The joy of fatter paychecks: Haves and have-nots

Everyone likes the idea of seeing a little more cash left over on their take-home pay, and employers are happy to award their workers for a job well done. But times are tough, and next year Canadians may have to get used to the idea of smaller-than-normal pay increases. Albertans may be in for the biggest shock of all!

Earlier this week, a survey of Canadian employers shows that at the national level, average salaries are set to increase by 2.3 percent in 2010, which is much lower than the 2009 forecast of 3.7 percent from last year's survey.

The survey, conducted by the well-respeced Hay Group, captures responses from almost 500 Canadian organizations in the public and private sectors.

But oh, have the mighty fallen!

Alberta is expected to tumble from its traditional spot as the province with one of the highest rates of pay growth.

That honor now goes to Saskatchewan, where employees can expect an average pay hike of 3.8 percent. Newfoundland (+3.5 percent) and Manitoba (+3.0 percent) come next among the provinces.

In Alberta, wages and salaries are forecast to increase by an average of only 2.6 percent. It is still an increase, but it does represent the largest drop from one year to the next among all of the provinces. Last year, Alberta saw pay-checks rise by 4.9 percent.

And the softer labor market conditions in Alberta are apparently sufficient to weigh down the national average.

"Over the past year, we've continued to experience symptoms of an overall weaker economic outlook, which last year was partially offset by the buoyancy of the energy sector in Alberta. The 2010 forecasts, however, do not include that energy sector optimism, and as a result, the forecasts are noticeably lower than those of last year", comments Karl Aboud, director of the Hay Group Reward Consulting Practice, in a press release.

But the woes in the energy sector aside, there are some good reasons why we shouldn’t be too surprised to see salary increases in Alberta come off their lofty heights from previous years.

For one thing, Alberta employees already make more than their counterparts in any other part of the country – and the difference is not insignificant. Average weekly wages of employees in Alberta were $962.77 in June (the latest month of data available). That is well above the national average of $823.23, and even 14 percent higher than the No. 2 province, Ontario.

Secondly, not only are wages and salaries in Alberta high, they’ve been rising at the fastest rates among the provinces. Average earnings in Alberta over the last 12 months have increased by 5.2 percent compared with the same 12 months a year earlier. Nationally, the rate of increase has been a much more modest 2.2 percent.

And third, inflation in Alberta is now among the lowest in the country – which reverses a trend back in 2006 and 2007 when Alberta had the highest rates of consumer price inflation. Now, in the summer and fall of 2009, Alberta is in a state of price deflation (led primarily by lower gasoline prices and other factors that are expected to be temporary). If you adjust for price deflation, real wages and salaries in Alberta are actually somewhat higher than the 2.6 percent in nominal wage gains forecast in the survey.

In short, Albertans have seen more than their share of wage and salary increases over the past few years. Sure, the cost of living is higher in Alberta than in many parts of the country, particularly for rental accommodation and some segments of the real estate sector. Food costs are higher than average, too.

But there is a reason why Alberta remains a destination for interprovincial migration in 2009: the jobs market remains relatively good. Even with the job losses registered in August, and with Alberta’s unemployment rate rising to the highest in decades at 7.4 percent, it may still be easier to find work here than in places like southern Ontario.

This kind of labor mobility from one region to another is exactly how a labor market should work. It helps elevate job shortages in one region, and helps moderate wage increases in the other.

So through the magic of labor market mobility, more competition for fewer jobs, and the softening of the energy patch, it is no wonder that wage increases in Alberta are being brought down to earth.

Letter to the Editor: Your comments are welcome.

This article is courtesy of Troy Media Corporation.