This text is part of the special Syndicalism booklet
The economy is currently experiencing an inflationary surge, and who says inflation also says a decrease in purchasing power. Although improving purchasing power is one of the unions’ traditional demands, labor lawyer François Longpré does not believe that inflation will be at the heart of the next negotiations. He tells us why.
“Inflation, which has remained stable for several years, was not a factor during the last collective agreement negotiations,” explains François Longpré, lawyer specializing in labor law at BLG and negotiator of collective agreements for employers. But with soaring inflation we’re experiencing, I expect that to be part of the discussion. »
Part of the discussion, no doubt, but couldn’t inflation become a major issue in the next negotiations? “I don’t think so,” says François Longpré. There is far too much uncertainty about the current rise in inflation. Is it temporary, mainly attributable to the economic disruption caused by the pandemic, or on the contrary, will it settle for a longer period? No one today can answer this question with certainty. »
Not to mention that the Bank of Canada has clearly indicated that it will raise its key rate, perhaps up to 2%, which should slow economic growth enough to bring inflation back to its usual target, i.e. in a range from 1% to 3%. “Uncertainty about the duration of the inflationary surge combined with the action of the central bank and its effects on the economy make it unlikely to agree a collective agreement where inflation plays a major role”, believes François Longpre.
An inflationary spiral?
But if inflation, against all expectations, persisted and the reduction in purchasing power was such that higher wages became inevitable, should we fear an inflationary spiral in which an increase in remuneration leads to an increase in the price of goods and services, followed by wage catch-up, etc. ?
“Not at all,” says François Longpré. First, it is very difficult today for a company to pass on to consumers an increase in the cost of its labor by increasing the price of its goods and services, because competition means that consumers can procure goods and services from competitors. Instead, companies prefer to absorb rising labor costs, either by reducing their profit margin or by increasing their productivity through greater automation, for example. »
And, he wishes to recall, the current inflationary situation is far from being similar to that experienced in the 1970s, when inflation was very high and above all, persistent. “In the 1970s, we saw several collective agreements take inflation directly into account, thanks to clauses that could cause compensation to fluctuate according to the rate of inflation in force, and this, for the entire duration of the collective agreement. . We are far from such a scenario. »
The art of compromise
François Longpré maintains that the negotiation of a collective agreement is a complex undertaking and that if one wants to carry it out successfully, one must take into account a host of factors, of which inflation cannot be the star. “There is salary catch-up for undervalued jobs, pay equity between men and women, the difficulty of the task to be performed, competition, regional or otherwise, the financial health of the company, recruitment and staff retention, and so on. No collective agreement can work without taking into account these factors, which are more decisive than the prevailing rate of inflation. »
Does this mean that it will never be discussed? “The employers and the unions are condemned to come to an agreement, continues François Longpré, because it is a question of a long-term relationship, which implies a sharing of risks and responsibilities and obliges the two parties to put water in their wine. We may see some collective agreements negotiate a slight increase in compensation to somewhat offset the effect of inflation, but these will be minor adjustments. Negotiating a collective agreement is above all the art of compromise. »