Employers have devised a novel plan to retain and sustain their workforce during these trying times of low unemployment and rising prices: It’s called “paying people more,” and it’s all the rage.
Driving the news: The average Canadian employer expects to increase base salaries by 4.2% next year according to a new survey by Ekler—the biggest annual pay bump in 20 years.
- Hourly wages have already increased this year, jumping by 5.3% last quarter on a year-over-year basis, per Statistics Canada.
Another survey by analytics giant Mercer found that 34% of businesses are considering off-cycle wage increases to keep workers happy.
- To further sweeten the pot, companies are also offering better benefits and investing in ways to engage employees, like expanded diversity and inclusion programs.
Why it’s happening: A cocktail of high inflation and low unemployment—unusual in recent decades—has put workers in a position where they need more money to keep up with the cost of living and have the leverage to bargain for it.
- There were 997,000 job vacancies last quarter (the most ever) while unemployment levels have consistently hovered around historic lows all year.
Yes, but: Not everyone is happy to see wages going up (and we aren’t just talking about stingy managers).
- The Bank of Canada has repeatedly warned Canadian businesses against offering inflation-driven wage bumps.
- Their big fear is that wage increases will kick off a wage-price spiral, in which higher wages fuel inflation.
Bottom line: Workers may have more negotiating power than they’ve had in years, but even unusually large wage hikes don’t help much when prices rise faster than pay.