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B.C.'s public-sector union contracts unlikely to drive inflation: experts

Organized labour cites importance of collective agreements for competitiveness, small businesses
Current public-sector contract negotiations will likely have a bearing on future collective bargaining at organizations like BC Ferries, observers say | Rob Kruyt

It is no secret that B.C. is facing the expiration of a large number of public-sector union contracts this year, and negotiations are well underway for several of them.

But with inflation now pushing the cost of living higher throughout Canada, union representatives have indicated they will be fighting hard to secure higher wages, which some observers fear may compound the inflationary trend.

That is part of the balance that the province has to manage in securing the next major collective bargaining agreements with groups such as the BC General Employees’ Union (BCGEU), which represents 33,000 public-service workers.

“Central bankers worry that, if wage agreements factor in expectations of inflation, that’s essentially a self-fulfilling prophecy,” said Mark Thompson, professor emeritus at the University of British Columbia’s Sauder School of Business who specializes in labour issues. “But so far, it has not happened.”

The Bank of Canada has already increased interest rates this year in the face of rising inflation, and the fear is that higher wages negotiated in union collective bargaining agreements (CBAs) would increase inflationary risks and provide the central bank more ammunition to hike rates.

The contract aims of B.C.’s public-sector unions, however, do not appear to be a leading indicator of more inflation to come but rather a lagging indicator of the seriousness of the inflation that has already taken place, said Central 1 Credit Union chief economist Bryan Yu.

“I do think [union wages] reflect inflation rather than generate inflation,” Yu said. “It is inflation protection, although we would have to see the wording.
BCGEU president Stephanie Smith dismissed the idea that public sector CBAs can drive up inflation by including higher wage levels, noting the last wage increase for the union’s members was only two per cent.

A more urgent matter in the new deal, she noted, is properly compensating government workers who have not only faced some of the most challenging work conditions during the height of the COVID-19 pandemic, but have also become a key part of the B.C. economy as it seeks stronger growth in the coming year.

That, Smith said, is the true economic risk that arises from these expiring union contracts; if the workers do not get properly compensated, B.C. is effectively removing a foundational pillar of the local economy on which any economic gain will need to stand.

“When our members get a wage increase, they don’t put it in offshore tax shelters,” Smith said. “They spend it in their communities.… And people who do not have disposable income are not spending money in their communities. … Small businesses suffer when people don’t spend in the community.”

The BCGEU noted that talks with the province stalled on April 6, and the union initiated a strike vote on May 16 that will last five weeks. But Smith emphasized that the goal of the strike vote isn’t to take labour action but rather to have a strong result to take back to the province to bring the talks back on track.

“I respect BCGEU’s prerogative to do that in any round of negotiations,” B.C. Finance Minister Selina Robinson said in her statement about the strike vote. “The best agreements are worked out at the table. Leaving discussions at the table allows the parties who are negotiating to focus on reaching settlements.”

But the BCGEU deal isn’t the only one on the province’s plate. More than 180 union contracts covering more than 390,000 people who work in various parts of the B.C. economy expire this year.

Almost all of the unions agreed with the BCGEU that negotiations will hinge largely on higher wages – whether as a protection from inflation or as proper compensation for hardships during the pandemic.

For example, the BC Teachers’ Federation (BCTF) contract with the province expires on June 30. Teri Mooring, whose final term as BCTF president ends one day after the deal is set to expire, said her team’s goal is to secure a CBA before it expires.

The main wage issue for teachers, Mooring said, is competitiveness not inflation. She warned that if B.C.’s teachers do not receive wages more in line with other Canadian provinces, the sector’s labour shortage will worsen as prospective employees trained in B.C. depart for greener pastures elsewhere.

That, Mooring said, underlines the real economic risk facing the province when it comes to public-sector contracts: an overall degradation of K-12 education that jeopardizes B.C.’s economic foundations.

“Generally speaking, the public service in B.C. is not paid commensurate with other jurisdictions,” she said. “So in terms of teachers, we are not attracting teachers from other jurisdictions because of that. And when I talk to teacher education program leaders in the province, [prospective teachers] look at the wage scales and other factors, and the end decision is often to not remain in B.C.

“We are already not graduating enough teachers in B.C. Especially with the view of our cost of living, what is going to keep our [perspective teachers] here?”

According to labour data, Vancouver-area teachers in 2021 received an average annual salary of $85,980. In cities like Calgary ($94,014), Winnipeg ($91,493) and Toronto ($91,239), the wage is significantly higher without taking the cost of living into account.

Another major B.C. public sector union, the Hospital Employees’ Union, released a poll last month that showed the issue of lower wages and high stress stemming from the pandemic was so serious among its members that 34 per cent are looking to leave the health-care sector.

The numbers also showed 75 per cent of the membership experiencing burnout, 25 per cent reporting employers not backfilling positions left open by illness and vacation and 36 per cent saying they feel less financially secure than they were two years ago.

UBC’s Thompson said the main challenge for the province will be to distribute its finite financial resources to various unions and their memberships.

How the government does that now may affect future negotiations and service levels for workers at organizations like BC Ferries, which has faced significant challenges from COVID ridership restrictions and crew limitations.

“I think the main pressure point in these negotiations is that a number of these unions regard their members as having been on the front lines of COVID,” he said. “They’ve been told they’re heroes, which is nice, but they are also expecting some recognition.… How do you reward one group and not the other?

“If you ask the public, are nurses entitled to recognition for what they did? The answer, of course, would be yes. But it’s where you set the line, so to speak, when others also see themselves as front-line workers. BC Ferries, for example, cut its services considerably because the crew was sick, right? So what do you do about it? There are a lot of moving parts.”

Thompson pointed to a likely solution, one that Smith said was already tabled in one of the BCGEU’s proposals to the province: a cost-of-living-adjustment (COLA) clause, which Thompson said was ubiquitous in public union contracts in the 1970s during the oil shock.

The clause acts as insurance for union members against unforeseen costs driven by the macro-economy by pegging employees’ wages to a certain rate of inflation.

If the inflation gets to the designated rate, the COLA clause is triggered and leads to a higher wages for employees covered in that CBA – but it offers a degree of flexibility to the government’s finances because the additional wage cost would only be triggered if inflation reached a certain threshold.

And whatever the province decides to do, gaining that flexibility may be crucial – because if any lesson can be taken from the pandemic, it is to expect the unexpected, Thompson said.

“Right now, the B.C. economy is doing well,” he said. “But if you have a recession, then that changes.… What happens if you had another wave of COVID? If you are the government, you are going to have to be thinking about that. It’s a tricky, tricky situation.”