When cost of living spikes, workers expect more from employers

By Tony Poland, LegalMatters Staff • Inflation could continue to have an impact on labour relations in the coming year as workers look to play catch up with their eroding purchasing power, says Toronto employment lawyer Jeffrey M. Andrew.

Andrew, a partner with Cavalluzzo LLP, points to a report published by RBC Economics that states more time is lost to work stoppages during periods of high inflation.

“Inflation is elevating the cost of living – and sending labour relations regarding wages into more contentious territory,” according to the report. “Lingering around a 40-year high, inflation in Canada has dramatically eroded purchasing power, forcing consumers to rethink their purchases.”

Unions have responded by demanding pay hikes, “increasingly using labour action to further their cause,” RBC states.

‘As inflation goes up, industrial disputes escalate’

“The report certainly made sense. As inflation goes up, industrial disputes escalate,” Andrew tells LegalMattersCanada.ca.

The report by Canada’s largest bank examined whether more turbulent times were on the horizon for Canadian labour relations. According to RBC:

• High inflation is driving more workers to take labour action to press for wage increases.
• Unfilled workdays due to labour stoppages rose 49 per cent last year compared to the 10-year average that led up to the pandemic.
• First-year percentage wage gains in recently negotiated contracts are at the highest level since the early 1990s.
• These jumps could push other workers and their representatives to be more aggressive in their demands, leading to further stoppages.

RBC says as the economy weakens, employers will be less able to meet outsized wage demands so “taming inflation will be key to restoring peace in Canadian labour relations.”

Andrew says it has been a tough time for workers.

“Wage increases have not necessarily kept track with the rate of inflation, particularly in the last year or so,” he says. “We have seen inflation rise significantly, so there has been quite a lag.

“Workers are not blind. They know that their purchasing power is much less,” Andrew adds. “They see companies making a profit and CEOs claiming bonuses. That inevitably causes people to demand more from their employers.”

Economic uncertainty, inflationary pressures

He says economic uncertainty and inflationary pressures seem to have spurred on more unionized workers to fight to improve their lot in life. 

According to the RBC report, nearly 160,000 person days were not worked due to a worker strike or lockout in 2022. 

The increase in worker stoppages hasn’t shown signs of slowing, the RBC reports. As an example, Andrew says there were job actions by Metro grocery store employees, B.C. port workers and Ford autoworkers this year.

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“Unionized employees have been working under a great deal of restraint,” he says. “You get into a situation where an employer is faced with demands that are possibly higher than they hope to pay and that is the type of situation that can lead to strikes because the union leadership is aware that they are just not meeting their members’ expectations.”

RBC noted that Canada’s aging population has accelerated acute labour shortages, giving employees even more bargaining power. 
“It is a good time for workers because if there are labour shortages, particularly with skilled labour, there will be more competition for recruitment and employers will need to pay more,” says Andrew.

The recent gains that unionized workers have made could push others to be more aggressive in their demands, leading to further stoppages, according to RBC.

Settlements reflect workers’ demands

“What happens is people get wind of what other workers are getting, particularly in the same sector or something comparable, and it reflects their demands,” Andrew explains. “Employers might say that is fine for that business but we are not their size. However, employees rightfully look at it and say you pay the same price for a widget as the other business. Why shouldn’t you be paying the same price for employee services as well?”

He says union gains can also benefit non-unionized workers. In addition, some businesses will try to keep pace with wage and benefit increases to discourage employees from unionizing.

“There is a premium you get for being unionized because of the bargaining power but often the non-unionized sector does benefit indirectly when unions are successful,” says Andrew. 

In a weakening economy, unionized workers can have an advantage, he says.

‘Unionized sector workers have recourse’

“Like a non-union worker, they may still be lagging behind. Their buying power has dropped. Their ability to service their mortgages or their rent has dropped. Their job security, if they are in a less stable business, isn’t any better,” says Andrew. “But in the unionized sector workers have recourse. And that creates pressure on the employer to try and keep the business going by having to pay more.”

However, challenges remain, he says.

“The employer may pay to keep labour peace but have a backup plan,” says Andrew.  “When people leave, they may not replace them, sharing the workload with those who remain. Layoffs can become more common as employers try to do more with less. 

“There is always a relentless push to save money,” he adds. “If employers start to feel that they are paying more than they wish to pay for labour they look for ways to avoid doing so. There is always the risk of employers cost-saving through reduced employment.”