The Truth About Canada (11 page)

Let’s take a closer look at how workers in Canada have been doing in our growing economy. In 1995, the industrial aggregate of hourly earnings was $15.05. Ten years later, it was $18.17, representing an average annual increase of just over 31 cents, or 2 percent, a year. During the same years,
the average inflation rate was 2.24 percent. So, while the economy has been booming in recent years, Canadian workers haven’t exactly struck it rich.
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During the 20 years from 1987 to 2006 inclusive, the annual increase in the consumer price index was greater than the increases in wage settlements in 10 of those years, and in two of the remaining 10 years they were identical.

One interesting way of looking at wages is as a percentage of GDP. In 1992, before taxes they were 55.4 percent. In 1993, 55 percent. Since then, they’ve gone downhill, to only 50.2 percent in 2005. The 5.2 percent difference worked out to almost $7.3-billion in 2005. (In 2006, wages increased marginally to 50.7 percent of GDP, still far below the level of most previous years.)

In sharp contrast, it’s revealing to look at corporate profits as a percentage of GDP during the same years. In 1992, before taxes they were 4.7 percent of GDP; in 1993, 5.7 percent. But in 2006, they were up to 13.9 percent of GDP, the highest in history.

Another way to measure wages is to compare contractual wage settlements to increases in GDP. For the period from 1996 to 2005, hourly settlements averaged just 2 percent annually. Meanwhile, average annual GDP increases at market price averaged 5.4 percent. Once again, while the economy has been doing well and profits have been soaring, workers are showing little or no improvement in their earnings.

In a different measure, the Vanier Institute of the Family reported in February 2006 that since 1990 the average after-inflation increase in hourly earnings for Canadians had been only a tiny 10 cents. And in a 2004 study of 11 countries, the consulting firm KPMG said that Canada had the lowest labour costs among all the countries in their survey.
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Great for corporations, but hardly something for workers to rejoice about.

It’s interesting to compare wage increases in Canada with those in other developed countries. In the 10 years from 1996 to 2005 inclusive, wage increases in Canada were below the average wage increase of the other 29 OECD countries in eight of the 10 years.

Statistics Canada defines “low wage jobs” as jobs paying less than $10 an hour (in constant 2001 dollars). In 2004, over 1.3 million full-time
Canadian workers had low-wage jobs. Women are twice as likely to be in low-wage jobs as men. Dennis Raphael of York University says that in contrast to Canada, only 5 percent of Finnish and Swedish workers earn low wages, and, as we’ve seen, their poverty rates are far lower than Canada’s. Raphael says, “In essence, the single best predictor of the number of people living in poverty in a nation is the number of people earning low wages.”
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Raphael also says, “Among developed nations, Canada has the second highest percentage of low-paid workers … exceeded only by the U.S. Our minimum wages are among the lowest.”
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Economists Arthur Donner and Douglas Peters, in a May 2006
Toronto Star
op-ed piece, are to the point:

To a far greater extent than in the past, the issue of economic justice and income distribution is off the radar screen of our politicians, leaving huge numbers living in poverty.

We are struck by the way in which the minimum wage was deliberately allowed to fall despite the fact that the minimum wage plays a key social and anti-poverty role.
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From 2000 to 2005 inclusive, the share of employees working for minimum wage in Canada varied from a low of 4.1 percent to a high of 4.8 percent. In 2005, the highest provincial percentage was in Newfoundland and Labrador, at 6.8 percent, the lowest in Alberta at 1.5 percent.
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That same year, some 587,000 men and women worked at or below the minimum wage in their province, which ranged from a low of $6.25 an hour in Newfoundland and Labrador to $8.00 an hour in British Columbia. By 2007, Newfoundland and Labrador as well as Alberta and New Brunswick had minimum wages of $7.00 an hour, while the other provinces were between $7.15 and $8.00, the rate for Ontario and B.C.

Women made up just over 60 percent of all minimum-wage workers. This works out to about one in 19 women workers, compared to one in 30 men.

Again, how do minimum wages in Canada compare with those in other developed countries? If we compare the statutory minimum wages
plus social-security contributions for average workers in 17 OECD countries, 11 have higher combined wages and benefits than Canada. The only countries lower than Canada on the list are Poland, the United States, the Czech Republic, Japan, and South Korea. In July 2007, the United States increased the minimum wage to $5.85 an hour, the first increase in a decade.

For the most part, especially considering inflation, minimum wages in Canada have improved very little in recent years. In some provinces, they have gone backward in real purchasing power. After many years, the Ontario minimum wage finally went up from $6.85 an hour in 1995 to $8.00 in 2007. But in high-cost cities such as Toronto, eight dollars an hour is hardly enough to come close to a decent standard of living. Ontario is not an exception. In no Canadian province are minimum wages close to the poverty line.

In Ontario, almost 1.2 million people have to live somehow on wages of less than $10 an hour. And even with the 2007 increase of 25 cents, in real terms they were actually earning 10 percent less than a decade earlier. A 2007 Canadian Centre for Policy Alternatives (CCPA) report showed that if the real wages of workers in Canada had increased at the same pace as productivity, average annual salaries would be some $10,300 higher.

Now let’s look at how Canadian workers have made out compared to their CEOs.

In the fall of 2006, University of British Columbia economist Robert Evans, writing in
Healthcare Policy
, pointed out that between 1976 and 1990 average per-capita income hardly changed, but the top 0.01 percent of earners saw their incomes more than double. Evans blames the increasing wealth and power of the very rich for the increasingly unfair elite agenda of lower taxes for high-income recipients and lower social spending. Meanwhile, CEOs are firing well-paid workers and contracting out their jobs at lower pay with fewer benefits.

In the above-mentioned report from the CCPA, economist Hugh Mackenzie showed that in 2005 the average top-paid CEO made just under $9.06-million and the top 100 ranged from $2.87-million to over
$74.82-million. Meanwhile, the average Canadian worker earned about $38,000 in a year, and the average person working for minimum wage earned $15,931 a year.

Mackenzie illustrated the difference in annual income by working out that the average top-paid CEO had equalled the average Canadian’s yearly earnings by 9:46 a.m. on January 2. And as for the country’s highest earner of all,

Canada’s highest-paid CEO in 2005 would barely have had time for morning coffee on New Year’s Day before matching average earnings for Canadians for the whole year. His pay passed the Canadian average at 10:04 a.m. on January 1st.

The highest-paid CEO makes as much as a small town — 1,969 people — working at the average of wages or salaries, or 4,686 people working full-year at the minimum wage.

One Conference Board of Canada survey in 2005 indicated that pay for corporate directors soared 41 percent over two years, far more than 10 times the increase in the average wage of workers during the same period. Of the 50 highest-paid executives in 2005 (salary, plus bonus, plus shares, plus options, etc.), all received more than $9-million in compensation. Seven received more than $20-million. Hank Swartout, CEO of Precision Drilling Trust, received over $74.8-million; Hunter Harrison, CEO of Canadian National Railway, was awarded $56.2-million; Frank Stronach of Magma $52.5-million; Mike Zafirovski of Nortel over $37.4-million; and John Hunkin, former CEO of the CIBC, received a total of just under $29.5-million.
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Most of these represented enormous increases from their compensation of a year earlier. In 2007, James Balsillie and Michael Lazaridis received $92.5-million, André Desmarais and Paul Desmarais Jr. received $40.2-million, and Glenn Murphy had to get by with only $34.4-million.

We’ve already seen the tiny percentage wage increases Canadian workers have received. Let’s look at some recent CEO percentage
increases: Denis Turcotte of Algoma Steel, 183 percent; Marc Tellier of Yellow Pages, 163 percent; Nancy Southern of Canadian Utilities, 135 percent; Donald Lang of CCL Industries, 138 percent; Clayton Riddell of Paramount Resources, 101 percent.

According to the
Globe and Mail
, Canada’s chief executives saw their average compensation increase by 39 percent in 2005. Adam Zimmerman, the retired CEO of Noranda Forest, has been one of only a small handful of Canadian executives to speak out against the excessive levels of corporate compensation. In an October 2005 speech in Toronto, he said, “These huge remuneration schemes are the root cause of all that is going wrong in the world.”

The major banks are the “princes” of the compensation world, and other companies follow them. The CEOs of Canada’s six biggest banks were paid a total of $53-million in 2006. Zimmerman said that CEO pay should be put in perspective with the salaries of normal employees. In one CCPA study, the 100 highest-paid chief executives made 218 times as much as the averge full-time Canadian worker. “Were it not that they do it within the law,” Zimmerman said, “I would think executives are stealing money.”
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Hand in hand with growing income and wealth inequality have come increasing corporate concentration, media concentration, and globalization (where transnational corporations oppose social reforms which might increase their costs). Dennis Raphael and Toba Bryant write:

Since the mid-1970s a fundamental change in the operation of national and global economics has occurred. The increasing ability of transnational corporations to easily shift investments across the globe pressures national governments to accede to demands to reverse reforms associated with the welfare state. International trade agreements weaken national identities and nationally based labour unions. Trade is now international, but unions are nationally based. With such a power shift, business has less need for political compromises
with labour and even governments. Worker power and the ability to negotiate better wages and benefits are weakened.
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Now that we’ve looked at wages, let’s turn our attention to the remarkable figures that demonstrate the distribution of income and wealth in Canada.

10

THE DISTRIBUTION OF INCOME IN CANADA

“A substantially nastier economic reality”

“While the poor have become poorer, the rich have become much richer.”

W
e’ve already seen how poorly the average worker in Canada has done in recent years. Now let’s take a broader look at how incomes, including family incomes, break down; that is, who’s gaining and who’s been missing out.

From 1990 to 2000, families in the highest 10 percent of income earners in Canada increased their incomes by an average of 14.3 percent. Middle-income families, however, saw their incomes increase by only a tiny 0.3 percent, and those below middle-income levels
lost
on average 0.7 percent of their incomes. Over the entire 16 years from 1984 to 2000, the average after-tax income of the poorest fifth of Canadian families increased by less than $1,000!

Looking at the incomes of all Canadians, not just families, in 1990 the average personal income of the top 10 percent was $161,460. By 2000, it was $185,070, a gain of $23,610. There was quite a different story for the lowest 10 percent, whose average earning in 1990 was only $10,341. Ten years later, that had increased by only $80 a year. In other words, the top 10 percent increased their earnings by over 295 times the lowest 10 percent!

In October 2000, Paul Martin, who was then finance minister, said, “We must work towards reducing the gap between rich and poor.… We have always said we must work towards reducing this gap.” Let’s see the results of what Paul Martin and the Liberals “have always said.” Here’s
what happened after Mr. Martin and Mr. Chrétien went to work. Four years after Martin’s promise to reduce the gap, in 2004, the highest 20 percent of Canadian families earned 42 percent of all market income, while the lowest 20 percent earned only 3.6 percent.

Back in 1989, the year of our now infamous House of Commons resolution on child poverty, and the first year of the FTA, the bottom 40 percent had over 17.2 percent of income. Measured by quintiles, in 2004 the top 20 percent of families had 46 percent of all market income while the bottom 20 percent had a tiny 3.6 percent.
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In a July 2004 paper, economists Emmanuel Saez, of the University of California at Berkeley, and Michael Veall, of McMaster University, make some important points:

Over the last 20 years, top income shares in Canada have increased dramatically, almost as much as in the United States. This change has remained largely unnoticed because it is concentrated within the top percentile of the Canadian income distribution and thus can only be detected with tax return data covering very high incomes.

The upturn during the last two decades is concentrated in the top percentile (whose share increased from about 7.5 percent in the late 1970s to 13.5 percent in 2000 … ).
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