1Q26_ Quarterly Outlook Report_Final_EN - Flipbook - Page 34
T H E P LUMB LI N E | A RETU RN TO F I RS T PRI N CI PL ES
Real wage growth has lagged productivity growth over time
300
~2% CAGR
Index = 100 (1970)
250
200
150
~1% CAGR
100
50
1970
1981
1992
Labour productivity
2003
2014
2025
Real wage growth
Source: Bloomberg Finance LP, Scotia Wealth Management
Labour market outcomes are not likely to be uniform. Impacts will vary across sectors, task types,
firm sizes, and worker profiles. In many cases, AI will augment high-skill workers and scalable
firms, raising productivity and wages at the top of the distribution. At the same time, routine or
highly automatable roles face greater displacement risk, creating downward pressure on wages
and employment in affected segments. The distributional challenge therefore lies less in
aggregate job loss and more in transitional frictions and mismatches between displaced workers
and emerging roles.
The pace of adjustment will matter. If reskilling, job matching, and re-employment lag layoffs,
separations may persist, participation rates may decline, and hysteresis effects could weigh on
future productivity. While automatic stabilizers such as unemployment insurance help cushion
income shocks, their coverage and adequacy vary widely. Across OECD countries, unemployment
insurance replaces less than 60% of lost income on average and only temporarily, while long-term
welfare benefits often remain below poverty thresholds.
Adequacy of minimum income benefits: welfare benefits vary widely across countries
70%
60%
50%
40%
30%
20%
10%
0%
JPN
GBR
ESP
DEU
AUS
FRA
OECD
GRC
CAN
USA
Minimum income benefits as share of median disposable household income (%)
OECD poverty line
Source: OECD, Scotiabank Economics
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