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Apr 28, 2023

Wages on way up

Small businesses expect to increase wages by an average of 3.3% over the next 12 months, says the latest Canadian Federation of Independent Business (CFIB) Business Barometer. However, while average wage increase plans remain elevated by historical standards, they are down after peaking at 3.6% in June 2022. "Wage plans would have to further moderate to bring inflation within the Bank of Canada's target range of 1% to 3%, however they are really not that far off and, quite frankly, show a sensible approach in the current inflationary context,” says Simon Gaudreault, chief economist with CFIB. “Small businesses, while responding with higher than usual wage increases, are not really the ones fueling the inflation fire at the moment. This also puts public sector unions' current wage increase demands into perspective. Small- and medium-sized businesses – the backbone of the private sector and an important group of middle-class taxpayers – simply can't keep up with such requests, which would also put them at a significant disadvantage as employers in a tight labour market." On a related note, average price plans remained unchanged at 3.5% in April, but are still on a significant downward path since peaking at 4.9% in May 2022. Wages tend to be stickier than prices, so it's normal for price increases to be ahead of wage increases. It takes more time for wages to adjust, says CFIB.

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