New signs of wage inflation may force Bank of Canada's hand in raising rates

Like its counterpart in the United States, the Bank of Canada has said it hopes to slow inflation before large price rises become embedded in the expectations of workers and businesses.

But recent examples of not just wage demands, but actual negotiated long-term contracts, seem to hint that early signs of wage inflation may have already begun to emerge in the Canadian labour market.

"Sobeys warehouse workers have negotiated massive wage increases, improved pensions and wage parity for part-time workers in a new four-year collective agreement," crowed Unifor, the union that represents the Sobeys employees, in a release last Thursday, declaring a 19.5 per cent wage increase over the life of the agreement.

While it can be argued that's just keeping up with the rising cost of living, wage increases are also one factor the Bank of Canada is watching as it considers when and how much to raise interest rates to battle inflation.

While data from December's Labour Force Survey showed average wages up 2.7 percent over the past year, the increase gained by the Sobeys workers is closer to five per cent a year for the next four years.

That compares to the latest inflation indicator that showed consumer prices rising at an annual rate of 4.8 per cent, a thirty-year high.

Economists looking out for signs of wage inflation will get the latest earnings data from Statistics Canada on Friday in the January jobs report. Overall, economists are predicting that the Canadian economy will lose something in the order of 100,000 jobs this time after repeated gains.

Omicron, the latest COVID-19 variant, is to blame, Royal Bank economist Dawn Desjardins told CBC News.

Exactly how that would affect wage data is hard to read because in the past low-wage jobs have been the worst affected by lockdowns, skewing the data in favour of higher wages.

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"Unifor achieved significant pay hikes over the life of this agreement, including substantial raises that workers will see immediately," said Unifor National President Jerry Dias last week, but Canada's biggest private sector union is not alone in trying to catch up with rising inflation and past low wage gains.

In the case of the union representing journalists at the news service owned by the Canadian media conglomerate Thomson Reuters, the Reuters Guild is demanding a wage hike of eight per cent, saying they have not had a raise since 2020 and comparing that to the staggering returns of the family that owns the business.

The Reuters Guild says it wants "to make up for years of wage stagnation and inflation — while company profits soared and the family of Chairman David Thomson's wealth grew by $8 billion."

Other unions across the country are looking for increases as their members watch spending power shrink in the face of rising prices for essentials including housing, food and fuel.