a)Today's economic environment is challenged with higher than normal inflation, and the Bank of Canada has resorted to increasing interest rates to cool the economy. briefly describe the impact on the Canadian labour market when the government and the Bank of Canada tried to reduce and eliminate high inflation in the 1970's.

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Changes in Average Weekly Earnings and Hourly Wages The Survey on Employment, Payrolls, and Hours (SEPH) collects data on labour compensation. Although SEPH does not collect data on actual wage rates, the information it gathers can be used to calculate measures of average weekly earnings and hourly wages by dividing total earnings by total paid weeks or hours. The average hourly wage data from the SEPH have the advantage of being directly derived from a survey, but they are limited when compared to labour income estimates from the System of National Accounts. The information is available only from March 1983 on and is less comprehen- sive because it excludes compensation elements not directly reflected in the payrolls of firms, such as employers' contributions to pension funds, health, and insurance programs. In 1983, Canadian employees in all industries were paid an average of $383 per week, including overtime premiums. Twenty years later, in 2003, average weekly earnings had risen to $690, that is, by 80%. Although weekly earnings increased at about 4% annually between 1983 and 1990, their growth dropped off sharply after the 1990-91 recession. If inflation is taken into account, real weekly earnings stagnated over the entire period of 1983-2003. The weekly earnings figures for all industries hide marked differences in the earning levels between the goods and services-producing industries. In 1983, average weekly earnings in the goods-producing industries were $471, compared to $351 in the services-producing industries. In other words, employees in services-producing industries earned 75 cents for every dollar earned per week by their counterparts in the goods-producing industries. By 2003, weekly earnings in the two sectors had grown to $864 and $638, respec- tively. That is, at 74 cents, the gap had changed very little over the last 20 years. Because average weekly earnings are the product of average hourly earn- ings times average usual hours worked per week, an increase in nominal weekly earnings may not reflect any gain in the reward for labour services but Changes in Average Weekly Earnings and Hourly Wages The Survey on Employment, Payrolls, and Hours (SEPH) collects data on labour compensation. Although SEPH does not collect data on actual wage rates, the information it gathers can be used to calculate measures of average weekly earnings and hourly wages by dividing total earnings by total paid weeks or hours. The average hourly wage data from the SEPH have the advantage of being directly derived from a survey, but they are limited when compared to labour income estimates from the System of National Accounts. The information is available only from March 1983 on and is less comprehen- sive because it excludes compensation elements not directly reflected in the payrolls of firms, such as employers' contributions to pension funds, health, and insurance programs. In 1983, Canadian employees in all industries were paid an average of $383 per week, including overtime premiums. Twenty years later, in 2003, average weekly earnings had risen to $690, that is, by 80%. Although weekly earnings increased at about 4% annually between 1983 and 1990, their growth dropped off sharply after the 1990-91 recession. If inflation is taken into account, real weekly earnings stagnated over the entire period of 1983-2003. The weekly earnings figures for all industries hide marked differences in the earning levels between the goods and services-producing industries. In 1983, average weekly earnings in the goods-producing industries were $471, compared to $351 in the services-producing industries. In other words, employees in services-producing industries earned 75 cents for every dollar earned per week by their counterparts in the goods-producing industries. By 2003, weekly earnings in the two sectors had grown to $864 and $638, respec- tively. That is, at 74 cents, the gap had changed very little over the last 20 years. Because average weekly earnings are the product of average hourly earn- ings times average usual hours worked per week, an increase in nominal weekly earnings may not reflect any gain in the reward for labour services but

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In the 1970s Canada grappled with a surge in inflation prompting concerted efforts by the government ... View the full answer