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Canada′s wage growth remains sturdy

Canada’s economy may have stumbled into a contraction this year, but the slump hasn’t sent wages spiralling.

Average annual earnings growth has outpaced the consumer price index every month of 2015, payrolls data show, even as the economy shrank in the first half of the year. Another measure, from the Labour Force Survey (LFS), shows average hourly wages grew 3.4 per cent in August from a year earlier – the fastest pace in nearly three years, suggesting many workers are seeing real wage gains.

That’s not to say that everyone is equally getting ahead – wage trends vary depending on region and occupation. But average growth has been sturdy. That resilience suggests employers might be viewing the downturn as short-lived, and are prioritizing finding and hanging on to workers so they’ll be ready when demand strengthens.

Wage growth “has been surprisingly good. Certainly stronger that what one would think given the headlines,” said Robert Fairholm, partner and economist at the Centre for Spatial Economics.

He believes a weaker currency might be giving exporters some breathing room. “The Canadian dollar weakening has allowed companies to pass through more wage gains than they normally would.” … It’s been the shock absorber,” he said.

Still, pay trends have varied, which explains why some workers might feel they’re not getting ahead. Benjamin Tal, deputy chief economist at CIBC World Markets, divided industries into three categories – low-, mid- and high-paying jobs. Over the past decade, “you find that wages of higher-wage industries have risen the fastest, followed by mid- and then low-,” he says. “So in that sense we are seeing some widening of the gap.”

In the first half of this year, annual wage increases grew 4.1 per cent among high-paying jobs on average, he noted, based on LFS data. They’re up 2.9 per cent among mid-paying jobs and just 1.5 per cent among low-paying positions.

Most of the jump in the labour force survey’s wage measures stems from increases in the services industry, while the goods-producing side of the economy is similar to last year, he said, adding that gains have also been stronger among non-unionized workers.

Among provinces, earnings growth has been fastest in Prince Edward Island and Newfoundland in the past year, payrolls data show. And by industry, weekly earnings have risen the most, year over year, among those who manage companies, at 11.2 per cent, while they’ve fallen in mining and energy, along with in the real estate and arts sectors. (In absolute terms, mining and oil and gas are still the highest-paid sectors, even as they are shedding the most jobs. Earnings are on average $2,000 a week, more than double the national average for all industries).

Demand persists for those in skilled professional occupations, such as accountants, lawyers and tech experts, said Dianne Hunnam-Jones, district president for staffing agency Robert Half.

“Technical recession or not, the skills gap continues to exist in Canada,” she said. “We haven’t seen a decline at all in wages – I don’t think a single one of our clients has said, ‘Now we’re in a recession, we’re going to be paying less.’”

Data scientists are particularly sought after, she said. Salary predictions for next year peg their increases at 8.5 per cent. The tech sector in general is projected to see pay gains of 5 per cent, while accounting is expected to grow by 4 per cent.

Wages tend to lag other economic indicators, and they might cool from current levels. Already, Statistics Canada’s survey of payroll employment shows annual growth moderating from 3.1 per cent in January to 1.9 per cent in June.

Salary projection surveys point to modest gains. Morneau Shepell’s survey shows wage gains of 2.5 per cent next year, the lowest since 2009, amid a slowdown in Alberta and in the public sector. Mercer’s survey pegs growth at 2.8 per cent, while Hays Group is forecasting 2.4-per-cent growth. Among unionized employers, wage settlements this year show average annual increases of 1.7 per cent, the same as last year but half the pace of prerecession levels.

Wages are influenced by a range of factors, among them economic growth forecasts, inflation expectations and the jobless rate. It helps that inflation is low – a high bar isn’t needed to achieve real wage gains.

Looking ahead, with demand firming in the United States while oil prices remain under pressure, “I’m not saying it’s going to be spectacular, but we’re going to see, in our view, labour market resilience continue,” said Krishen Rangasamy, senior economist at National Bank Financial.

By Published: September 27, 2015


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