Adam said
"Not commenting on specifics of MPI so much as general labour tension we're seeing lately.
I guess I'm a sort of "both sides" person on all of these labour disputes that are really adding up (add Rogers Sugar today to the strike list).
Costs have gone up and depending on the career, field, pay and cash flow of the employer there's a real case for workers' take home pay to scale vs cost of living increases.
At the same time I get a little concerned when I see blanket narratives around CEO pay, companies making record profits, etc. Thats definitely not all CEOs, thats definitely not all industries or companies and in cases where it might've been when interest rates were low it isnt necessarily the case today. These narratives are being used to justify wage increases that become cost increases for companies that in some cases become justification for companies to increase the price on what they're selling to recoup increased cost in wages. Depending on how things play out there's a chance for this to lead to things getting real ugly by cycling into another hit of inflation. Then guess what happens when peoples' costs go up again with that next hit of inflation. Then what happens if we see deflation like what there have been signs of in China, and increased wage costs are already baked in. Then mix in that the cost of the debt thats allowed so many companies to do well over the last decade-plus is significantly higher, meaning cash flows that supported profits of prev years isnt necessarily the same going forward depending on the company and the debt they're carrying.
At some point on a company-by-company, industry-by-industry basis cool, rational heads need to find a sweet spot to stop potential for a vicious cycle that hurts us all, arrive at a definition of fair pay in current realities while being mindful of the bigger picture and making deals that respect there are many directions the economy can go from where it is today. Where's the middle ground that respects difference in cost of living today from 3-4 years ago, yet doesnt bake in outsized assumptions about where the economy goes one month, one year, five years from now?
I know absolutely nothing about MPI, how this applies to it specifically is up to someone wiser than me! :)
"
Adam, I get your point, but you’re trying to think out an impossible chicken and egg problem. Do higher wages cause inflation, or does inflation require higher wages? Which comes first? In fact, it doesn't matter. As long as there has been capitalism, prices have gone up, and wages have gone up. The thing is, most of the time, the two are ‘more or less’ in sync. Meaning neither takes a dramatic jump compared to the other, leading to a crisis. But once in a while, that does happen – like our current period of exceptionally high inflation (and now interest rates). The thing is, unless wages catch up, we all end up a little bit poorer in relative terms, because prices generally won’t come back down. General deflation is actually worse for the economy than wages catching up. So unless one is OK with prolonged periods or general stability, punctuated with short periods where we all get poorer, then wages will have to rise eventually to balance the cycles out again. Thing is, during these times, the poorest suffer the most. The rich won’t really change their consumption habits. The middle to upper class might buy fewer toys or go on fewer vacations. The poorest end up having to choose between food and rent or other necessities. By the way, the opposite doesn’t seem to occur – sudden jumps in wages that far outpace inflation. The system kind of inevitably prevents that from happening, since those kinds of wage jumps would cause prices to go up. I guess the question then is why do prices go up rather dramatically once in a while when wages didn’t drive them up?
And the ‘narrative’ about CEOs and record profits isn’t a narrative. It’s an observation. I did say that these are the ‘big’ ones, meaning I recognize that not all private companies are in the position of the ones I mentioned. However, the point is this (now here is the narrative): The definition of ‘success’ in a free market capitalist economy is profit. So those ‘big’ ones are the ‘best’ players in a capitalist economy. That’s what everyone is ideally striving toward. And through free market competition, the successful ones will put the not-so-successful ones out of business. That’s what competition is supposed to do. The narrative suggests that as this goes on, our economy will be dominated by more and more of these entities with super rich CEOs on the basis of ever larger profits. The irony of competition is that it will eventually eliminate competition. Prosperity for the majority of ordinary working people can only be maintained if wages keep up fairly with inflation. By ‘prosperity’ I mean a decent life, not excessive wealth. If wages don’t keep up, the inevitable result is that working people get gradually poorer in relative terms over time, as our same old income buys less and less.
Now back to the MPI situation. It turns out people across the public sector just saw their real incomes go down over 15% in a few short years because the province mandated zero or near-zero wage increases just before inflation spiked. In other words, government meddling prevented wages and prices from kind of carrying on ‘more or less’ in sync. I note that currently, bargaining in the private sector is seeing companies offering well over our province’s current pattern of 2% annual increases, which will leave public sector workers still years behind through the next contract cycle. The automakers, for example, have been offering 5% increases. I’m not passing judgment on what their wage increases should be, just observing that the private sector appears to be making more generous offers in these inflationary times. Surely they wouldn’t be doing this if it was going to be catastrophic for their businesses.