Thank you, Mr. Lawrence, for the question and for your commitment to getting out of the echo chamber, which I heartily endorse.
I would not say productivity is a necessary condition for wage increases. It is possible, even with zero productivity growth, to have real wages increase. That would imply that the labour share of GDP would have to increase. That means some other factor of production in the economy would have to get a smaller slice of the pie at the end of the day.
In the current moment, that's not a hypothetical question because we have seen a significant shift in the composition of income distribution across factors in Canada away from labour, compensation, wages, salaries and supplementary benefits towards corporate profits. The corporate profit share of GDP reached an all-time high in Canada in 2022. This reflected the fact that companies in many industries—not all—were able to take advantage of the pandemic, the disruptions, the shortages and the consumer desperation to increase prices above their own costs. This is a significant reason why inflation spiked and it is exactly why corporate profits grew.
For a while, it is possible to have wages increase without productivity changing at all, as long as that corporate profit share reverts to some more normal ratio of overall output.
I will point out that central bankers around the world, such as Ms. Lagarde at the European Central Bank and President Biden south of the border have indicated the importance of the normalization of corporate profit shares as part of the disinflation process that we have to go through to get inflation back to target.
For a while, anyway, it is possible for wages to grow without productivity growth.