Rising federal hiring and wage scales skew national averages, complicating economic forecasts, reports Desjardins Group
Recent reports highlight a significant influence of federal employment on Canada's wage trends. According to Desjardins Group's latest analysis, despite a general slowdown in inflation, wage growth in the public sector remains robust, significantly impacting overall wage metrics.
Statistics Canada data for May revealed that average hourly wages across the nation rose by 5.1% from the previous year, with April showing a 4.7% increase. However, a deeper dive into the figures reveals a disparity between sectors. The first quarter of 2024 saw business sector wages increase by 3.4%, while public sector wages surged by 8.4%. This rise, although a slight deceleration from the 10% growth in late 2023, highlights a continuing trend of robust wage increases in the public domain.
Randall Bartlett, Senior Director of Canadian Economics at Desjardins, attributes this trend to significant hiring and higher wage scales within the federal public service. Since 2019, federal public sector employment has jumped by 17%, adding 657,000 new positions. This growth contrasts with a 4% increase in the private sector, reflecting a shift in employment dynamics.
This surge in federal employment and wages is reshaping the labour market landscape. The ratio of private to public sector employees has shifted from four to one at the end of 2019, to 3.5 to one currently. Bartlett points out that the attractive compensation packages in the federal sector not only draw talent but also create discrepancies in wage expectations across different sectors.
In fact, public administration professionals at the federal level earned an average of $45 per hour from January to May this year, standing out from the $35 average across other public and private sectors. This significant difference underscores the unique position of federal employees in the wage hierarchy, where only those in the oil and gas sector earn more.
The Bank of Canada acknowledges these trends but views them through the lens of private sector wage dynamics, which more directly influence the consumer price index and inflation forecasts.
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