Are you doing better even if you have been with the same employer for a decade or more?

Probably not, if you have been with the same employer for a long time – 10, 15, 20 years or more – and have not gotten any promotion, or monetary reward, or bonus for your work performance, productivity, or contribution. The only increase in your salary is the union-negotiated, or employer granted periodic increases. Such increases usually fail to keep up with the rising rate of inflation.

Among employees belonging to a union, those in the public sector generally fare much better than their counterparts in the private sector. It’s well documented that a much higher proportion of public sector employees is unionized.

This question if one is better off while working too long with the same employer seeped into my mind while I was writing my second book entitled “A Writer’s Journey Through the Bureaucratic Maze: A True Account (to be out by late May or early June this year). There, in Appendix II, I used the actual salary amounts and number of years spent without any promotion, or rewards, and found out that I, in fact, was losing each year the purchasing power of the salary at hand. In this post, I want to share that example with you, along with some of its implications.

Illustrative example (based on factual data):

I started working at one of the Canadian federal departments in 1970. My starting salary was close to $11,000. By 1978, the salary moved to $32,000. And by the time I retired in March 2012, I was making close to $93,000. The corresponding ‘all items’ Consumer Price Index (CPI) with (2002=100) for 1970, 1978, and 2012 are 20.3, 36.6, and 121.7 respectively.

Let us now look at the components of change in salary between 1970 and 1978 and between 1978 and 2012 – the change due to rising inflation only, and the real change due to promotion/advancement.

The difference in 1978 and 1970 salary: $32,000 – $11,000 = $21,000
Increase in 1978 salary due to the change in CPIs (or inflation alone) = $11,000 x (36.6/20.3) = $19,833
Now the difference of $21,000 can be re-expressed in terms of two components: $21,000 = ($32,000 – $19,833) + ($19,833 – $11,000)
= $12,167 (real change due to promotions) + $8,833 (change due to inflation)
100% = 58% + 42%

So between 1970 and 1978, 58% of the change in my salary was due to promotions and the other 42% to strictly inflation.

Following the same steps, the change in salary between 1978 and 2012 was: ($93,000 – $32,000) = ($93,000 – $106,403) + ($106,403 – $32,000)
where $106,403 is simply the increase in 1978 salary due to inflation (= $32,000 x (121.7/36.6)).

This shows that by the time I retired in 2012, I was making even lesser than the inflation-adjusted 1978 salary – never mind making any real gain due to any promotion (which I didn’t get).

So between 1978 and March 2012 (399 months), I was short of $13,403 in order to simply keep up with the inflation.

Put it another way, I lost about $34 (=$13,403/399) a month, or $408 ($34 x 12) a year in the purchasing power of salary at hand. In the eyes of the world, I was working full-year full-time, but with each passing day/year, I was losing the purchasing power of money. Isn’t it ironic?

That’s why I mentioned at the outset that working too long with the same employer isn’t economically healthy for workers with stagnant, or periodic union-negotiated increases in salary.

Post’s message:
Employees working with the same employer over a long period, with no promotion or advancement, but simply periodic union-negotiated increases in wages and salaries are likely to be losers as they would be losing the purchasing power of their salary at hand. One can say one is fully employed and getting a salary, when in fact, the rising inflation over time would steadily keep chipping away one’s purchasing power. Employees have to make up this loss by looking at other sources of income including moonlighting, use of personal savings, and/or debt.

For paid workers, the only way they can beat the inflationary changes and protect their purchasing power is to keep on making career advances and make real gains in wages and salary. But there eventually comes a point when such workers either come to the end of their road as they lack any further opportunity, skills, connections, personal marketability, etc. From that point on, they are on the way to lose the purchasing power of their salary at hand.

Business people and those self-employed on own account, on the other hand, can always beat inflation by steadily rising prices of goods and services they sell. This group would lose its purchasing power only when their business isn’t doing well, or they have slowed down on account of their poor health, or other volatility in the market. Other than that, self-employed persons pave their own paths to prosperity. They are not limited like their paid counterparts – always vulnerable to the personal biases and whims of their employers.

What does the future hold?
First, on the rising rate of inflation.

In Canada, the rate of inflation (measured in terms of the change in ‘all items’, or’core items’ (as used by the Bank of Canada) CPI was rampant in the seventies and eighties. For example, all of the goods and services that cost me $1.00 in 1970 were costing me $2.17 in 1980, $3.86 in 1990, $4.70 in 2000, $5.74 in 2010, $6.00 in 2012, and $6.33 in 2016. So during my work life (1970 – 2012), I witnessed the cost of living move up six times, and 6.33 times by 2016. The percentage decomposition of the change in ‘all items’ CPIs showed that 42% of the total change occurred in the 1970-80 decade, followed by 31% in the 1980-90, 11% each in the next two decades (see charts).

Post_CPI_Chart 1

The Canadian rate of inflation has been hovering around 2% a year since 1992 (with the exception of the year 2002-03 with a rate of 2.8%, and 2010-11 with the highest rate of 2.9%). With the rate of inflation low and stabilized, employees with long job tenure and stagnant wages and salaries would be losing their purchasing power steadily, but at a much slower pace.

Second, on the rising number of employees with long tenure.

It’s well-known that Canada’s population is aging, living longer, and among those working, a good proportion is opting to work longer. Since the job or occupational mobility decreases with age, it’s likely that those working longer would be extending their employment with the same employer. According to Statistics Canada, 23.8% of all 9.7 million employees in 1976 had worked for the same employer for more than ten years; four decades later, in 2016, their proportion had risen to 31.4% of the total of 18.1 million. The proportion of those working more than twenty years with the same employer had risen from 10.2% to 12.6% (see chart).


Of the additional 8.3 million employees between 1976 and 2016, 40.3% were working for ten years or more for the same employer. Evidently, more and more employees are staying put either because of the rapidly changing economy, technology squeezing some old and traditional jobs out and opening, in turn, some new and challenging ones, widening the gulf between those with and without proper marketable skills.

All these changes are likely creating, in turn, a phobia among employees to change employers. They must be living with the premise that a job at hand is better with the current employer than running a risk of losing it with a new employer. For them, the grass on the other side of the fence may not be all that greener after all.

Your suggestions/comments on this or any existing post are always welcome.

Employee, job tenure, CPI, rate of inflation, income, salary, wages, savings, debt, purchasing power, decomposition of change.

Our changing economy


The concept of expanding or shrinking economy is not new. You likely read about it regularly in newspapers. The country’s economic output is measured in terms of the total value of goods and services produced, or as economists named it, gross domestic product (GDP). A month-to-month or year-to-year increase in GDP indicates that the economy is expanding whereas a decrease indicates that it is shrinking. The GDP is valued in terms of both current market prices, or in terms of prices of a given base year in order to remove the effect of fluctuating prices or implicit inflation. The GDP adjusted for inflation is called the real GDP – a universally recognized conventional measure of economic growth or recession.

Do you ever wonder about the makeup of GDP in terms of the sub-sectors of the economy or industry groups? After all, the strength of an economy depends not only on its resource base, but also on the type of industrial infra-structure it maintains, providing jobs, investment, and earning opportunities to its population.

This post provides readers a bird’s view of the composition of GDP by industry groups – groups similar to those used by our American and Mexican counterparts, as agreed upon under the North American Free Trade Agreement (NAFTA). To illustrate the changing nature of the economy, I have chosen two time points: the years 1997 and 2015 rather than yearly data to conserve space. Industry groups are classified first into two main sectors: goods-producing, and service-producing. The former consists of five industry groups, and the latter thirteen – thus showing a breakdown of GDP by eighteen industry groups (as listed in Table 1).

While highlighting the makeup of GDP (in chained 2007 dollars, as published by Statistics Canada) by industry groups, I also look at the number of persons employed (full and part-time) by industry groups (Table 2) in order to see if an industry contributing the most to GDP also employs the most. One would usually expect that but that’s not the case.

GDP by industry group

In 1997, goods-producing sector contributed 35% of Canada’s GDP, valued at $1,072 billion (Table 1). By 2015, this sector’s contribution reduced to 29.8% of GDP of $1,649 billion. This shows that between 1997 and 2015, Canada’s goods-producing sector lost ground – mainly the manufacturing industry that has lost its contribution to GDP from 14.7% to 10.6% for several reasons including the outsourcing, lack of investment, technology, and short of skilled manpower. Construction industry is the only one that increased its contribution from 6.0% to 7.2%.

Table 1_GDP by industry group

Over the same period, Canada’s service-producing sector has increased its contribution to GDP from 65.0% to 70.3%. Only five out of thirteen industry groups in the service-producing sector increased their respective contributions: retail and wholesale trade, finance and insurance, real estate (including owner-occupied dwellings) and rental and leasing, and professional, scientific and technical services. The last group, comprising professionals, with a lot of human capital, technical and high skills, has increased its contribution from 5.4% to 6.3%.

It may be noted from Table 1 that of the $577 billion real increase in GDP between 1997 and 2015, 80% is generated by the service-producing sector – one-half of it from four industry groups alone: wholesale and retail trade, real estate and rental and leasing, and professional, scientific and technical services. Among goods-producing industries, construction industry accounted for 9.4% and manufacturing for mere 2.8%.

Employment by industry group

In 1997, there were 13.7 million persons 15 years old and over were employed – 26.1% in goods-producing and 73.9% in service-producing sectors. By 2015, the respective proportions were 21.6% and 78.4% of the 17.9 million employed. The proportion of those employed in manufacturing dropped significantly from 14.7% to 9.5%. Some of these likely found jobs in construction industry, hitching up its proportion from 5.3% to 7.6% (Table 2). Industries that benefited the most in the service-producing sector were professional, scientific and technical services, health care and social assistance.

Table 2_Employment by industry group

Of the additional 4.2 million persons employed between 1997 and 2015, only 7% got employment in goods-producing sector; the remaining 93% found jobs in service-producing industries – mainly in health care and social assistance (21.4%), and professional, scientific and technical services (13.8%), and retail trade (9.4%).

Output contributed per employed

Since industries in goods-producing sector are more likely to be capital-intensive, with state of the art technology, requiring skilled labour force, the output per employed person is likely to be higher for those employed in this sector than that of their counterparts in service-producing industries. For example, the output per employed person is the second highest ($350-$400 K) in the forestry, fishing, mining, quarrying, oil and gas, compared to ($78-$102 K) for manufacturing, and the lowest ($28-$29 K) for those in the accommodation and food services. The highest ($500-$700 K) was found for the real estate and rental and leasing industry but that was because it included owner-occupied dwellings, renting of homes, leasing of autos, etc. – so it really can’t be compared with the output per employed person.

No association between industry’s size of contribution to GDP and its number employed

An industry’s requirement of labour depends on the type of product(s) its manufactures, capital intensity, level of automation or technology, competitiveness, demand for its product(s), and several other considerations. Usually, a capital-intensive and fully automated industry would require lesser number of persons on its payroll. Since mining, quarrying, oil and gas, as well as utilities industries fall into this group, their relative contribution to GDP is way higher than the share of total employed. Data in Tables 1 and 2 support this, showing ratios between 2.19 and 3.34 for these good-producing industries. In the same fashion, wholesale trade, finance and insurance, and real estate and rental and leasing have ratios greater than one among the service-producing industries. On the other extreme, accommodation and food services industry contributed 2% of GDP but has around 7% of the total employed.


The Canadian economy has been steadily changing, leaning more and more on service-producing industries. With the exception of a very few industries like professional, scientific and technical services, health, education, finance and insurance in this sector requiring workers with higher education, technical and specific trade skills, resulting in higher payouts, this increasing reliance on service-producing sector may affect not only earnings levels of Canadians, but also their living standards.

Tags: Economy Industry GDP Employment Goods-producing Service-producing Contribution to GDP