Canada’s biggest private unions are looking for some of the largest pay gains seen in a generation to make up for the damage inflation has inflicted on consumer purchasing power.
- Private sector wages are up by 3% this year but have actually fallen in when you account for inflation (sitting at 6.9%, down from a peak of 8.1% in June).
- Public sector unions are also upping their wage demands. Ontario narrowly avoided another education worker strike by agreeing to a pay increase deal of 3.6% a year.
Why it matters: If large, multi-year pay bumps become locked in through union contracts, it could become more difficult for the Bank of Canada (BoC) to return inflation to its 2% target.
- The BoC advised against unusually large pay bumps to avoid a wage-price spiral, in which high prices lead to higher wages, which then pushes prices even higher.
Yes, but: There’s little evidence that higher wages are the driving force behind inflation right now, and a lot of evidence that people are struggling to keep up with a rising cost of living.
- Far fewer Canadian workers are unionized now compared to previous periods of high inflation, which may also make the emergence of a wage-price spiral less likely.
Bottom line: It’s not surprising unions are negotiating more aggressively for higher pay after a year of high inflation. Whether they have the power to make wage waves is another matter.