Canada Government Workers Strike Over Pay to Offset Inflation

Canada said it made a competitive offer to the union, which included a wage increase of 9% over three years. The union “continues to insist on demands that are unaffordable and would severely impact the government’s ability to deliver services to Canadians,” said Canada’s Treasury Board, the federal department responsible for personnel and government administration.

The push for hefty pay raises to offset rising prices for food, mortgage payments, durable goods, and services has posed a challenge to governments in Canada and Europe, as they seek to avoid complicating the work by central banks to wrestle down inflation. Research from the International Monetary Fund suggests public-sector wage gains tend to spill over to the private sector.

Public-sector wages settlements “may have a significant and lasting effect on private wages and core inflation,” the IMF said in a report last week, in reference to inflation readings that strip out volatile-priced items like food and energy. “Public wage policy should balance the need to attract and retain high-quality civil servants against the risk of fomenting inflationary pressures.”

In the U.K., after some of the biggest strikes in decades this winter, the government handed rail workers a 9% pay rise over two years and struck a deal with unions representing nurses, paramedics, midwives, security guards and cleaners for a 5% pay increase this year. The government hopes the deals can act as a template for other disputes. In Germany, a large-scale transport strike brought large parts of the country to a standstill late last month. Verdi, a German union that represents around two million employees across a number of services sectors, wants to secure a 10.5% pay rise for staff, while EVG, a rail-workers’ union, wants a 12% increase.

“We didn’t cause inflation and we shouldn’t have to pay for it,” Chris Aylward, national president of the Public Service Alliance of Canada, said this week, prior to the union and Canadian government failing to reach a tentative agreement ahead of a Tuesday evening deadline. “We’ve always said from day one that we need wages for our members that will keep up with inflation.”

The alliance’s membership represents about 40% of the total Canadian government workforce, and the union said the strike threatens to disrupt, among other things, tax-filing season, processing of immigration applications and passport renewals. The Treasury Board said some government services will be “delayed or unavailable.”

After peaking at 8.1% in June of last year, inflation in Canada has steadily decelerated to the low-end of the spectrum among major developed-world economies. Inflation in March eased to 4.3% from 5.2% in the previous month, and the Bank of Canada expects annual price gains to slow further to 3% by the summer. Bank of Canada Gov. Tiff Macklem

On Tuesday, testifying before lawmakers, Mr. Macklem said annual wage growth needs to slow from its current level, of between 4% and 5%. Mr. Macklem said he is prepared to raise rates again, from the current 15-year high of 4.50%, should inflation remain “stuck” above 2%.

“We’ve been giving the same message to businesses, to workers, and to governments—that is, inflation is coming down. Don’t plan on inflation staying high,” Mr. Macklem said at a press conference when asked about public-sector negotiations.

Mr. Aylward, the union president, said the negotiating team is trying to get the best deal for its members, and help set a benchmark for private-sector workers. “When the federal government represses its wages for its own employees, what you’re doing is repressing wages for workers right across the country,” he said. “We’re asking the government to come to the table and set that bar for all working people in this country to make sure that no workers get left behind.”

Write to Paul Vieira at [email protected]