Canada needs Canadian’s to spend to grow the economy and battle the global economic downturn, however the wages of working Canadian’s are not increasing in line with the cost of living.
Statistics Canada has outline that the major provinces are struggling with slow job growth which makes it harder for workers to demand higher wages and couple that with a rise in commodity prices around the world and you can see that energy (fuel) and food costs takes a bigger chunk out of Canadian’s pay cheques.
The gap between the have and have-not in Canada is a problem that is getting worse in Canada. While certain provinces benefit from the commodities rising value other provinces and towns are suffering. Many Canadian’s do not see this.
Across Canada, Ontario residents have experience the most drop in the purchasing power of pay cheques. The weekly salary of Saskatchewan workers was nearly 7 per cent higher in September from a year earlier. While, wages in Ontario declined by 1.3 per cent.
The inflation rate is close to 3 per cent which means real wages fell and along with minimal wage growth that equates to less purchasing power. Another factor is the devaluation of the American dollar which is exporting inflation all over the world every time the American Federal Exchange prints money.
Because the U.S dollar is the base currency of trade around the world, when the Federal Exchange prints money, it makes the U.S dollar worth less. The end result is you will need more dollars to buy the same amount of commodities…hence inflation.
Bank of Canada Governor Mark Carney says inflation should fall to 1 per cent by mid-2012. However, this is hard to predict as tensions in Iran may cause energy prices to rise once again.
But consumer spending is 50% of the Canadian economy and households are busy dealing with and paying off their high debt levels. In a slowing economy that is not a good sign.
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