Many central Albertans are struggling with the high cost of living, but increasing wages in a stagnant economy is neither practical nor helpful in the long run, local economic experts say.
A report from the Alberta Federation of Labour titled Alberta's Disappearing Advantage found "unprecedented" income reductions due to government policies and inflation. Wages are down even in the usually profitable petroleum and mining sectors, stated the AFL — and this is putting pressure on families that are struggling with inflation and other rising costs of living.
The report found that despite purchasing power in the province being down five to 10 per cent since 2018, Alberta has the slowest wage growth among all the provinces.
"This report is an alarm bell and an urgent call to action,” said AFL president Gil McGowan. “The living standards of all Albertans are collapsing... (we need to) convince the government to abandon policies that are hampering economic growth and suppressing wages.”
Scott Robinson, CEO of the Red Deer and District Chamber of Commerce, understands many people are having a hard time with affordability — but he said so are many businesses in the aftermath of COVID, inflation, and in a local economy that has been stagnant since 2016.
He's glad inflation is waning, as he doesn't believe wage increases will be practical until the economy improves. For instance, raising minimum wage in the service industry, with its tight margins, would drive up the cost of eating out, leading to fewer diners and more restaurant closures, said Robinson.
"Over time we can correct these things but it is a long-term process..."
Dustin Quirk, economics instructor at Red Deer Polytechnic's Donald School of Business, is also doubtful higher wages are the answer at this time.
While raising minimum wage may appear to help those earning $15 per hour, the reality is businesses often cut back hours or hire fewer minimum wage staff to deal with rising staffing costs, said Quirk. He noted most Albertans make more than that anyway, and would not be directly impacted.
"If the goal is to increase the wages and standard of living of all Albertans, productivity growth is the key," said Quirk. "If you just raise wages without improvements in productivity, businesses have to pass along these costs in the form of higher prices ...meaning that consumers are really no better off in the end." "
Quirk and Robinson are both disturbed that Canada's productivity is the lowest of all OECD (Organization for Economic Co-operation and Development) nations.
Robinson said both levels of government could do better in terms of encouraging investment. He feels the federal government needs to send a more straight-forward messaging to industry about what path to go down, in terms of reducing emissions and their carbon footprint. Is carbon capture and storage the way to go for the future, or will another method be trendy next month?
Unstable government policies and uncertain regulations have led investors to be hesitant about sinking their money into projects that may not pay-off in the long run, he added.
Robinson is pleased the provincial moratorium on alternative energy projects is being lifted and the UCP government is drafting some rules for going forward. He believes the government should then "step out of the way" and let the market operate.
Given that Canada and Alberta are lagging in productivity, Quirk believes the solution is for business and government to invest in more research and development, new machinery and equipment, and in "human capital" or in training, skills development, and education for their workers.
"The province has a key role to play in providing funding and support for education ...and providing incentives for businesses to invest in improving their infrastructure and upskilling their people," said Quirk. "This will take time, but with provincial and business commitment, all Albertans can benefit from a renewed Alberta Advantage."