As G7 finance ministers and central bank governors convene in Banff, Canada this week, a stark reality looms over their discussions: the economic resilience of working people has been exhausted. The fundamental reality is that after years of mounting inflation, declining purchasing power, and growing insecurity, the promise of shared prosperity has been broken.
Trade unions across the G7, through a rare joint statement under the banner of the Labour 7 (L7), have issued a direct appeal to these leaders: change course before it’s too late. Their message is clear: without a dramatic shift in economic policy, governments and central banks risk entrenching long-term stagnation, further raising inequality, and fuelling social polarisation.
The inflation surge of 2022–2023 triggered a cost-of-living crisis that left working families across G7 nations scrambling to afford basic necessities. Today, even full-time employment fails to guarantee an acceptable standard of living for workers and their families. While central banks responded by aggressively raising interest rates, this strategy came at a high cost. Businesses pulled back on investments, mortgages became more expensive, and consumer demand weakened. The central banks’ response drained momentum from economies that were barely recovering from the impact of the pandemic.
Even as prices begin to stabilise, the aftershocks of tight monetary policy persist. A large share of the debt – corporate and household alike – taken out during the era of low interest rates has begun to become due for refinancing, at significantly higher costs this time round. This is squeezing household budgets and undermining corporate balance sheets, creating a drag on both consumption and investment. The effects are cascading into the labour market, with rising layoffs and hiring freezes not only in sectors like construction and manufacturing – industries particularly sensitive to interest rate shifts – but also in the wider economy.
Labour 7’s alternative vision
Against this backdrop, the L7 has made a powerful call for an urgent economic shift. We are urging for accelerated interest rate reductions and a shift toward expansionary fiscal policy. At the heart of our proposal is a focus on quality job creation, social investment, and economic resilience – finally abandoning the austerity-lite frameworks that have come to dominate policy in most G7 countries and beyond.
While inflation has dominated headlines in recent years, it is clear that the greater threat now lies in prolonged stagnation and labour market deterioration, both in terms of job creation and working conditions. The L7 warns that continuing with restrictive monetary policy risks pushing inflation below central bank targets and triggering a damaging downward spiral of economic contraction, leading to job restructuring and rising unemployment. Without a change in direction, the G7 could be sleepwalking into a recession.
Fiscal policy, too, has fallen short. In the name of discipline and avoiding fuelling inflation, governments have resorted to too-cautious fiscal policies and even outright austerity measures, leading to grave underinvestment in public services and delayed critical infrastructure and green transition investments. These choices are not fiscally responsible, they are socially reckless. The Labour 7’s statement urgently calls for increased investment in social protection, education, health care, active labour market policy programmes, clean and affordable energy, and green infrastructure. Such investment is not only necessary to stimulate demand and employment, and to speed up the path to economic growth, but is essential to future-proof economies against climate and geopolitical shocks.
Funding a just economic recovery
To fund these priorities, unions are advocating for a significant rethink of tax policy: introducing more progressive taxation of wealth and capital income, higher corporate tax rates, windfall profit taxes, and a financial transaction tax – all supported by strengthened international cooperation to prevent tax avoidance and evasion. These are not radical proposals – they are common-sense measures aimed at recalibrating a system where the burden has shifted disproportionately onto working people, while corporations and the ultra-rich continue to thrive, often through crisis-driven windfalls.
Ongoing trade wars are further compounding these challenges. The recent rise of aggressive tariffs has already disrupted global supply chains and added additional costs for both investors, producers and consumers. As the L7 statement points out, it is the low-income workers who are paying the highest price in this new era of weaponised trade.
The political choice before the G7 is not just economic – it is moral and generational. Will economic policymakers double down on a status quo that privileges short-term fiscal restraint over long-term shared prosperity? Or will they seize the moment to pivot toward a more just, inclusive recovery that centres workers, rebuilds trust in public institutions, and addresses the root causes of economic instability?
This week’s meeting in Banff is more than another policy discussion – it is a referendum on the future of work, fairness, and solidarity in some of the world’s wealthiest nations. The voices of labour have spoken clearly. Now, the question is whether G7 policymakers will listen – or whether they will continue to leave workers in the macroeconomic crossfire.