An economics professor at the University of Regina broke down Canada’s current wage inflation spiral, saying it has the potential for strikes in 2023.
“Coming out of the pandemic you had a lot of people who continued to work and weren’t looking for major wage concessions,” said associate professor Jason Childs.
“Now they are looking to be rewarded for their efforts during the pandemic and that is going to mean some major shifts in how businesses compensate their employees.”
Strikes and threats of work halts have been seen across Canada in 2023, including the largest federal workers strike in Canadian history at the end of March. Nearly a third of the country’s public service workers went on strike and stood on picket lines in over 250 locations across the country.
WestJet’s union threatened to strike before the May long weekend but reached a deal just before the deadline.
A port strike in B.C. is currently on day 10 and is estimated to be costing the Canadian economy at least $500 million a day.
Childs said one of the reasons for the strikes is that purchasing power has been eroding at the greatest rate in over 40 years.
“People are going to want to make up that ground so they are going to be making more aggressive or larger wage demands from employers and that is going to mean more opportunities for labour strife.”
Companies with profit margins in the range of one or two per cent are going to struggle to meet the demands of their employees and still have enough to pay the bills.
“You can get what you call a wage inflation spiral,” Childs explained. “You have this inflation touched off by the printing of money that we saw during the pandemic, that gets inflation going. Workers make larger and larger wage demands to try to keep up — a very natural and reasonable thing to want to do — but then that means employers have to further raise their prices to consumers to pay for it all.”
“There is no one that is satisfied with the wage unrest in Saskatchewan right now,” said president of Saskatchewan Federation of Labour Lori Johb.
“Workers have gotten our economy through the pandemic, what we have been through in the last couple of years and it’s time we see something for that. Our government is touting a billion-dollar surplus and that needs to come forward. Workers need to see some of that.”
Johb said that she has seen wages rise and impact prices for small businesses, contributing to the wage inflation cycle, but said that it’s the big corporations that should be increasing wages without massive inflation repercussions.
“It’s the Tim Hortons and the McDonalds and the Walmarts — huge employers that are not doing what they can, so I don’t believe that it’s the small business owners.”
Childs said that to break wage inflation cycle, negotiations need to happen with unions.
“When you see wages rise, due to minimum wages or other means, the bigger employers are better able to deal with that by making substitutions of capital for labour,” Childs said.
Childs said an example of this is big corporation stores making the switch to self-checkouts and online accessibility.
“We are going to see businesses getting squeezed on multiple fronts here and there is the potential for that to bake in this inflationary push we have been seeing.”
Brianna Solberg, director of provincial affairs with CFIB, said that this is one of the many reasons that small businesses are having to close their doors.
“It’s no surprise with these increased costs that many are struggling to recover, and they are worried to stay afloat,” Solberg said. “A majority of small business owners are already paying above minimum wage just to attract and retain staff in this tight labour market.”
She said many have already increased wages in response to labour shortages.
“A further increase to minimum wage will force them to give an even further bump,” Solberg said. “The best response that small business owners have in order to make up for high labour costs or labour shortages is to work more hours themselves.”
CFIB surveyed small business owners this year and said that many are working up to 59-hour work weeks because they don’t have the financial resources to hire more staff.
Childs said that another way to fall out of the spiral is to have a recession.
“When unemployment rises, workers don’t have that bargaining power anymore to demand the higher wages, so workers end up taking it on the chin,” Childs said.
“That’s likely to happen at the lower ends. One of the horrors of inflation is it doesn’t hit everyone equally. It tends to be harder on those who have less bargaining power and economic standing.”
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