Unions | How negotiations contribute to inflation

The hike in payrolls worries economists, knowing that those increases can fuel inflation, which the Bank of Canada is trying to fight by raising interest rates. Our columnist takes stock after reviewing the 2022 collective agreements.

Posted at 6:30am

All workers want better pay, especially when prices are skyrocketing. Like these furniture union members near Rimouski, whose pay increased 26% in 2022, I discovered.

However, the dynamics of prices and wages can become problematic at a certain point, creating a vicious circle: prices rise, so wages rise, which in turn raises prices and possibly wages, and so on…

Hence the question: What salary increases do workers get these days? In particular, do the sharp increases granted over several years, as in the collective agreements of the 1970s, which had contributed to the spiraling inflation, force a stronger interest rate hike?

The issue is of concern to the Bank of Canada, according to a July 14 address by its Governor, Tiff Macklem, to members of the Canadian Federation of Independent Business (CFIB).

When asked for anti-inflation advice, Tiff Macklem replied: “As a company, don’t expect current inflation to remain at this level. Don’t build this into your long-term contracts. Do not include this in collective agreements. It will take time, but rest assured that inflation will come down. […] We are confident that inflation will return to our 2% target in the next two years,” he said.

What about salary increases? To get to the bottom of this, I looked through most of the major collective agreements signed in Quebec in 20221.

First observation: The development of the salary scales for 2022 has nothing to do with the recent past. Of the 47 collective agreements analyzed, only four companies offer increases of less than 2.5% in 2022. And eight companies have committed 10% or more for 2022 alone.

On average, the salary increase of all analyzed collective agreements in 2022 is 6.5%.

This number is very close to the economists’ inflation forecast for the full year (between 6.5% and 7%). And also quite close to the annual average salary increase recorded by Statistics Canada in Quebec last quarter (7.5%).

Now a crucial question: How did employers and trade unions agree for the following years? The result of my research: In the major collective agreements, the wage increases are on average 3% for 2023 and 2.8% for 2024.

It is safe to assume that companies took Tiff Macklem’s message and predicted that inflation would eventually ease as most economists are predicting, although we must forget the Bank of Canada’s 2 percent target within two years for these salaries.

Of course, nothing is set in stone. The next agreements, which will be signed by the end of the year, must be followed closely. As time passes, inflation is perceived as permanent and employee expectations grow.

Furthermore, no one will prevent the parties from reopening collective bargaining agreements in the event of inflation next year, which has happened multiple times over the past two years amid high staff turnover fueled by the virtual absence of unemployment and labor shortages.

The boom comes from the regions

In many cases precisely, it is labor shortages that are forcing business leaders to struggle to expand, much more than the union power balance or workers’ desire to catch up with inflation. And that fuel for price increases strikes me as much more concerning, especially in Quebec.

For example, the 10 biggest wage increases in major Quebec agreements were all listed in regions far from Montreal where the shortage is felt most horribly.

For example, the kitchen and bathroom furniture manufacturer Miralis from Saint-Anaclet-de-Lessard near Rimouski granted its 252 employees an average of 26% more salary in the first year. At the time of signing, carpenter wages ranged from $21.02 to $24.35 per hour.

Drummondville-based auto parts maker Soucy International has also increased its pay scale by 22% this year, slightly more than Verreault Navigation shipyard in Bas-Saint-Laurent (about 16% this year, I estimate).

In both cases, salaries range from $23 to $35 an hour, and electrical mechanics are among the best paid at nearly $33 an hour.

Other notable agreements include the agreements recently signed by Resolute Forest Products in the paper and sawmill sectors. Unlike most other agreements, which revert to a 3% horizon in 2023 and 2024, Resolute’s pay increases will average about 4% in 2023 and nearly 6.5% in 2024.2.

Resolute’s agreements are also unique as they serve as a reference agreement for the paper and sawmill industry.

Of course, these salary increases are often accompanied by improvements in working conditions (holidays, retirement, etc.).

To reach agreement, employers and unions have sometimes relied on the future consumer price index (CPI) from 2023 to 2025. This is the case for 7 of the 47 agreements analyzed.

For example, Drummondville-based bus maker Microbird agreed to align the increase in 2023 with CPI developments after wages rose by an average of 16% in 2022. In 2024 it is the CPI with a minimum of 2.5% and a maximum of 4%.

Another example: the Sandoz factory, recently acquired by Delpharm, which caps CPI growth in 2023 at 4%.

It is obvious that the recent agreements between unions and management will do little to contribute to long-term inflation. It remains to be seen how negotiations will develop over the next few months, particularly with the Quebec government…

1. I have selected 47 collective agreements, including those for 100 or more employees. See the Corail website for information. I refined the work with calls to the big union headquarters.

2. Resolute Forest Products agreements are very complex. They include salary adjustments in dollars per hour, as well as percentage or dollar per hour increases for specific years. There are also separate increases for craftsmen and production workers. The total increases calculated after The press are therefore approximations. And they don’t include retention bonuses.

Jumps in the salary table

Manufacturing, means of transport

In the manufacturing sector, the wage increases of the major collective agreements are strongest, especially in transport. Four of the eight companies listed will offer 10% or more in 2022. And for a fifth company — Bombardier — the recent agreement includes a 6.5% increase for December 2021, and that increase is therefore not included in our compilation of increases for 2022. One notable exception: engine maker Pratt & Whitney. The five-year deal only offers 2.4% in 2022 and little more after that. It must be said that it was signed on February 14, 2022 – and essentially finalized at the end of 2021 – at a time when inflation was not yet firmly established (particularly before the war in Ukraine). The agreement was narrowly accepted by union members.

Various manufacturing

Furniture, textiles, fireplaces, electrical transformers: Regardless of the sector, salary increases in the manufacturing sector are rather generous. This is especially true for furniture manufacturers who are affected by labor shortages. Miralis offers 30.5% over three years and Ameublements El Ran around 14.3%, according to the development of the consumer price index (CPI). It should be noted that this table includes the largest increases for the second year of the agreement (2023), for example around 4% for Cheminées Sécurité International, Laval, and Hitachi Énergie, Varennes.

food and trade

Several food and retail companies have had to grant their union members significant wage increases. This is the case at Olymel, specifically at the Saint-Hyacinthe plant (11% in 2022), at pogo maker Aliments Conagra in Boisbriand (7.1%), at Boulangerie Canada Bread in Montreal (6%) and even in the warehouse from Sobeys in Terrebonne (6%). In this fight against inflation, the SME that brews Blainville’s Boréale (Les Brasseurs du Nord) had reached an agreement ahead of the war in Ukraine and the rise in gasoline prices in early 2022. It essentially spread the increases over six years, offering its employees 2.75% per year for five years and 3% in the last year of the contract.

service sector

Drivers make it big in this industry. Repentigny-based Lanau Bus has set inflation increases in 2022 – likely to be 6.5% – in addition to a 1.5 percentage point increase in the CPI for the following two years. Autocar des Chutes of Quebec agreed 11.2% in 2022, then 2% per year for nine years. At Autobus Galand, Théberge Transport and Victor Transport, the jumps are 20% in the first year, according to Teamsters spokesman Stéphane Lacroix (these last four companies are not included in our table as their agreement targets fewer than 100 employees). A head-on collision is on the cards for some of the airlines still in negotiations this fall.

utilities, forestry and mining

Judging by the most recent wage settlements, the public sector will remain at the bottom of the wage increases for the time being. Sherbrooke police officers certainly received 4% in 2022, but the City of Quebec limits the increase in salary scales to 2% in 2022 and 2023. It must be said that some, such as professors at the University of Quebec in Abitibi-Témiscamingue, are waiting for the salary policy of the government of Quebec in the coming months. On the other hand, in the resource sector, the agreement signed at Resolute (approx. 9% in 2022, 4% in 2023 and 6.5% in 2024) is likely to increase the prices of forest products as it includes the benchmark agreement industry.

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