Canadian Recruiters: No Big Wage Growth Pick Up On The Horizon

By Yali N'Diaye

     OTTAWA (MNI) - Despite above-potential GDP growth rates and increasing job

creation, wages continue to increase at a "consistent" pace and are unlikely to

accelerate significantly in general across Canada in the coming year, recruiters

tell MNI, although some sectors and provinces are ahead of the rest of the

country.

     Regionally, British Columbia, Quebec and Ontario were cited as the

provinces with the largest wage gains, while recruiters are also noticing a come

back in Alberta that had been battered by the oil price shock.

     Canada's unemployment rate, which started the year at 6.8%, declined to

6.2% in August, a level unmatched since October 2008.

     On the job creation front, the economy has added 219,100 jobs year-to-date

based on the Labor Force Survey data, nearly three times as much as it did over

the first eight months of 2016.

     Meanwhile, hours worked rose 2.2% year-over-year in August following a 1.9%

gain in July.

     Yet, wage growth, a key indicator closely followed by the "particularly

data dependent" Bank of Canada, has been lagging, and recruiters don't expect

any notable acceleration except for some specific skill sets.

     This disconnect is puzzling to the Bank of Canada, which said in its

September 6 policy statement that "there remains some excess capacity in

Canada's labor market, and wage and price pressures are still more subdued than

historical relationships would suggest."

     Going forward, "particular focus will be given to the evolution of the

economy's potential, and to labor market conditions," the BOC said.

     To be sure, there has been a slight pick up recently and average weekly

wages rose in August by 1.8% year-over-year, following a 1.4% gain in July.

Hourly wages rose 1.8% as well, following a 1.3% advance in July, according to

Statistics Canada's Labor Force Survey.

     The payroll survey has also shown a pick up, with average weekly earnings

including overtime for all employees rising 1.8% year-over-year in July, after

1.5% in June and a 2017 low of 1.0% in March.

     Over the second quarter, while real GDP expanded at an annualized rate of

4.5% that BOC Governor Stephen Poloz qualified as a "huge" number, hourly wages

increased 1.7%.

     For Poloz, wage increase "has been slower than would be expected in an

economy that is approaching full output." He partly attributes the slow pace to

a shift from higher-paying jobs in the energy sector to lower-paying jobs in

services. 

     "How long this effect will continue is not clear," he said in a speech

Wednesday.

     Rowan O'Grady, President of Hays Canada, has started surveying north of

3000 recruiters in preparation of the 2018 salary guide to be released later

this year.

     While responses are still being processed, after steady increases in 2017

so far compared to 2016, it looks again "like it's going to be consistent, I

would say, with the previous couple of years," he told MNI, not seeing signs of

an acceleration across the board.

     In 2017, about 50% of employers offered and implemented an increase of less

than 3%, and 24% offered an increase of more than 3%, which is "pretty

consistent" with 2016 and 2015, he said.

     For 2018, 55% expect an increase of less than 3% and 23% of more than 3%,

which is similar to 2017.

     From a sector standpoint, O'Grady expects the biggest increases in IT and

construction. There could be gains in mining and oil and gas, he posited, where

there have been salary cuts and freezes, though it might still be too early for

a wage pick up in the sector.  

     Regionally, he said the job market in British Columbia continues to be very

strong, as well as Ontario, and Montreal (Quebec) - especially for IT and

construction. Meanwhile, Alberta has leveled out for the last year and is now

showing some signs of increase.

     In his view, what's going to move salaries upward beyond companies' plans

is that "there is far more confidence in the job market among individual people

right now," who feel confident they could leave their job, or are open to new

opportunities.

     Once they leave for a new job, and employers realize they are suffering

from staff turnover, they will have to pay more, O'Grady said.

     The Conference Board of Canada's consumer confidence index climbed 8.1

points to 121.7 in August, its highest level since November 2007, fueled by

improved optimism about future finances but also job prospects.

     Nonetheless, "we haven't seen a lot of wage growth this year," said Elise

de Vasconcelos, director of client programs at Adecco. "It's been pretty

stagnant."

     Generally speaking, de Vasconcelos noted that despite a better job market

in terms of job creation, they are not necessarily paying better than last year.

     To be sure, some skills are in "hot" demand across the country,

particularly digital website, digital marketing, online marketing or social

media type of jobs, she told MNI, be it temporary or permanent jobs.

     But salaries for middle management "are flat right now."

     Canada, however, is not isolated.

     In fact, a report published Wednesday by the International Monetary Fund

was dedicated to the disconnect between unemployment and wages in many advanced

economies.

     "Nominal wage growth in most advanced economies remains markedly lower than

it was before the Great Recession of 2008-09," the IMF said in a World Economic

Outlook chapter on recent wage dynamics.

     It found that most of the wage slowdown can be explained by labor market

slack, productivity and inflation expectations, all amplified by the

synchronized nature of excess capacity globally. But until such factors improve

and involuntary part-time employment declines, wage growth could remain

"subdued."

     In Canada, Poloz said Wednesday that youth unemployment also keeps him up

at night, hoping that firms will eventually expand capacity and create new jobs

to draw back the "decidedly discouraged" youth.

     Overall, however, Canada's job market has been faring well in terms of

employment, consistently exceeding analysts' expectations.

     But Adecco's de Vasconcelos doesn't see wage growth accelerating "hugely"

in 2018, expecting the same sectors as in 2017 to record the highest gains:

finance, utilities, construction and engineering. "But it still will not be a

big increase," she told MNI.

     So far she said the biggest wage gains have been in the province of Quebec,

followed by British Columbia.

     B.C., along with Ontario and Quebec enjoy low unemployment rates of 5.1%,

5.7%, and 6.1%, respectively, below the national level of 6.2%. While Alberta

still stands at 8.1%, it came down from 8.8% in January.

     While she doesn't see huge gains, de Vasconcelos expects the proposed wage

increase in Ontario to boost numbers there from next year through a domino

effect that would put pressure on jobs currently paying $14 or $15 per hour, as

these workers will seek better-paying jobs.

     In May, the province of Ontario proposed a legislation to raise the minimum

hourly wage from $11.40 currently to $14 in 2018 and $15 in 2019, followed by

annual increases at the rate on inflation. 

     Across Canada, "overall we've seen salaries rise about 3% to 4% on

aggregate on average," said Koula Vasilopoulos, a district president with Robert

Half, which is consistent with 2016. She sees no notable difference between

temporary or permanent positions when it comes to wage growth.

     Based on interaction with clients as well as national growth and employment

statistics, she expects that trend to continue, although some gains could be as

large as 6% to 9% for the most in-demand skill sets.

     A key reason she believes salaries are not increasing more in line with the

pace of expansion of Canada's economy is that a growing number of employees are

ready to forgo some wage gains for other benefits in the overall package.

     While unhappy employees are not hesitant to look elsewhere, they are now

taking more factors into consideration than just the pay check, she said, citing

flexible work schedules as an example.

     This is "absolutely" happening more and more, she said.

     On a sector basis, Vasilopoulos noted the resource sector has come back

"quite nicely," while manufacturing is also seeing good wage gains.

     Regionally, she too sees a pick up in British Columbia, Ontario, Quebec,

and to a lesser extent Alberta.

--MNI Ottawa Bureau; +1 613 869-0916; email: yali.ndiaye@marketnews.com

[TOPICS: M$C$$$]