Canadian wage inflation looms as ‘perfect storm’ hits labor market


View of an illustration outside a parquet sales office next to an employment agency in Toronto, Ontario, Canada, October 8, 2021. REUTERS / Chris Helgren / File Photo

OTTAWA, October 28 (Reuters) – Canadian workers are fast becoming staples in a tight labor market, and companies are increasingly forced to raise wages to fill positions – and retain existing staff – a factor likely to complicate the Bank of Canada’s efforts to control inflation.

While rapidly rising salaries have yet to be filtered by official data, hiring intentions are well above pre-pandemic levels and recruiting companies say it is a ” seller’s market “for skilled and unskilled job seekers in many industries.

Economists say wage growth could become a big problem for the Bank of Canada, which is already grappling with inflation near a two-decade high. On Wednesday, the central bank surprised the market with its hawkish tone, advancing the possibility of an interest rate hike as it warned that inflation would rise. Read more

“I’m seeing wage rate increases for the workforce ranging from 10% to 40%,” said Tanya Cerniuk, sales manager for Canada at Adecco Group (ADEN.S).

“I saw one today… they were offering CA $ 14 ($ 11.35) an hour and now they are offering CA $ 19.50 an hour,” she said. “Things change so quickly. Employers have to be very nimble.”

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

“I was blown away by the number of opportunities that were available, as well as the portion of the compensation offered,” Haas said. “I have never had a job search experience like this in my life.”

As employment in Canada returned to pre-pandemic levels, wage growth rose 1.7% year-on-year in September, up from 4.3% in February 2020, just before the start of the pandemic, according to Statistics Canada.

“If you look at the different wage measures, they are actually still somewhat below their pre-pandemic levels,” Bank of Canada Governor Tiff Macklem said on Wednesday.

The central bank is watching closely for signs of wage inflation, as the consumer price index is now expected to exceed the control range of 1-3% until the end of 2022, he added.

MORE MONEY, MORE WORKERS

Some companies, hesitant to raise base wages amid pandemic uncertainty, are instead offering rich signing bonuses and hourly bonuses based on attendance and retention, said Adecco’s Cerniuk, who all may not register as salary increases.

The easing of COVID-19 restrictions prompted an early start to seasonal hiring for the holidays, pitting retailers and restaurants against manufacturers and warehousing companies to keep workers safe. Declining immigration during the pandemic added to the pinch.

“I think it’s a perfect storm,” Cerniuk said.

A giant billboard outside an Ottawa liquor store offers seasonal jobs starting at about 15% above the minimum wage, which is C $ 14.35 an hour in the city. province of Ontario, while a sign in a nearby Whole Foods store promises to pay C $ 2-3 an hour. bonus plus richer overtime if they stay throughout the holiday season.

Derek Holt, head of capital markets economics at Scotiabank, pointed to seasonally adjusted and annualized numbers that show a sharp acceleration in three-month wage growth, which is hard to ignore.

“Wage growth is tearing apart in Canada,” he said in a recent note, adding that this was just the latest point of pressure on the central bank.

Groupe Meloche, an aerospace component maker in the Montreal area, raised workers’ wages this month and plans another pay hike in February. The company has around 30 open positions – 10% of its workforce – and the staff shortage makes it difficult to complete deliveries on time, said managing director Hugue Meloche.

“We expect strong growth,” he told Reuters on the sidelines of Aero Montreal’s global supply chain summit this week. “We have to prepare.”

Reporting by Julie Gordon in Ottawa, additional reporting by Allison Lampert in Montreal and Fergal Smith in Toronto Editing by Paul Simao

Our Standards: The Thomson Reuters Trust Principles.

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