Labour relations in Canada settle into a “new normal”: Report

The “new normal” of collective bargaining in Canada—modest economic prospects matched by modest expectations—may provide a degree of certainty not seen in several years, The Conference Board of Canada concludes in its Industrial Relations Outlook 2013: Embracing the “New Normal.”

 “We have been living in the “new normal” since 2009, but we are only now realizing that we will not soon return to the buoyant growth enjoyed before the recession,” said Karla Thorpe, Director, Leadership and Human Resources Research. “The bargaining climate has fundamentally changed, and modest economic prospects matched by modest expectations may encourage pragmatism rather than rhetoric at the bargaining table.”

The Canadian and global economies face a period of slow near-term growth. The Canadian outlook is exacerbated by a strong currency, tepid productivity improvement, and demographic changes that will challenge government spending and revenue capacity over the long term. Employment growth in Canada has slowed this past year, reflecting ongoing employer nervousness about the economic climate.

Average base wage increases for unionized workers in 2013 are projected to be 1.8 per cent in the public sector and 2.1 per cent for the private sector. Given the current social and economic climate, a singular focus on increasing the union wage premium – currently down to less than eight per cent – may be counterproductive for the labour movement. Improving working conditions for workers and influencing public policy may prove to be a more fruitful approach.

Governments across all jurisdictions continue to focus on reducing their deficits and controlling public spending. Even after budgets are balanced, public sector employment and compensation (where more than 70 per cent of workers are unionized) will be subject to increasing restraint.

Some of this pressure will come from scrutiny into public sector pensions and benefits, which are often seen to be generous compared to the private sector. Future public sector bargaining will undoubtedly see these differences intensify.

Private sector bargaining outcomes will likely mirror the agreements reached in the auto industry in 2012, with reduced wages and increasing use of two-tier wage structures to make companies more competitive. At the very least, the results of bargaining in the auto industry will put downward pressure on wages in manufacturing and related industries.

This outlook is based primarily on The Conference Board of Canada’s economic, compensation, and industrial relations research, as well as the discussion at an annual roundtable held with senior labour relations practitioners from both management and unions