(Bloomberg) -- Wage gains in Canada are trailing behind rising food prices, a major force driving the labor strife that has upended the country’s supply chains.
In the span of four months, the northern nation has been rattled by work stoppages involving key infrastructure. Prime Minister Justin Trudeau’s government forced railroads to start moving again in August and sent dockworkers in Vancouver and Montreal back to the job earlier this month. Now, postal workers are striking just as the holiday season begins.
While the job actions partly reflect a catch-up period for union employees with lengthy contracts, their wage demands reflect the dramatic erosion of purchasing power they’ve experienced in recent years. The postal workers’ union wants a 24% pay bump over four years; other labor groups have also sought double-digit increases.
Workers are feeling poorer in many advanced economies, contributing to the downfall of incumbent governments in the US, UK and elsewhere. Trudeau has announced billions of dollars in measures meant to soothe voters’ anxiety about the cost of living, even as consumer prices have hovered around the 2% target for months.
The Canadian Union of Postal Workers said it’s demanding raises because “too many people have fallen behind” during the run-up in prices. “Inflation is down — that doesn’t mean that you’re back down to where you were,” Jim Gallant, the union’s negotiator, said by phone.
Grocery prices have jumped 20% over the past three years, while wages have grown by about 12%, according to Statistics Canada data. That’s left people struggling with constant sticker shock in the checkout line.
“It’s quite striking how fast food prices have gone up over the past few years to the point where wages relative to food prices have been quite flat,” said Brendon Bernard, senior economist at job-listing website Indeed. “While overall prices across the economy show we’ve made progress, when it comes to actually buying food, the perception that people are falling behind is borne out.”
In October, grocery prices rose 2.7% from a year earlier, accelerating from 2.4% in September. It’s also the third straight month where the gains outpaced headline inflation. Prices for fresh vegetables, for example, jumped 7.3% last month from a year ago, underscoring still-high rate of inflation for some of Canadians’ most frequently purchased items.
Canadians are also struggling with another major budget item — housing. Average asking rents in the country declined in October for the first time since the Covid-19 pandemic, but are still up 22% since the same month in 2021. And although the Bank of Canada has begun cutting interest rates, it says housing hasn’t been this unaffordable since 1990.
Finance Minister Chrystia Freeland laid out her case Monday for her government’s plan to temporarily waive federal sales taxes on some items and send C$250 ($179) checks to nearly 19 million workers, saying there’s a disconnect between recent positive economic data and how Canadians feel.
“The fact that the Canadian economy does appear set for a soft landing, that’s good news, but Canadians aren’t feeling it,” she said. “That is shaping their economic behavior in ways that are not great for the Canadian economy.”
Hourly wage growth for permanent employees in Canada remains elevated at above 4% year-over-year. But the central bank sees a softening labor market helping to cool wage pressures in coming months. In its quarterly survey of businesses, firms also said they expect wage growth to moderate over the next year.
During negotiations between Canada Post Corp. and the union representing some 55,000 workers, wages remain one of the top unresolved issues. The employer said in a statement it’s offered an 11.5% pay increase over four years, plus more paid leave and protections for defined-benefit pensions and job security.
The company has lost more than C$3 billion since 2018 and just posted a C$315 million loss before tax in the third quarter, it pointed out, adding that it’s trying to urgently update its business to offer delivery seven days a week.
“Canada Post now enters the busy Black Friday online shopping week effectively shut down as CUPW’s national strike is now in Day 11,” the company said Monday. “We are down nearly 10 million parcels since the strike began, which will only increase as the strike continues and people look elsewhere to have their items delivered.”
--With assistance from Jay Zhao-Murray and Brian Platt.
(Adds finance minister comment in paragraph 10.)
©2024 Bloomberg L.P.