Why wages aren’t going up
Benjamin Tal, deputy chief economist at CIBC World Markets, says there are many reasons wage growth hasn’t been strong.
He says there’s a mismatch between people and jobs, automation is reducing bargaining power, and the share of older workers (50-60) is rising at the fastest rate ever.
“People do not retire as quickly as in the past, but they reduce the number of hours they work,” Tal told Yahoo Finance Canada.
“So employment is still rising, but the number of hours is not rising as quickly, which is disinflationary.”
Tal said older workers tend not to ask for raises. They also miss out on bigger paydays by not jumping ship to other employers. When people retire, they are replaced by younger workers who get paid less.
Preparing for the worst
A new paper by the National Bureau of Economic Research in the U.S. proposes employers should think about offering workplace rainy day funds as a way to keep up with unexpected events like falling behind on debt. It would also prevent raiding retirement funds.
Rubina Ahmed-Haq, personal finance expert, says it’s a great idea, but since most employers don’t offer it, it’s important to sock away some money when times are good. She suggests aiming for enough to get you through three months.
“Find out how much three months of expenses are by writing everything down that you spend, including bills and mortgage,” she told Yahoo Finance Canada
“Your life could cost $2,500 a month or $15,000, but you won’t know unless you add it up first.”
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