Canadians were blind\u002Dsided by their loss of purchasing power in 2022. Read more.
Implicitly, Macklem was saying real wages will fall substantially in 2022 as prices soar, hardly a popular idea but a necessity if we’re to avoid a wage-price spiral. If wages do accelerate to catch up with our current inflation rate of about eight per cent, that means employers’ labour costs — the largest part of their costs — will increase markedly, triggering another round of price hikes.
Canadians were blind-sided by their loss of purchasing power in 2022 because no one in the federal government or Bank of Canada warned them their income gains during the pandemic were ephemeral and unsustainable. But how could it be otherwise? If real incomes could be boosted simply by granting wage hikes beyond productivity gains or sending government checks to people, there would be no poverty in Canada or anywhere else in the world.