Alberta's famous 'wage premium' is eroding fast, experts say

Alberta’s famous ‘wage premium’ is eroding fast, experts say

CALGARY — Paychecks for workers in the province that once led the nation in wage growth have stagnated, but experts say the double whammy of inflation and labor shortages means that Alberta businesses are about to have to rely on wages soon.

For years, Alberta workers have been the highest paid in the country thanks to the province’s lucrative oil and gas sector. During the oil sands boom of a decade ago, Alberta’s so-called wage premium was startling – in 2013, for example, the average weekly wage in the Western Province was 23% higher than the national average.

This premium has been eroded over the past seven years or so due to a long decline in oil prices, although the most recent data from Statistics Canada shows that in 2022, workers in Alberta are still benefiting from the highest salaries in the country ($1,266 on average per week in September compared to the national average of $1,175 per week).

But where Alberta really stands out right now is in its stagnant wages. Despite tight labor markets and the latest spike in oil prices, Alberta has seen the weakest wage growth of any province over the past two years, according to Statistics Canada.

Nationally, wages have increased by 7% over the past two years, while in Alberta they have increased by less than 1%. In some industry sectors, Alberta wages are actually falling, while the same sectors are seeing wage growth in other provinces.

“The gap is closing, and it’s closing pretty quickly,” said Mike Holden, chief economist for the Business Council of Alberta.

“In the short term, this is a concern because it means inflation is taking a bigger toll in Albertans’ households than in the rest of Canada. Albertans’ wages are not rising fast enough to offset the effects of inflation they are experiencing.

There are a variety of reasons paychecks in Alberta haven’t risen as quickly as the cost of living, Holden said.

One factor is that the big tar sands boom that sparked Alberta’s last economic boom and helped boost wage growth in the province is over. While oil companies are currently making strong profits, they are channeling them into debt repayment and shareholder returns rather than capital projects and construction.

In fact, while Alberta has seen job growth over the past year, much of that growth has occurred in relatively low-paying industries like food services and accommodation.

Canada’s inflation rate held steady at 6.9% last month (6.8% for Alberta). But Holden added that Alberta employers may be more reluctant than employers in the rest of Canada to raise wages in response to inflation, simply because they know Alberta workers still earn more on average than the rest of the country. .

Gil McGowan, president of the Alberta Federation of Labour, said he also blames the provincial government for a series of moves he says add up to a “de facto wage suppression strategy.” These include the United Conservative Party’s crackdown on public sector wages, as well as its labor law changes that have made it harder for Albertans to unionize and therefore collectively bargain wages, it said. -he declares.

“Wages that don’t keep up with inflation aren’t just creating a problem for individual workers, they’re also creating a problem for the broader economy,” McGowan said.

“Because if our wages don’t keep up, we’ll have a harder time attracting people to work in this province and that will only exacerbate things like the labor shortage.

There are currently nearly 100,000 job vacancies in Alberta and, according to the Canadian Federation of Independent Business, 34% of small businesses in the province are experiencing labor shortages that are impacting their operations.

But Annie Dormuth, Alberta CFIB spokesperson, said simply raising wages is not a solution for small business owners who are themselves facing rising interest rates as well as inflationary pressures and the supply chain.

“Many of our members have explored ways to attract workers, such as increasing wages or offering more competitive benefits. They are currently exploring all of their options to meet their capacity needs,” Dormuth said.

“But in many cases, raising wages also means raising prices, and many are hesitant to do so because they know their customers are also struggling with the cost of living right now.”

Holden said it’s likely that many employers will have no choice but to take action on wages over the coming year if they want to continue to recruit and retain staff.

“We’ve heard from a number of our member companies that while they’ve resisted wage growth so far, many of them feel compelled to do so,” he said.

But he said what Alberta really needs is economic growth, because raising wages just to offset inflation is a recipe for more inflation.

“Long term, you still want to see wage growth, but you want to see wage growth for the right reason. And that’s productivity growth,” Holden said.

“Real and sustainable salary growth is what you want to see.”

This report from The Canadian Press was first published on November 25, 2022.

Amanda Stephenson, The Canadian Press

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