THE WESTERN CANADIAN LUMBER WORKER AUGUST - SEPTEMBER, 1972 By MARC WYMAN The labour movement and other economic bodies and observers have said repeatedly that the Trudeau government's battle against inflation led to the current unemployment crisis. What is inflation, and how does it affect your wages and your budget? Simply stated, inflation is when your consumer dollar buys less than it did. We say that in 1972, the Canadian dollar is worth only 73 cents compared to the 1961 dollar; we mean that today’s buck will buy only 73 percent of what it bought 11 years ago. The people who are hardest-hit by infla- tion are obviously those on “fixed incomes” — old and retired people on government or private pensions, people on welfare, low- income groups, and people whose life savings are in insurance policies — in other words, anybody whose income doesn’t in- crease at least at the same rate as the prices of food, shelter, clothing, etc. People on wages and salaries are somewhat better off, although frequently their wage boosts aren’t enough to keep up with the increasing cost of living. Some trade union members benefit from so-called ‘‘escalator” clauses which link the wages to prices, so that wages go up the same amount as the consumer price index * does. In Canada, though, only 16 per cent of the wages governed by union contracts covering 500 workers or more, benefit from INFLATION ~ CANADA’S NUMBER ONE PROBLEM bs 4 bd an escalator clause. The proportion in the manufacturing industries is 33 per cent, which is somewhat better, but far from _ideal. The fact remains that only three per cent of the total force is covered by cost-of-living escalator clauses. Nor are other Canadians being helped much, despite the federal government’s first step towards linking old age and veteran’s pensions to the price index. In France, however, the national minimum wage Is linked to the cost of living. Why not in Canada and its provinces? What’s the answer to inflation? Many economists say there isn’t a complete an- swer at all —that the cure is worse than the disease. They are referring to attempts by governments to control inflation and the fact that these attempts have historically resulted in greatly increased unem- ployment, such as the bad times we're having now. The Nixon administration in the U.S.A. has tried price and wage controls, but nobody is pretending that they’ve worked. Delegates to the recent Democratic Party convention in Miami Beach pointed out repeatedly that the wage ceilings have been fairly effective, but the price limits haven't. Price controls without wage controls aren’t the answer, for if wage bills rise dramatically and prices are forced under a ceiling, business failures and contractions will result, and once again heavy unem- ployment will ultimately result. Escalator clauses aren’t a perfect solution to the problem, but they help. The economic leadership which free collective bargaining gives will mean that, to some extent at least, the unorganized, the old, the - jobless, and the pensioner will also benefit. Meanwhile, let’s see where the family dollar went in 1964 and where it went five years later. ; ITEM : 1964 1969 Food 21c 18c Housing 25c 24c Clothing 9c 8c Travel and _ Tran- sportation We 12c Personal taxes 9c 15c Other items 24c 23c The table shows how the buck was sliced up in 1964 and 1969, but it doesn’t show what a buck bought then and what it buys now. - We saw before that the Canadian dollar was now worth only 73 cents compared to what it would have bought in 1961. Another way of putting it is that anybody who was making $100 weekly in 1961 has to make $137 weekly now to live at the same standard as he did 11 years ago. How have prices risen? Which prices have gone up, and by how much? In terms of “1964 constant dollars”, that is, with the dollar pegged at its 1964 purchasing power, the following price increases have been > recorded: Item Percentage price increases, 1964-69 Food 19.0 Shelter 25.6 Household operation, furnishings and equipment : 12.4 Clothing 17.4 Travel and transportation 18.8 Other current consumption 20.2 Totla current consumption 19.7 In terms of 1964 constant dollars, the family which spent $1,323 on food in 1964 spent $1,343 in 1969. Other expenditures, with 1964 first and (1969) in brackets, were: shelter, $1077 ($1,159); household operation, etc., $534 ($682); clothing, $500 . ($616); travel and transportation, $776 ($919); other, $1,036 ($1,176); total $5,296 ($5,800). Remembering, those are ‘‘constant 1964 dollars.” In ‘“‘current dollars” — dollars reflecting what the buck will buy now — we © find dramatic differences between 1964 and 1969 figures. Percent Item 1964 1969 increase Food $1,323 $1,598 21 Shelter 1077 1,456 3) Household operation, furnishings and equipment 534 767 44 . Clothing 550723 31 Travel and transportation I76. 1.092 41 Personal taxes 599 =: 1,380 38 Other expenditure 500 652 30 Total expenditure 6,395 9,082 42 In other words, in a five-year span, a family spent 42 per cent more dollars for the same benefits, when those were “current dollars.” The rise in “real’’ spending, which is based on the ‘constant’ dollars, amounted to 11.2 percent, although prices rose 19.7 per cent. That, according to Statistics Canada, is where the family dollar goes. The problem, of course, is making income keep up with outgo, whether the dollar is ‘‘worth’’ less or not. And making income keep up with outgo is, after all, merely keeping one’s head above water.