Wages for workers in the province that once led the country in wage growth have declined, but experts say the double whammy of inflation and labor shortages means Alberta businesses will soon face a wage bill.
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 a decade ago, Alberta’s so-called wage premium was staggering — in 2013, for example, the western province’s average weekly wage was as much as 23 per cent higher than the national average.
That premium has eroded over the past seven or so years due to a sustained drop in oil prices, although the latest data from Statistics Canada shows that in 2022 Alberta workers still enjoy the highest wages in the country (1,266 dollars per week on average in September compared to the national average of $1,175 per week).
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But where Alberta really stands out right now is the stagnation of its wages. Despite tight labor markets and the latest boom 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 seven per cent over the past two years, while in Alberta they have increased by less than one per cent. In some industrial sectors, wages in Alberta actually fell, while wages in other provinces saw wage growth in the same sectors.
“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, that’s a problem because it means inflation is taking a bigger bite out of Albertans’ households than the rest of Canada.” Albertans’ wages are not rising fast enough to offset the effects of inflation they are experiencing.
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There are a variety of reasons wages in Alberta aren’t increasing as fast as the cost of living, Holden said.
One factor is that the great oil sands expansion that fueled Alberta’s last economic boom and helped higher wages in the province has ended. While oil companies are making good profits right now, they are channeling them towards paying down debt and shareholder returns rather than capital projects and construction.
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In fact, while Alberta has seen job growth over the past year, much of that growth has been in relatively low-wage industries such as food service and lodging.
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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 blamed the provincial government for a series of moves that he said lead to a “de facto wage suppression strategy.” Those include the United Conservative Party’s crackdown on public sector wages, as well as its changes to labor laws that have made it harder for Albertans to join unions and therefore bargain wages collectively, he said.
“Wages that don’t keep up with inflation not only create a problem for individual workers, they create a problem for the economy as a whole,” McGowan said.
“Because if our wages aren’t maintained, it’s going to be harder for us to attract people to work in this province, and that’s just going to make things like labor shortages worse.”
There are currently close to 100,000 job vacancies in Alberta, and according to the Canadian Federation of Independent Business, 34 percent of small businesses in the province are experiencing labor shortages that are impacting their operations.
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But Annie Dormuth, Alberta CFIB spokeswoman, said simply raising wages is not the answer for small business owners who are dealing with rising interest rates themselves, as well as inflationary and supply chain pressures.
“Many of our members have explored ways to attract workers such as raising wages or offering more competitive benefits. They are exploring all their options to meet their capacity needs right now,” Dormuth said.
“But in many cases, raising wages also means raising prices, and many are hesitant to do that because they know their customers are also struggling with the cost of living right now.”
Holden said many employers are likely to have no choice but to take action on wages next year if they want to continue recruiting and retaining staff.
“We have heard from a number of our member companies that although they have resisted raising wages up to this point, many are feeling pressure to do so,” he said.
But he said what Alberta really needs is economic growth, because raising wages simply to offset inflation is a recipe for more inflation.
“In the long run, you always want to see wage growth, but you want to see wage growth for the right reason.” And that’s an increase in productivity,” Holden said.
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“Real, sustainable wage growth is what you want to see.”
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© 2022 The Canadian Press
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