Edmonton wage earners ‘spinning their wheels,’ economist says

EDMONTON – Adjusted for inflation, wages for 99 per cent of Edmonton residents haven’t increased one bit over the last 30 years, the city’s chief economist said Wednesday.

In Calgary, wages have actually declined. The vast majority of people in Calgary can buy less with their paycheque today than they could in 1982, said John Rose.

That might seem counterintuitive, given the tremendous growth in both cities over those three decades. But that growth is actually the problem, said Rose, speaking to the Economists Society of Northern Alberta and citing recently released data from Statistics Canada.

Growth in the business sector meant shiny new office towers, especially in Calgary, but it has also led to an increasingly polarized society where much more wealth is concentrated with the richest one per cent.

“It’s changed the structure of the economy,” said Rose, presenting a series of graphs comparing the size of the business services sector and the percentage of wealth going to top earners. “It’s a mind-numbingly simple relationship. When you attract headquarter functions, it results in a rapid run-up in the share of wealth going to the top one per cent.

“You increase office employees, you’re going to increase the concentration of wealth at the top. That’s the bottom line.”

That’s a problem for governments because historically, unequal societies grow more slowly over the long-term and their economies are more volatile. “That’s a particular concern obviously in a jurisdiction like Alberta where the economy is kind of volatile to start with,” Rose said. There are also other social concerns, he said.

But Rose said he’s less concerned with how rich the top one per cent is getting, and more concerned with stagnant wages for most Edmonton residents. The top one per cent of income earners in Edmonton saw their wages, adjusted for inflation, increase by about 45 per cent. The rest of the population saw no increase.

“They are spinning their wheels. That’s the point. Their ability to consume has gone nowhere in 30 years. Those individuals are not any more prosperous than they were in 1982.”

In Calgary, the one per cent saw wages increase by 52 per cent, compared to a five-per-cent decrease for the rest. Rose’s analysis looked at median individual income before tax.

Taking questions from the economists present, Rose was asked what policy changes might address the situation.

The easiest change would be to increase the number of people getting post-secondary education, he said. That would increase the supply of the highly educated people competing for top jobs. A sales tax and increased taxes on capital gains should also be considered, he argued.

At a municipal level, cities could put less emphasis on trying to attract corporate headquarters and more emphasis on trying to attract other kinds of employment, he said.

“It goes against boosterism,” said Carl Sorensen, a retired city planner and economist at the luncheon.

“Absolutely,” Rose replied. “This raises questions. Does a rising economic tide lift all boats? Not really. This blind boosterism, you have to think about it twice. Be careful what you wish for.”

University of Alberta economics professor Rick Szostak, also in the audience, said that seeing the data broken down to the level of the city was new. The close statistical correlation between the growth in headquarters and the percentage of wealth concentrated among top earners was also interesting, he said.

“But I’m a little skeptical that things are actually that bad,” he said. Adjusting for inflation over time is a difficult thing to do and doesn’t take into account the range of new products now available. “I think the average person is better off than those numbers might show.”