Ouch, inflation rose 8.5% in March in the United States, its biggest increase in 40 years, and this progression still shows no signs of slowing down. If the figures for Canada are a little more modest with an increase of 5.7% in February, the current increase in prices is more and more likely to create a clash with the much slower increase in wages.
Posted at 6:30 a.m.
Since the appearance of a little more sustained inflation in 2021, after a year of severe economic disruption caused by the COVID-19 pandemic, the rise in the cost of living has continued to grow.
From month to month, the Consumer Price Index is only appreciating, while it is propelled mainly by the rise in energy and food prices, which was itself fueled by the outbreak of war in Ukraine.
We may say and assess everywhere that this rise in the cost of living is temporary and that the movement should gradually fade to return to a more normal and acceptable rhythm – of the order of 2 or 3% on an annual basis. –, the very real situation at the moment is that the rate of increases continues and does not weaken.
The purchasing power of consumers, on the other hand, is only following the opposite movement, and it is hard to imagine that one day, significant wage increases will make it possible to reduce this gap which is only growing.
Very few organizations are in a position to give their employees salary increases that would allow them to fully absorb the increase in the cost of living, unless they pass the bill on to their customers by raising their prices, feeding the same hit the insatiable appetite of inflation.
“There are luckier employers who have signed a collective agreement that covers another two years and who are protected from the current situation,” points out Richard Gaudreault, associate lawyer in the Labor and Employment Law group at Lavery.
But, agrees the specialist, the particular situation of high inflation that we are going through, however temporary it may be, will generate clashes in certain negotiations.
In 20 years of negotiation and consulting practice, Richard Gaudreault assures us that he has never worked in a context like today’s, and the truth is that a majority of companies are not prepared for it. to face.
“I am currently at five or six bargaining tables, and the employers have no plans and are looking for solutions. We know that the inflation rate will not stay high forever and many will opt for temporary solutions, but the challenge is to get union members to accept them,” explained Richard Gaudreault.
Anti-clash solutions
For the past twenty years, many companies have favored the signing of long-term collective agreements – six, seven or eight years – because they wanted to buy industrial peace and the context of economic predictability allowed it.
“On the salary level, there were modest increases with more significant increases at the end of the contract. The trend this year will be to conclude short-term agreements to deal with the crisis,” observes the lawyer.
To respond to the immediate effects of soaring prices and not to weigh down companies’ long-term balance sheets, the payment of lump sums could be made while providing wage increases over time, modulated at inflation rates closer to the normal.
Widely used during the 1970s and 1980s, the adoption of cost-of-living indexation scales with ceilings and time delay measures would also ensure a certain predictability and mitigate the impact of rising unemployment. ‘Consumer price index.
The current problem of high inflation is amplified by that of the labor shortage, which forces companies to redouble their creativity to ensure the retention of their key personnel.
“Surprisingly, the labor shortage of recent years has not led to the upward movement in wages as one might have expected. Experienced employees preferred to capitalize on all of their social benefits and on the flexibility of their working conditions granted to them by many employers,” emphasizes Richard Gaudreault.
A little more flexibility in working hours, for example, would therefore be another axis that would allow employers and employees to agree on lower wage conditions than those required by inflation.
Until then, we can still hope that the inflationary surge that has been plaguing us over the last few months will indeed be short-lived, as many economists predict. The latest US statistics for March seem to want to confirm this possibility.
Inflation certainly rose by 8.5% during the month of March, which entirely discounted the effects of the war in Ukraine, which began on 24 February. Once energy and food prices are excluded, the inflation rate rose only 0.3% in March, compared to 0.5% in February. Hoping that this slowdown marks the beginning of a trend.