Key to mending broken labour relations is fixing inflation, RBC economists say

High inflation is driving workers to take labour action in the fight for wage increases, according to a new report by Canada's largest bank that says more turbulence could be on the way for Canadian labour relations.

According to the report published by RBC Economics on Sept. 20, unfilled workdays due to labour stoppages rose 49 per cent in 2022 compared to the 10-year average leading up to the pandemic.

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Conflicts between employers and workers haven’t slowed down in 2023, which has already seen labour action by federal employees, B.C. port workers, autoworkers, grocery store employees and TVO staff, who entered their fifth week of job action on Sept. 21.

The key to restoring peace, the report says, is to tame inflation.

Sitting around a 40 year high, inflation in Canada has dramatically eroded purchasing power and raised the cost of living for most Canadians.

Across the country, unions have responded to the erosion of purchasing power by demanding higher pay for their members, often resorting to labour action such as strikes and walkouts.

In 2022, RBC reports, workers and union members collectively spent 160,000 work days on strike or locked out by their employers. And the rise in job actions hasn’t shown signs of slowing since then. As of July 2023, the number of work days not worked was up 25 per cent from the same period in 2022.

The report argues that recent wage gains are the highest they've ever been, which may be driving more labour groups to be more aggressive in their demands. According to data from Employment and Social Development Canada, first-year raises were up 7.1 per cent in July, the highest first-year rate adjustment we’ve seen since the early 1990’s.

However, unions have argued that employers are either locking large sums of money into long-term investments or enjoying record profits while short-changing labourers.

The Canadian Media Guild argued on Sept. 21 that the $17 million Ontario's public broadcaster invested last year in five-year GICs and Principal Protected Notes goes above and beyond what it should have tied up in long-term investments.

When wage negotiations broke down between B.C. port workers and the B.C. Maritime Employers Association (BCMEA) this summer, the International Longshore and Warehouse Union's Canada division said greedy shipping companies and terminal operators, not greedy port workers, were to blame for the conflict.

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Citing a study published by Vancouver’s Centre for Future Work, the union argued six members of the BCMEA made more than $100 billion in profit in 2022 – up 1,500 per cent from 2019 – while longshore base wages in B.C. grew by less than 10 per cent over the same period.

Regardless of the reasons why negotiations between specific labour groups and employers in Canada have broken down, RBC predicts negotiations in general will increasingly hit walls as a weakening economy places more pressure on both labourers and employers.

"As the economy weakens, the ability of employers to acquiesce to firmer demands will diminish. And passing on higher operating costs (including wages) to customers will get harder," the report reads.

"As more labour contracts expire this year, taming inflation and bringing balance back to the country’s labour market will be key to restoring peace to labour relations in Canada."