Should businesses raise wages as inflation soars?
André Pratte is a principal at Navigator and executive chairman of the Canadian Centre for the Purpose of the Corporation
Mr. Macklem explained how, according to Economics 101, long-term inflation expectations feed into the price spiral: “Businesses are having trouble attracting workers, are having trouble keeping workers, so they start raising wages and they’ve got strong demand for their products, so they pass those higher wages on to higher prices. Households then face higher inflation. Workers want higher wages to compensate them for higher inflation. Firms offer those higher wages.
Answering these questions is complicated by the fact that an increasing number of executives are justifiably becoming convinced that their companies must be driven not only by the interests of their shareholders, but by those of all their stakeholders, including their employees . According to a report published Wednesday by Royal Bank of Canada economists, the labour shortages hampering Canada’s economic growth will be with us for a long time, even if we go through a recession next year. “The root of Canada’s labour crunch predates the pandemic, and will outlive the next downturn as well,” the economists write. “Indeed, a greying population will continue to create disruptions that extend beyond the shorter-run economic cycle.
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