In this week’s EconMinute, we’re talking about real wage growth—i.e., how much Canadians can afford to buy, given their income.
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For months, we’ve been reading the headlines about, and feeling the pinch of, higher prices: gas, rent, grocery store staples, and home appliances have all become more expensive. The most recent data show that the prices of the things consumers buy (as measured by the Consumer Price Index) increased by 5.7% versus last year. That’s more than double the typical 2% a year increase we were used to seeing prior to the pandemic.
Incomes tend to increase over time, however, too. So, the question is: has pay kept up with inflation or are people falling behind in what they can afford to buy at the grocery store?
To add additional context to this question, we looked at how Canadians are doing compared with two other countries that have experienced high inflation recently—the U.S. and the U.K.
Here is what we found:
- Price increases in Canada are similar to those in the U.K. (5.7% versus 5.5%, respectively), though not as bad as in the U.S. (an almost unbelievable 7.9% increase versus a year ago).
- However, wages in Canada are not growing as quickly as they are in those other countries: just 3.1% compared with 4.8% in the U.K. and 5.1% in the U.S.
- This means that, though Canada might not have the highest inflation rate, our pocketbooks are being stretched just as much as Americans’—and more than those in the U.K.
- In total, the “real” value of Canadians wages (i.e., how much that money actually buys) decreased by 2.6%, similar to the 2.8% in the U.S. and more than the 0.7% in the U.K.