New Analysis Reveals Canadian Union Wage Premiums vs. Non-Unionized Workers Falling Rapidly
The union wage advantage in Canada is on life support.
New analysis by The Northern Account has uncovered an interesting phenomenon as it relates to union wages in Canada: they have narrowed significantly vs. non-union wages, and this trend has been accelerating since 2016.
Non-Union Wages Up 113% Since 2001
According to Stats Canada data obtained by The Northern Account, the average non-union hourly wage in Canada stood at $34.08/hour in March 2024.
This is up 113% from an average wage of $15.99/hour in Jan 2001.
It is also up 36% from December 2016, when the average non-union worker in Canada made an even $25/hour.
Union Wages Up Only 85% Since 2001
The average hourly wage of a unionized Canadian worker stood at $36.50 in March 2024, up 85% since Jan 2001.
However, the problem truly beings in 2016, when union members made an average wage of $30/hour; from this point forward, union members only managed to secure 21% worth of wage increases in the period from Dec. 2016 until March 2024.
During this period, they lagged non-union member raises by 15%.
Put another way, an average non-union member in Canada received raises that totaled 71% more than union members did, over the last 8 years.
The Result? A Complete Collapse of the Union Wage Premium in Canada
The chart below depicts the average union worker wage premium over the average non-union workers in Canada, over time.
The union wage advantage began to collapse in 2016, and it has been accelerating downwards ever since.
In fact, the union wage advantage has fallen from a high of 28.81% in Feb 2004 to 7.6% in March of 2024. The spread between the two classes of workers is now only $2.48 per hour.
One Cause of This Narrowing: Inflation.
According to a recent report from TD economics, union wage growth tends to stall in times of high inflation.
First-year wage adjustments of renegotiated multi-year contracts have reached 6.4% as of Q3-2023, their highest level since 1991. It is typical for first-year adjustments to be higher than the following contract years to compensate for lost purchasing power from previous cost of living adjustment (COLA) clauses that evidently undershot expected inflation.
-TD Economics
Essentially, union negotiators failed to predict high inflation and locked into long-term collective agreements. Conversely, non-unionized employees are more agile, and can renegotiate their wages on the fly, or simply change employers.
Union Workers are Stuck with Sub-CPI Raises, and Non-union Workers Aren’t
This can be visualized.
The chart below from the TD Economics report (mentioned above) depicts almost perfect correlation between unionization and low wage growth:
Will the Unions in Canada be Able to Negotiate Themselves Out of This Rut?
Only time will tell if unions will be able to secure large enough contract agreements to reestablish their wage dominance over non-member Canadians.
It should be noted that wages aren’t the only perk that unions provide to their members; benefits, pensions and job security all play a large role in union membership.
Of course, union members have to pay dues in order to secure these benefits. In fact, the average union member pays 1.6% of their gross salary as union dues in Canada.
For now, union membership may be worth it, but if this trend continues, members might start to question the value for money.
