POLICY: Tepid Wages After Re-Opening-Canada Union Economist

Canada's pandemic job rebound will see tepid wage growth with many workers facing long-term unemployment that will require policy makers to step up retraining programs, union economist and government adviser Angella MacEwen told MNI.

Service jobs hit hardest by the downturn may be slow to return for most of this year, and long layoffs will lead to "scarring" according to MacEwen, an economist at the Canadian Union of Public Employees, Canada's largest with 700,000 members. She advises federal and provincial governments and testified at Parliament last week on pandemic spending programs.

"We probably won't see those in-person services jobs coming back until everybody's really comfortable," she said in a phone interview. "Hopefully that's September, hopefully at least by the end of this year, maybe people will still have to wear masks but most people will be vaccinated and the spread will be to the point where people feel comfortable going out to a restaurant."

Big wage gains are "unlikely" even through a re-opening that could unleash consumer spending, she said. That view runs counter to investors driving up bond yields on signs central banks will run emergency policies through the rebound, boosting inflation beyond an expected jump in gas prices. Bank of Canada Governor Tiff Macklem told MNI recently that slack in the economy will hold down inflation and he won't have a problem reining in any big upside surprise.

TWO-TRACK ECONOMY

The "two-track" economy with many higher-income employees able to work at home makes it harder to figure out where inflation is headed, MacEwen said. Well-off families may spend a lot on travel when that's possible but much of that money could be on foreign trips, she said.

Workers in hospitality and other services may find it easier to retrain into growing fields such as health care. MacEwen backed the idea of expanding paid sick days, an idea urged by the opposition NDP party. The governing Liberals have said they will spend up to CAD100 billion after the pandemic and restore all of Canada's one million lost jobs, without a detailed plan of how that money will be used.

Disruptions to the supply side of the economy could create some inflation, MacEwan said, though the bigger pressure comes from the jump in workers giving up job searches and others who want full-time work but can't get it.

"Governments are starting to think about training, how do we take workers that are unemployed and transitioning them into jobs that are opening up and won't go away because of the healthcare needs," she said.