Last week, during the Bank of Canada October 2025 monetary policy report press conference, Governor Tiff Macklem said the following:
Unless something else changes, our incomes will be lower than they otherwise would have been. . . . There are things the country can do to try to bend that curve up, but those aren’t things monetary policy can do. These are more structural changes. I mean, fundamentally, as the senior deputy governor has hammered many times, we need to get our productivity growth up. If we can do that as a country, we can bend that curve up. So, I mean, I think what’s most concerning is that unless we change some other things, our standard of living, as a country—Canadians—is going to be lower than it otherwise would have been
I have a few things I wanted to mention regarding this statement.
First, what does Macklem mean by a lower standard of living?
Wikipedia says that the “standard of living is the level of income, comforts and services available to an individual, community or society”.
Investopedia defines it as one’s “access to the necessities of life such as a living wage, decent housing, and food”.
I mean, if people’s income drops, but the price of housing and groceries also drops, they might not be any worse off. That being said, if Macklem thinks we should prepare for a lower standard of living, what does he think we have been doing the last 3 (or more) years?
Income has already been stagnant while the cost of everything has increased. Our standard of living has already declined, and now he is telling us we should expect it to get even worse?
Regarding increasing productivity, I have two thing on that.
One way to increase productivity is to increase the number of full-time jobs out there. Companies seem to be increasingly offering fewer full-time jobs and more part-time jobs. It is kind of difficult to be more productive when you having to split productivity between two or three jobs.
Another way to increase productivity is to raise wages. If workers are paid more, they will spend more. When more money circulates in the economy, it increases consumer demand. That increased demand will put pressure on businesses to raise output, which could increase productivity.
Our current financial situation, as a society, is because of the incessant thirst of the owning class to increase profits and their own wealth. That leads to things like paying workers less, halting research and development investment, participating in real estate speculation, increasing grocery prices, and so on.
The solution is not to continue doing what we have been doing. The solution is to improve the material conditions of the working class.
