Wages and Labour Productivity in Canada from the Early 20th Century: Did Workers Benefit from Economic Growth?
This article assesses the growth in real wages of workers in Canada from the beginning of the 20th century to 2013, considering the wages of both unionized and non-unionized workers. This growth is compared with the increase in labour productivity, testing Robert Solow’s economic theory suggesting that real wages increase at the same rate as labour productivity. The wage growth is examined during three time periods based on the dominant modes of industrial relations regulation: 1900-1939, 1940-1979 and 1980-2013. The first phase, that of liberalism, was ruled by linked to free labour market and the beginnings of unionization, The second in an area of Keynesian ideas, is characterized by union activism and help of the state. The third, in the assertion of neoliberalism, saw the decline of trade unionism and the support provided by governments. Our analysis brought out three important factors influencing wage determination: 1- economic growth; 2- state action; and 3- union activism. Our research shows that the average real wages of workers in Canada have hardly increased beyond inflation over the last three decades despite an increase in labour productivity. This quasi-freeze in the purchasing power can be related to changes in the erosion of the balance of the balance between labour and management and the neoliberal values prevailing in governments. On the other hand, the years prior 1980’s evolved in a completely different light, with employees benefitting from economic growth and increased labour productivity. Following the Second World War, the purchasing power of employees more than doubled while they also enjoyed a decrease in their working hours and numerous social benefits. This progress was the result of strong economic growth, a higher rate of unionization and Keynesian government policies focused on stimulating consumption. As for the period from 1901 to 1940, employees also benefitted from industrial development, even though the relations that determined hiring and working conditions were mainly based on free market rules. During this period, state action remained marginal, but some unions were successful in imposing collective bargaining.