Canadian Corporate Profits Are Soaring While Inflation Is Eating Into Workers’ Wages
Labor hardship and a fattened corporate sector underlie Canada’s pandemic recovery. Workers are suffering while corporate profits are capturing more economic growth than in any previous recession recovery period over the past 50 years.
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 as harder on workers. (Getty Images)
Over the past fifty years, Canada has experienced six recessions. In the 1974, 1990, and 2008 recessions, workers ended up better off than corporations whereas in the 1981 and 2020 recessions, corporations had the upper hand. This time around, the corporate profit-to-GDP ratio is higher than any recovery in the past half century. In the final months of 2019, corporate profits captured 12.4 percent of GDP. By the first quarter of 2022, corporate profits had risen to 15.2 percent of GDP. This unprecedented 2.8 point increase during the pandemic recovery is more than three times larger than the next highest recovery of corporate profits, in 1981.
On the flip side, workers have lost ground in this recovery, losing 0.8 points of GDP two years since the recession began. This isn’t quite the worst loss following a recession in the past fifty years — which was 0.9 points in the 1981 recession — but it comes close. What is unprecedented is how much the corporate sector has managed to capture of the gains from the current recovery, despite rising inflation. At the same time, inflation is whittling away at workers’ real wages. The net result is a historic realignment of who benefits from economic growth in Canada, shifting away from workers and toward the corporate sector.
Not a Typical Recovery
Unlike recent recessions, the current economic recovery has occurred amid high levels of inflation — something that Canada hasn’t seen since the 1980s. Canada’s labor market is currently strong and unemployment is low. Average hourly wage gains were 3.3 percent over the past year, meaning that workers are seeing their wages fall in real terms because of uncharacteristically high inflation, which ran at 6.8 percent over the same period.
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