October 27, 2008 / 5:24 PM / in 9 years

Crisis-wary Canadians set to chop wage hikes: survey

OTTAWA (Reuters) - Canadian employers looking to cut costs to withstand the global financial crisis are planning to whittle away at wage increases in 2009, the Conference Board of Canada said on Monday.

<p>A Canadian flag blows in the wind in front of the Peace Tower on Parliament Hill in Ottawa in this May 22, 2004 file photo. REUTERS/Jim Young</p>

Even before the market meltdown in September, companies said they were planning to scale back nonunion wage increases to 3.9 percent next year after raising them about 4.2 percent in 2008, according to the think tank’s survey of 395 employees in June through August.

The market meltdown since then likely means that increases will be closer to 3.4 percent than the 3.9 percent projected by the respondents, said Prem Benimadhu, vice-president of governance and human resources management at the Conference Board.

Other forecasts in the report, if revised, are also likely to be lower, it said.

“Chaos in the financial markets south of the border and globally will undoubtedly put downward pressure on wages in Canada,” the Conference Board said in its annual survey.

Wage increases for unionized employees in 2009 were seen averaging 3.2 percent, with 3.5 percent for the public sector and 3.1 percent in the private sector.

The biggest pay hikes will be in the oil and gas industry, and other natural resources and Western Canada will fare better than the central and eastern regions.

Manufacturing, battered by the U.S. slowdown and until recently the strong Canadian dollar, will see the lowest pay hikes. Regionally, the weakest wage increases will be in Ontario, Quebec and the Atlantic provinces

The inflation forecast at the time of the survey was 1.8 percent for 2009, so wage gains were seen outpacing the rise in the cost of living.

Despite the tougher economic times, almost three-quarters of respondents reported difficulty recruiting and maintaining skilled staff. That number was 89 percent in Alberta, Canada’s oil heartland.

But the economic downturn should push the unemployment rate up to 6.9 percent from 6.1 percent in September, relieving some of the pressure in labor markets, the Conference Board predicted.

That might also mean employers, especially in Alberta, may no longer feel under pressure to offer highly competitive wage packages to attract talent.

“Given the potential decline in corporate profits and world economic uncertainty, 2009 may see a deviation from this trend,” the report said.

Reporting by Louise Egan; Editing by Peter Galloway

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