COVID-19’s threat to the economy and its role in driving up inflation will wane along with its threat to public health.
While the recent surge in inflation has given employees leverage to demand higher wages, wage growth is expected to lag behind inflation until 2023, according to Scotiabank (TSX:BNS). Inflation is expected to hit 5.9 per cent this year compared with a four per cent growth in wages. According to Scotiabank forecasts, inflation will ease to 3.1 per cent while wages will continue to rise to 6.1 per cent in 2023, partially closing the wage gap.
All industries will likely see some form of wage growth, but those that can pull from an international labour pool will be less impacted than localized businesses.
Industries, such as the resource sector, that require Canadians to fill job vacancies are subject to higher compensation growth.
The global pandemic has also slowed immigration into Canada, restricting the pool of available labour and putting additional upward pressure on wages.
Over the past year ending February 2022:
•Wages for all employees grew an average of 3.1 per cent compared with an inflation rate of 5.7 per cent for the same period.
•Wages in the natural resources industry, including the oil sector, grew 4.4 per cent, while energy rates rose 24.1 per cent.
•Wages in the educational services sector increased by 1.4 per cent compared with a 4.1 per cent rise in the price of recreation, education and reading products.
•Service sector worker compensation rose 2.4 per cent while the associated cost of its services grew 3.8 per cent.
•Manufacturing wages increased 5.2 per cent compared with a 7.6 per cent rise in the average price of all goods.