THINGS AREN’T GOING OUR WAY. That’s nothing new. But things seem really off this time. We all feel it. And we are not wrong. Truth bomb: Corporate sector winning the economic recovery lottery; workers falling behind, a recent study by David Macdonald for the Canadian Centre for Policy Alternatives (CCPA), details exactly how right right we are to feel how wrong things are.
Truth bomb #1:
This has never happened before
This has never happened before. Corporations have always made the most of every chance they get to increase profits—but not like this. What is different now is how much of the recovery gains the corporate sector has managed to capture—despite rising inflation. At the same time as inflation is paring away the real value of our wages.
This has never happened before.
“The net result,” writes Macdonald, ”is a historic realignment of who benefits from economic growth in Canada, shifting away from workers and toward the corporate sector.”
Blaming the victims—again
Workers are among those most victimized by inflation. June 23 figures pegged inflation at 7.7%—a forty year high. Average hourly wage gains last year were just 3.3%. That translates into a universal wage cut of over 4%!
Macdonald points out that the reality that wages are not keeping up with inflation, has no effect on who gets blamed. It’s still workers.
Macdonald writes: “Despite the fact that workers’ wages have been falling behind inflation, wage demands remain a stubborn mainstay in economists’ explanation of inflation.”
Macdonald goes on to point out: “... wage growth is mentioned twice in the Bank of Canada’s most recent analysis of inflation, while profits and the corporate sector are not mentioned at all.”
Not your average recovery
Canada has experienced six recessions in the last fifty years. Corporations came out ahead after the recessions in 1981 and 2020. In three of the others, workers ended up a little better off. In one, recovery brought no real change.
So, the fact corporations are coming out on top again does not make the pandemic recession unique. What makes it unique is that corporate gains are far, far greater than ever before—including the record gains of 0.8% in the 1981 recovery
By the first quarter of 2022, corporate profits were more than three times larger than the record recovery of corporate profits in 1981.
On the flipside, workers have lost ground in this recovery. Not as much as in their historic loss in 1981—but very close.
Macdonald notes: “...the current economy recovery hit a new record: no other recovery in the past half-century in Canada has provided so much benefit to corporate profits and only one other recovery has been harder on workers.
increase highest ever
Corporate profits are more volatile than wages and swing more quickly in recessions. However, after the worst of a recession, corporate profits bounce back and recapture much of what they lost.
In the recessions of 1981 and 2020, corporations did even better than that: corporate profits ended up being higher after the recession than before.
”What is particular about the pandemic recession is that corporate profits barely declined ... This is historically unprecedented,” writes Macdonald.
Macdonald also notes: “...the corporate profits-to-Gross Domestic Product ratio is the highest of any recovery in the past 50 years in Canada.
“The combination of high Inflation accompanying a recovery isn’t unprecedented in Canada,” writes Macdonald, “ but it’s been a few decades since that happened.
“What is unprecedented is how much of the gains from the current recovery that the corporate sector has managed to capture, despite rising inflation, or perhaps because of it.
chance to clean up
“With consumers expecting higher prices, corporations have a once-in-a-generation chance to rapidly raise prices to make up for increased input costs (like transportation) and to capture an unprecedented proportion of economic growth as profits during this economic recovery.
“At the same time, the resulting inflation is whittling away at workers’ real wages, diminishing their economic recovery. The net result is a historic realignment of who benefits from economic growth in Canada, shifting away from workers and toward corporate profits.”
Read the full report here.
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