Wage inflation is coming – and could complicate things for the Bank of Canada

Wage growth could turn into a big problem for the Bank of Canada, which is already grappling with inflation that is near a two-decade high, economists say.

Canadian workers are fast becoming hot commodities in a tight labour market and companies are increasingly forced to raise wages to fill jobs – and retain existing staff – a factor likely to complicate the Bank of Canada‘s efforts to tame inflation.

While fast rising wages have yet to filter through to official data, hiring intentions are far above pre-pandemic levels and staffing companies say it is a “sellers market” for skilled and unskilled job seekers across many industries.

Economists say wage growth could turn into a big problem for the Bank of Canada, which is already grappling with inflation that is near a two-decade high. On Wednesday the central bank surprised the market with its hawkish tone, nudging forward the chance of aninterest rate hike as it warned inflation would go higher.

“I’m seeing increases in labour wage rates anywhere from 10% to 40%,” said Tanya Cerniuk, head of sales for Canada at global staffing firm Adecco Group.

“I saw one today … they were offering C$14 ($11.35) an hour and now they’re offering C$19.50 per hour,” she said.

“Things are changing so quickly. Employers are having to be very agile.”

Digital marketing professional Riley Haas started looking for a new job in August and signed on with an internet marketing company within weeks, earning about 30 per cent more than before, plus benefits.

“I was blown away by the number of opportunities that were out there, as well as some of the remuneration being offered,” Haas said. “I have never had a job-hunting experience like this in my life.”