Bargaining forward builds a stronger economy

Wage growth slow despite low unemployment rate Source: Statistics Canada Tables 14-10-0064-01 and 14-10-0018-01Bargaining for decent wage increases doesn’t just give workers, families and communities a boost. It also drives a strong economy. Household spending, which relies on healthy wages, has been a main driver of economic growth since the 2008 recession. But that’s changing.

Stagnant wages are affecting the economy. In January, the Bank of Canada pressed ‘pause’ on an interest rate hike, thanks to weaker-than-expected consumer spending and housing investment.

When the Bank increases interest rates, the cost of borrowing for consumer spending and housing grows. Since Canadians owe nearly $1.78 for every dollar of disposable income, the situation is becoming unsustainable without increases in wages.

There are several ways to track wage growth. The Bank of Canada uses four Statistics Canada measures to generate an estimate of average hourly wage growth, called the ‘wage common.’ Three per cent growth of the wage common is considered healthy. Since 2011, average wage growth has hovered between two and three per cent and only reached three per cent once, in the last quarter of 2017.

These averages don’t tell the whole story. Faster wage growth for higher-paid workers has boosted the average, while most workers have had even lower wage growth. Looking at unionized workers in Canada, the national average for negotiated wage settlements in 2018 was 1.3 per cent. That’s down from an average of 1.7 per cent in 2017. The three oil-producing provinces posted the weakest growth in wage settlements, with Alberta and Newfoundland and Labrador averaging 0.1 per cent increases. British Columbia is the only province where wage adjustments topped two per cent in 2018.

When we look at how much prices increased in 2018, and are expected to increase in 2019, the picture gets even worse for unionized workers. Only in Quebec did wage adjustments keep pace with overall price increases.

So it’s no surprise households are spending more cautiously. The puzzle is why wages are so weak in the first place. Given the strength of employment and Gross Domestic Product growth, wages should be rising faster.

Comparing the average hourly wage growth for all full-time workers in 2008 and 2018 shows just how much wage growth is lagging other indicators. In 2008, the average hourly wage for full-time workers grew by 4.3 per cent. In 2018, with a lower unemployment rate, hourly wages for full-time workers grew by just 2.4 per cent, with most of that driven by increases for top earners. Low-wage workers have seen some improvement thanks to increases to the minimum wage in several provinces, but workers in the middle have had much slower wage growth.

There are many factors behind stubbornly weak wage growth. These include employer demands for concessions and two-tier contracts at the bargaining table, the growth of precarious work, weaker labour legislation and worker protections, contracting out, as well as provincial austerity budgets mandating wage rollbacks or freezes.

CUPE’s bargaining policy, Moving Forward, outlines our union’s plan to resist concessions and two-tier proposals, including supporting locals bargaining for real wage increases. At the National Bargaining Conference, local leaders will develop their skills and share strategies to keep us moving forward. That’s good news for CUPE members, many of whom are long overdue for a raise, and it’s good news for the economy.

To see how much (or little) your wages have grown, check out CUPE’s real wage calculator at cupe.ca/real-wage-calculator.

WAGE AND PRICE INCREASES BY JURISDICTION

  Canadian average Federal NL PEI NS NB QC ON MB SK AB BC
Average base wage increase
in major settlements, 2017
1.7% 1.5% 0.9% 1.0% 1.8% 2.0% 1.4% 1.6% 0.7% 2.0%
Average base wage increase
in major settlements, 2018
1.3% 1.8% 0.1% 1.5% 1.2% 1.8% 1.8% 1.9% 0.6% 0.1% 2.1%
Inflation average 2018* 2.3% 1.6% 2.3% 2.2% 2.1% 1.7% 2.4% 2.5% 2.3% 2.4% 2.7%
Inflation average forecast 2019** 1.8% 1.9% 1.8% 1.8% 1.8% 1.8% 1.8% 1.8% 1.8% 1.7% 1.9%
Sources: wage settlements from Labour Canada (2018 wage settlements include data from January to November);
*Statistics Canada Table 18-10-0005-01 – Consumer Price Index, annual average;
**Based on the latest forecasts from TD Bank, RBC and BMO to January 15th, 2019.


Source: CUPE National