Union contracts being negotiated and ratified in B.C. could affect salary negotiations at private-sector firms.
In a worst-case scenario this could lead to a wage spiral. Higher wages mean more money is sloshing around in the economy, enabling consumers to buy goods. That in turn pushes up prices for those goods and heightens worker calls for even higher wages.
Private-sector wage negotiations differ from non-union ones because salary increases do not need to be uniform across the workforce. They are also done once each year instead of covering multiple years at once.
Public-sector negotiations, however, influence non-union employee expectations and put pressure on employers.
Plenty of recent public-sector contracts have been negotiated.
British Columbia General Employees Union workers recently ratified a contact that could pay more than 16.5 per cent over three years. Variables in the contract mean it could pay as little as around 12 per cent over three years.
British Columbia Teachers’ Federation members are voting Nov. 16 through 18 on a contract that raises wages about 13.5 per cent over three years.
The biggest public-sector increase by far is to be for full-time B.C. doctors, who will be paid $385,000, up from $250,000 under the current fee-for-service model, if they ratify a contract that would start in February. That would be a 54 per cent jump in compensation, and it comes thanks to what many are calling a crisis in B.C.’s health-care system, with nearly one million British Columbians without a family doctor.
Unionized workers have long made higher average salaries than their non-union counterparts.
Statistics Canada data show unionized workers are paid an average of $1,265.87 per week, while others are paid an average of $34.61 per hour.
That compares with the $1,126.55 weekly and $30.72 hourly that non-union workers are paid, according to the nation’s number cruncher.
Year over year the average Canadian’s hourly wage increased by 5.6 per cent in October – the fifth consecutive month that wage growth was more than five per cent.
For small-business owners, these compensation increases can be crippling because it may not be possible for them to pass higher costs to consumers, said Jairo Yunis, Canadian Federation of Independent Business’ (CFIB) senior policy analyst for B.C.
A recent CFIB survey found 68 per cent of small business owners said rising wages were their most challenging expense.
To compensate, 79 per cent of entrepreneurs said they worked more hours to make up for the financial hit, the study found.
“Ultimately, the solution is to boost labour supply,” Yunis said.
That could be from strategies such as having B.C. ask the federal government to waive its requirement that businesses provide time-consuming labour-market opinions every time they try to bring in those workers – something long urged by organizations such as the BC Restaurant and Foodservices Association.
Yunis said 88 per cent of B.C. small-business owners surveyed said that they increased wages to attract workers but that they were successful only 36 per cent of the time.
“This is the most incredibly tight job market that we’ve had for quite some time,” agreed Business Council of British Columbia senior policy adviser Jock Finlayson.
“There are more job openings than there are unemployed people. In the U.S., they’ve still got 10 million unfilled jobs. In Canada it’s maybe 900,000. In that kind of an environment, coupled with rising inflation and cost of living pressures, it’s not surprising to see wage settlements moving higher.”
Higher wages are alarming Bank of Canada governor Tiff Macklem, who recently urged employers not to succumb to the pressure to significantly hike wages because he views the current inflation spike as temporary.
Finlayson similarly expects inflation to fall.
“I think inflation is peaking in 2022,” he said. “It will diminish in 2023, and diminish further the following year, so therein lies the issue for employers that may be inking contracts like the B.C. teachers’ contract.”
Conference Board of Canada director of economic forecasting, Ted Mallett, similarly told BIV “inflation is on the way down.”
Headline inflation fell in September to 6.9 per cent, from 7.6 per cent two months earlier.
Mallett said annualized quarter-over-quarter inflation has fallen much more, to below four per cent, and he expects it to drop further, to around two per cent by 2024.
“The employer has to consider retention,” he said. “They want to make sure that their skilled employees are as happy as possible so they may want to focus on higher pay in the immediate short term, but without locking into longer-term commitments.”
Mallett added that union contracts’ influence on the private sector “isn’t zero,” but that it is not the main driver in determining non-union wage hikes.
Some non-union employers are likely to freeze wages because their businesses are not doing well, he said.
A recent conference board survey found that 12 per cent of non-union employers had salary freezes for executives in 2022 and that 15.1 per cent of those surveyed said such freezes would be in effect in 2023.
“Even in good economic times, there are businesses that are not doing well,” Mallett said.
Salary hikes are also sector dependent.
B.C.’s legal sector, for example, is reeling from U.K. and U.S. firms in the past two years raiding up to 20 per cent of qualified associates, said Smith Legal Search managing partner Warren Smith.
“When you have that kind of talent strip occur in a really short period of time, they’re paying massive retention bonuses to the remaining associates – to the tune of 20 per cent,” he said.
“The [legal] market is short on talent, so unless the market really falls off in demand, which I don’t think it’s going to happen, then firms are just pinched, and they are going to continue to be pinched.” •
