Wages are expected to go up in Canada in 2022, but workers may not feel the difference if salary gains are eroded by rising inflation, according to a new survey and data. A LifeWorks survey on the salary plans of Canadian employers showed a projected average annual pay increase of 2.5% for 2022.

Projected salary freezes are also declining. According to LifeWorks, only 3% of organizations have planned to freeze salaries in 2022, down from the 12% that froze salaries in 2021, and 36% in 2020. “A tight labour market has caused ‘the great resignation,’ which is forcing organizations to adjust pay levels by the highest percentage in the last five years,” said Anand Parsan, partner and national practice leader of compensation consulting at Lifeworks, in a press release.

When excluding organizations that are planning salary freezes, the poll found average salaries are expected to rise 2.7% in 2022 — the highest in half a decade. But that salary bump could fall short of Canada’s steadily rising inflation rate, leaving workers with less buying power overall.

Statistics Canada said the consumer price index for August rose 4.1% compared with a year ago — the largest year-over-year inflation increase since March 2003. If inflation continues to increase in the coming months, the situation could leave workers unable to afford as many goods and services.

“When we look historically, salary increases have always been above inflation, so there’s a net gain,” said Anand Parsan, partner and national practice leader of compensation consulting for LifeWorks.“But now inflation is outstripping increases in salary.”

Still, the survey found salaries are set to increase at the fastest pace recorded in five years. “Organizations are scrambling to find and attract talent so they’re forced to increase salaries,” Parsan said. “But organizations have to balance that with their ability to pay and what’s going to happen with the economy.”

The Bank of Canada has played down inflation concerns, noting that the factors pushing up inflation like pandemic-related supply bottlenecks are expected to be transitory. Sherry Cooper, chief economist of Dominion Lending Centres, said it’s premature to raise the alarm about inflation outpacing salaries. She noted that some higher prices reflect a return to normal after prices dropped in 2020 at the outset of the pandemic.

Cooper added that the Delta variant continues to have a significant impact on the economy. “It’s all still highly uncertain,” she said. “Businesses can’t afford to push up wages if demand is going to begin to slow.”

Meanwhile, another poll suggests the top priority of some employees may not be a pay raise. A survey by payroll and HR management firm ADP Canada found work-life balance outweighs salary as top perk for Canadian workers.

When asked to compare their current priorities to those before the pandemic, the poll conducted with Maru Public Opinion found 31% of working respondents said a job that respects work-life balance is more important to them now. That compared to only 20% who felt salary had become more important. The survey also found nine out of 10 remote workers polled hope to continue working remotely some or all days of the week, citing work-life balance as the most important factor.

Meanwhile, the LifeWorks survey found the highest wage increases are expected in the wholesale trade industry, where average salaries excluding freezes are expected to climb 3.1%. The construction, accommodation and food services, and information technology sectors are projected to see wage increases of 3%.

About the data

LifeWorks’ 39th annual salary projection survey included responses from 829 organizations across Canada polled in July and August. The online survey by ADP Canada and Maru Public Opinion included responses from 3,032 randomly selected Canadian adults between Sept. 1 and Sept. 3. According to the polling industry’s generally accepted standards, online surveys cannot be assigned a margin of error because they do not randomly sample the population.

Source: The Star
Source: Financial Post