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The Progressive Economics Forum

Update on Falling Real Wages

I’ve blogged on this before, and continue to be surprised by the lack of attention paid to the significant ongoing decline of real wages.

Falling wages are a key indicator of a very soft job market, and have the potential to undermine still quite strong household spending.

Today’s Statscan release of the payroll data show that Average Weekly Earnings including overtime in September were $872.75, up just 1.1% from a year earlier. The  change was entirely explained by changes in hourly wages since average weekly hours worked were unchanged.

Fixed weighted average hourly earnings excluding overtime were up just 0.7% from a year earlier, showing that wage stagnation is not being driven by an  overall shift of workers into industries which pay lower hourly wages. That said, there were major regional differences, with wages falling even in nominal terms by 1.3% year over year in Ontario.

The September Labour Force Survey data – based on a survey of workers as opposed to employers – confirms the overall picture, with average hourly wages increasing by just 1.4% year over year.

Meanwhile, the Consumer Price Index rose by 3.2% in September.

If the average worker is experiencing a 2% annual loss in real wages, we can surely expect a decline in consumer spending and difficulties in the housing market notwithstanding low interest rates.

 

 

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Comments

Comment from Mike
Time: November 24, 2011, 11:57 am

I imagine that the major cause for the stagnation in wages is the significant layoffs in the middle income earners and many subsequently finding work at a lower income. However, since neither Stats Can nor CRA apparently publish detailed income distribution tables this is hard to verify. Anyone game to lobby for this data?

Comment from Purple Library Guy
Time: November 24, 2011, 11:11 pm

Since I presume we continue to see rapid wage growth at the top end, presumably if the average growth is that low the median must be stagnant or falling.

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