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Top Banking CEO blames workers’ wages for causing inflation

Photo: ptra/pixabay

Fellow workers, did you know that the higher amounts of inflation these days are your fault? Did you know that you are getting paid too much?

It’s news to me, I can say that much.

RBC raked in $16.1 billion for the 2021 year-end – up 40% from 2020 – and its CEO Dave McKay recently claimed that some of the blame for this lies in workers’ wages being too high. He also feared that workers would demand even higher wages, causing inflation to spiral even higher:

This is what Royal Bank of Canada chief executive officer Dave McKay was talking about last week, when he publicly warned the Bank of Canada in a Bloomberg News interview that it needed to take “rapid action” to launch “a series of rate increases” to squelch this inflation problem. He believes the buildup of inflation since last spring has let the wage-growth genie out of its bottle, and even if current temporary pressures ease, no one’s putting it back in – workers will still demand pay increases to compensate for the rise in consumer costs, and those increases are never going to be reversed.

The danger is that the economy gets caught in a wage-price spiral – the dreaded state in which higher wages fuel higher prices, which trigger still higher wage demands, in a vicious circle.

According to him, it is workers that are asking too much, not RBC and other banks whose “$170 billion haul marks most profitable year ever.” Workers in Canada deserve better than this.

No need to bring up other economic factors causing inflation such as labour shortages due to sick workers, falling supply, changing demand, supply chain shortages and bottlenecks, and massive amounts of government spending.

If workers receiving more of a share of the wealth they produce results in an ‘inflationary spiral,’ what does that say about the economic system as a whole?

Inflated anti-worker rhetoric?

Among others, one of RBC’s own chief economists, Craig Wright, disagrees. Wages haven’t risen a whole lot more than usual. If you are like me and work for a wage for a living, this is probably obvious to you. 

“To date, the wage numbers have been surprisingly soft.”

December’s year-over-year wage growth was 2.7 per cent – a pretty normal pace by prepandemic standards. Still, the pace of wage growth has accelerated over the past few months. There may be more to come.


[Former Bank of Canada governor Stephen Poloz] isn’t convinced that businesses will necessarily pass higher wage settlements through to their customers. He cites strong corporate profits as a key mitigating factor: The companies that make up the S&P/TSX Composite Index recorded their largest collective profit increase in history last year.

“A lot of firms might be able to just say, ‘No, to stay competitive, I’m not going to try to pass this through,’” he said. “As long as that’s true for a majority of the economy, you don’t get the start of a spiral.”

It turns out that many larger companies have been profitable enough over the last year. They are therefore likely to get by just fine without passing increased labour costs onto consumers, preventing an inflationary spiral. If workers receiving more of a share of the wealth they produce results in an ‘inflationary spiral,’ what does that say about the economic system as a whole? Something to think about.

Joining the chorus of Conservative scapegoating

McKay has joined with the ensemble of the Conservative party who have turned to incessant blaming of Trudeau for all of Canada’s inflation problems. Not a day goes by without Pierre Poilievre or Erin O’Toole screeching about “Justinflation.”

Of course, like McKay, the Conservatives also ignore the other previously mentioned causes of inflation. However, their aim is directed at government pandemic-relief spending on workers, not so much on wages.

While I have no problem criticizing Trudeau on a number of issues, the conservative tactic of hammering away at inflation is fundamentally wrong. They claim inflation is happening because the federal government spent too much on workers, and workers should have been sent to work sooner – during a global pandemic mind you.

Furthermore, this serves to place the blame on a single individual, Trudeau, rather than a faltering economic system ill-equiped to deal with a pandemic. Well, faltering for everyone, except a select few who have profited tremendously throughout the pandemic. 

In the end, workers are attacked on two fronts via inflation rhetoric. First, by banking CEOs who claim workers make too much money, and second, by the Conservatives who claim that they received too much government support during the pandemic. In fact, in reality businesses received $26 billion more in pandemic relief funds than individuals did.

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