Unionized wage increases for 2007 show growth

But inflation does not appear among the causes
By Gordon Sova
|hrreporter.com|Last Updated: 10/01/2008

Every year, CLV Reports (Canada Labour Views) compiles a survey of unionized wage increases for the private sector. The results are broken down by industry and also by whether the collective agreement has a COLA clause.

CLV Reports recently analyzed 422 private-sector wage settlements reached in 2007. In all of these agreements, employees were represented by a union; all of the settlements were ratified in 2007. Nearly 180,000 employees are covered. (Some of these agreements have been published as summaries in CLV Reports, and some have not.) The average length of the settlements reached in 2007 was 3.50 years, virtually unchanged from last year and just slightly longer than the 3.46-year average over the past three years.

The average first-year non-COLA wage adjustment was 49.59¢ or 2.78 per cent, up strongly from 44.64¢ or 2.60 per cent in 2006. Manufacturing increases averaged 43.83¢ or 2.35 per cent, while increases in the service sector were 56.00¢ or 3.36 per cent.

Forty-one first-year wage freezes occurred; they are included in the averages. This is lower than the 55 recorded last year on a similar total of 427 agreements. In addition, 16 agreements instituted new wage grids, down from 19 last year. However, four agreements reduced wages in the first year; none did last year. These include 14 per cent at Olymel and three other reductions of between two and three per cent. Six agreements saw large first-year increases ranging from 11.1 per cent to 14.4 per cent.

The second-year non-COLA wage adjustment was 48.29¢ or 2.58 per cent on average for the total group, reflecting the average for manufacturing of 44.12¢ or 2.30 per cent and for services of 52.60¢ or 2.95 per cent.

The average wage increase for third-year non-COLA settlements was 48.23¢ or 2.54 per cent, with manufacturing at 45.43¢ or 2.33 per cent and services at 50.23¢ or 2.82 per cent.

It is noteworthy that, in each contract year, the service average is again higher than the average for manufacturing. Traditionally, manufacturing saw higher increases, but this has not been the case recently. Part of the reason is clearly the economic problems that manufacturing has been facing. However, this year we see several large increases in “new” sectors for union certification, suggesting that there is a process of increasing wages in industries where they have been depressed.

This year, there is a bit more fluctuation in second-year and third-year non-COLA increases than there was last year. In 2006, the difference in percentage increases was –0.12 percentage points and +0.07 (2.60 per cent in the first year, 2.48 per cent in the second and 2.55 per cent in the third); in 2007 they were –0.20 and –0.04 percentage points (2.78 per cent, 2.58 per cent and 2.54 per cent respectively in the first, second and third years). The corresponding differences in 2006 were –0.11 and +0.05 percentage points.

Inflation fears were not an important concern early in the year, at least, and the fluctuation may have had more to do with freezes, restructurings and adjustments than with protecting buying power. First-year wage freezes in 2007 at 41 did not meet the whopping 55 from 2006, but with second-year and third-year freezes at 25 and 17, respectively, surpass the 19 and 11 recorded last year. 2007 ratifications also included four first-year wage reductions; there were none in the 2006 sample.

Inflation expectations may have been at work in negotiating COLA agreements. Theoretically, one would expect open COLA increases to be the lowest, limited COLA increases higher and non-COLA the highest. This would most effectively maintain purchasing power. In 2007 and 2006, the increases followed this pattern, but they did not in past the past, in particular in 2002 and 2004. In 2007, non-COLA increases were consistently highest and limited COLA not far behind. That would suggest mild inflation fear. However, factors such as sector strength and union bargaining power also intervened in the mix.

Open COLA provisions are found overwhelmingly in auto parts, electrical products, primary metal and mining in our sample. Mining and metals (the minority of COLA clauses) have seen a good year; other manufacturers have not.

Human Resource and Social Development Canada (HRSDC) provided results for 2007, based on bargaining units of 500 employees and over. They show an average wage increase of 3.1 per cent (including COLA where applicable) for private-sector agreements, up from 2.2 per cent in 2006. The average for manufacturing settlements was 2.4 per cent, up from 2.2 per cent. Primary industries saw increases averaging 4.7 per cent, up sharply from 2.7 per cent, and utilities were also up strongly from 2.3 per cent at 3.8 per cent. These averages include COLA and non-COLA agreements and the COLA agreements assume a rate of inflation. Also, percentage increases are based on the lowest rate in the bargaining unit, rather than on the weighted average.

In Ontario, for 2007 and based on units of 200 and over, the private-sector average was 2.9 per cent, up from 1.8 per cent in 2006. These averages, again, are based on the lowest rate of pay, and include estimated inflation. In Alberta, the figures show wage increases in manufacturing settlements in 2007 averaged 4.7 per cent per year, up from 3.2 per cent in 2006. In Quebec, private-sector wage settlements in 2007 averaged 1.8 per cent for manufacturing, down from 2.1 per cent, and 3.4 per cent, up from 1.2 per cent, for services for a global average of 2.7 per cent, up from 2.1 per cent.

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