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Bank of Canada's position is very nuanced, but all the nuance is ignored by their critics. They never asked employers not to raise wages this year. They asked t

Bank of Canada's position is very nuanced, but all the nuance is ignored by their critics. They never asked employers not to raise wages this year. They asked them not to bake in e.g. 8% per year wage increase for the next 10 years if they are negotiating a long term contract with a union. The rationale is that while 8% raise this year is reasonable given the inflation rate, the inflation rate will not remain high for the next decade, so it will be too high further in the future. If many bind themselves with high wage increases long term, we will have high inflation for a long time due to the effect of the cost of labour on prices. > “Don’t build that into longer term contracts. Don’t build that into wage contracts. It is going to take some time, but you can be confident that inflation will come down.”

0xbadc0de5 4y ago
Thank you for pointing this out. As much as I like to criticise the government (in many cases, well-deserved), it's important to keep a nuanced perspective and reserve criticism for cases that indeed warrant it. Not basing long term contracts on short term economic fluctuations seems like a reasonable policy. If you're going to account for inflation in a contract, I believe indexing is the preferred method anyway. Many government pensions - and some salaries - are indexed to inflation.
soulofmischief 4y ago
Since wage hikes historically have not matched inflation, I don't see anything wrong with hikes that surpass inflation rates. We have a lot of catching up to do, and incumbents designed this system so that healing the gap hurts the bottom line of voters, so there is simply no painless way out of it. We've all been paying towards a debt that is about to be realized.
refurb 4y ago
Not sure that's much better? Tiff also said "inflation is transitory", but hey, here we are. And if I'm a union guy negotiating my next 3 year contract and I listen to Tiff and only get 8% this year, then 3% the next two years, is Tiff going to pay the difference when inflation isn't under control?

0xbadc0de5 4y ago

Thank you for pointing this out. As much as I like to criticise the government (in many cases, well-deserved), it's important to keep a nuanced perspective and reserve criticism for cases that indeed warrant it. Not basing long term contracts on short term economic fluctuations seems like a reasonable policy. If you're going to account for inflation in a contract, I believe indexing is the preferred method anyway. Many government pensions - and some salaries - are indexed to inflation.

soulofmischief 4y ago

Since wage hikes historically have not matched inflation, I don't see anything wrong with hikes that surpass inflation rates. We have a lot of catching up to do, and incumbents designed this system so that healing the gap hurts the bottom line of voters, so there is simply no painless way out of it. We've all been paying towards a debt that is about to be realized.

refurb 4y ago

Not sure that's much better? Tiff also said "inflation is transitory", but hey, here we are. And if I'm a union guy negotiating my next 3 year contract and I listen to Tiff and only get 8% this year, then 3% the next two years, is Tiff going to pay the difference when inflation isn't under control?