, $200 a week more. Or, as the report points out, Canadians working full time in 2005 would have earned an extra $10,000 in average real pay.

Ten thousand dollars buys a lot of stuff like a year of post-secondary education, a partial down payment on a house, a family vacation, higher retirement savings and, overall, a better share of the countrys economic wealth.

After subtracting taxes from the overall economic pie, or our GDP, the study examined wage and profit shares. It discovered that the wage share has been declining since the late 1970s, while the corporate profit share is at the highest level of the total GDP since 1961.

Just between 1991 and 2005, gross corporate profits were $130 billion more than if the profit share remained at its 1991 level.

And $130 billion feathers a lot of CEO nests. Certainly, the average Canadian CEO has not seen his wages stand still.

According to the 2007 Globe and Mail report on CEO pay and compensation, CEOs arent doing too badly. In 2006, CEOs were paid on average $1.48 million, a nearly nine per cent pay hike over 2005. The average pay increase for most Canadians was between two and three per cent enough to keep pace with inflation. In addition to salary, the average CEO option gain was another $1.92 million.

Retiring Bank of Montreal CEO Tony Comper took home top honours with a whopping $79 million in pay, shares and stock options. But others did almost as well. Of the top 25 on the Report on Business list, not one earned under $10.5 million.

The mantra from business groups and many economists has been that increased productivity will mean higher real wages. That has not been happening even during a so-called tightened labour market.

So, what incentive is there for people to work longer and harder when the benefits are going elsewhere like into some CEOs retirement home on a beach down south?

Every day, we are bombarded with news about how great the Canadian economy is doing. Canadians might ask themselves when they will start getting a boost from that economic wealth. Keeping pace with inflation is just not good enough, and falling behind should be a totally unacceptable outcome.

It used to be that politicians and policy-makers would concern themselves with distribution of wealth. That was before the stock market took over. It was before corporations had the power they currently enjoy. It was before obscenely wealthy CEOs felt entitled to $79-million payouts.

But surely the very least we can expect from those running the country is to ensure that the countrys wealth isnt gobbled up by those who already have too much.


Her column returns Aug. 19.

Organizations: CCPA, Canadian Centre, Globe and Mail Bank of Montreal CEO

Geographic location: Canada, Newfoundland and Labrador

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