Pay raises not enough to hammer Canada’s inflation: report

Everybody likes a pay raise — but is it enough to really make a difference? New study finds most Canadians’ pay raises haven’t matched the increase in the cost of living.

The report from the Canadian Centre for Policy Alternatives suggests if you’ve received less than 3.4 per cent in wage increases over the past two years, you’ve actually gone backwards.

The think-tank says almost 65 per cent of workers are in the same boat, including those in the health care, education, and the public sector.

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But some Canadians have done well during the pandemic, according to the report, including those who work in IT, culture, and recreation fields. Those sectors saw an average wage increase which surpassed inflation.

“Where we saw real wage gains in the past two years, it was for pandemic-related reasons: real estate agents benefiting from skyrocketing home prices, IT workers helping people work from home, and wholesalers working through supply chain issues,” CCPA Senior Economist David Macdonald said.

In February, inflation surpassed five per cent for the first time since September 1991. Recent numbers from the Bank of Canada show the country is on track to see an even greater increase in inflation to almost six per cent in the first half of 2022, before it is expected to ease in the second half of 2023.

As a result, the Bank of Canada announced it would hike interest rates to one per cent, up 50 basis points, which is the highest rise seen in two decades.

“With demand starting to run ahead of the economy’s supply capacity, we need that to happen to bring the economy into balance and cool domestic inflation,” the Bank of Canada said in a statement Wednesday.

“We also need higher interest rates to keep Canadians’ expectations of inflation anchored on the target, so that as global inflationary pressures from higher oil prices and clogged supply chains abate, inflation in Canada falls back toward the target.”