With the consumer price index soaring, it is obvious that wage increases will follow.
To paraphrase the famous hygrade sausage slogan: more people want to get pay rises because inflation is going up, and inflation will keep going up because more people are going to get pay rises!
Nasty vicious inflationary circle that the Bank of Canada will try to break with its sharp increases in the key rate.
Since the beginning of the year, the Bank of Canada has raised its rate by 2.25 percentage points, from 0.25% at the start of the year to 2.50% at present.
Unfortunately, despite the strong tightening of the Bank of Canada, inflation will continue to gallop. And that is why other key rate hikes will follow over the coming months. We should not be surprised to see the key rate end the year 2022 around 3.50%.
So far, wage increases have lagged behind inflation.
Take the increases granted for the past year to full-time employees, from May 2021 to May 2022, the last 12-month period compiled by Statistics Canada.
IN QUEBEC
For all employees, all industries combined, the average salary of a full-time employee in Quebec was $32.23 per hour last May, up $2.16, or 7.18% .
During this same 12-month period, inflation in Quebec jumped 7.5%. This means that the average salary of a full-time employee in the province is currently down slightly by 3/10 of 1 per cent.
But concerning the period of the last 24 months, from May 2020 to May 2022, there, wages lag significantly behind the increase in the consumer price index.
While inflation increased by 11.9% during these 24 months (2 years), the average hourly wage of the full-time employee increased by 7.86%, from $29.88 in May 2020 to $32.23 last May.
This means that the average hourly wage of full-time employees has fallen significantly behind the rise in inflation by 4 percentage points over two years.
This is equivalent to a loss of purchasing power of $2,195 in the case of a full-time employee, whose average annual salary reaches $58,659, over a year at 35 hours per week.
WORST CANADIAN SCALE
As a consolation, know that in Canada as a whole, the loss of purchasing power of full-time employees is higher than in Quebec.
While inflation jumped 7.73% during the 12 months from May 2021 to May 2022, full-time Canadians saw their average hourly wage increase by only 4.33% (+$1.37 per hour). ), to reach $33.01 per hour.
Worse still, in the last 24 months, from May 2020 to May 2022, inflation in Canada jumped 11.61%. And on the side of the average hourly wage of the full-time employee, the wage increase progressed only by 3.8% during these two years.
Compared to inflation, the salary gap in the whole country thus amounts to almost 8 percentage points. It is enormous. The loss of purchasing power would reach $5,517 over one year for a full-time Canadian employee.
With the prevailing low unemployment rate, it is clear that wages will catch up over the next few quarters. This will lead to inevitable further price increases for products and services.
We are not out of the infernal circle of inflation!
