Over the past year, union negotiations have ramped up and wage settlements have reached new heights, mainly due to the fact that negotiations were set back by the coronavirus pandemic and the inflation that followed, says Douglas Porter, chief economist and managing director at BMO Financial Group.

“Like night follows day, labour unrest and strike activity tends to follow inflation. What [always] happens is, after inflation peaks, workers are trying to catch up for the inflation they missed. Meanwhile, employers are looking at inflation starting to come down and they’re worried about getting locked into fairly large settlements or wage agreements. That could spell real trouble for employers.”

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However, he believes the balance of power has shifted in the last few months. “I think it’s moved away from employees and back to employers to some extent, because the job market has loosened and inflation has come down a lot. I think employers are going to negotiate a bit tougher over the next year. I would expect wage increases to be more moderate in the year ahead than what we’ve seen in the past year.”

The labour market was quite strong by early 2023, so unions and workers had the upper hand at that point and were demanding and receiving sizeable wage increases. Wage settlements peaked in late 2023 at levels the public hadn’t seen in decades.

“If we fast forward to today, we’ve seen the job market begin to lose a bit of steam. The number of vacant jobs has dropped by 40 per cent in the last two years. The unemployment rate has gone from less than five per cent to almost six and a half per cent now in Canada. So it’s a much looser job market. I would argue it’s [weaker] than it was before the pandemic.”

In terms of benefits, he notes some employers might be willing to offer benefits enhancements instead of getting locked into relatively large wage gains, but benefits come at a price as well. “I think the key point is the labour market just isn’t that tight anymore, so workers are going to have a hard time getting serious concessions out of their employers in the year ahead.”

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