Inflation,  Macroeconomics,  Research,  Wages

Wage Growth Picking Up, but Shows Important Differences Across Categories

There are some signs of a modest acceleration in nominal wage growth in Canada. This is not surprising, given both relatively tight labour markets and the impact of accelerating inflation on the wage demands of Canadian workers. Average hourly wages paid across the labour market grew 3.9% in the 12 months ending in May (latest data). That is an increase from year-over-year growth rates of 2.5% to 3% recorded in late 2021 and early in 2022.

Wages are still growing at only about half the pace of consumer prices, which grew 7.7% (according to the Consumer Price Index) over the same period. Since wage growth is weaker than price inflation, and the current uptick in wage growth lagged inflation by several months, it is clear that wage growth is a response to inflation – not its cause.

As workers in various industries and occupations grapple with the impacts of inflation on their real incomes, it is interesting to compare and contrast wage trends in various sectors of the labour market. These contrasting results reflect differential impacts of labour market conditions, occupational and industrial features, and institutional factors (such as minimum wage changes and collective bargaining).

A new research report, by Jim Stanford, Economist and Director of the Centre for Future Work, reviews these differential wage trends, based on the latest Statistics Canada data. Traditional supply-and-demand factors cannot explain differences in wage growth across sectors and demographic groups. Instead, the influence of structural and institutional factors (like collective bargaining, minimum wages, gender segmentation of employment, and more) is also clearly important in explaining who is falling further behind inflation – and who has a better chance of keeping up.

Please read the full report, Comparing Wage Trends Across Labour Market Categories.

Jim Stanford is Economist and Director of the Centre for Future Work. He divides his time between Sydney, Australia and Vancouver, Canada. Jim is one of Canada’s best-known economic commentators. He served for over 20 years as Economist and Director of Policy with Unifor, Canada’s largest private-sector trade union.