by Morinville Online Staff
Small businesses in Canada are planning to increase wages by an average of 3.3% over the next year, according to the latest Canadian Federation of Independent Business (CFIB) Business Barometer. The increase in wages comes amid high inflation rates and a tight job market.
Although wage increase plans have decreased from their peak of 3.6% in June 2022, they remain elevated by historical standards. The increase is not fueling inflation, according to Simon Gaudreault, Chief Economist and Vice-President of Research at CFIB.
“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,” Gaudreault said. “Small businesses, while responding with higher than usual wage increases, are not really the ones fueling the inflation fire at the moment,”
Gaudreault also said that small and medium-sized businesses, which CFIB regards as the backbone of the private sector and an important group of middle-class taxpayers, cannot keep up with current wage increase demands from public sector unions, which would put them at a significant disadvantage as employers in a tight labor market.
Meanwhile, the 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.
Andreea Bourgeois, Director of Economics at CFIB, said that wages tend to be stickier than prices, so it’s normal for price increases to be ahead of wage increases. She added that both price and wage plans are currently past their peaks and on a general downward trend, which is good news for the economy.
The CFIB Business Barometer also showed that slightly more businesses reported their general situation as bad this month (20%), while fewer reported it as good (34%) compared to last month. The long-term small business confidence index in April crept up by less than half a point to 55.7, and while on a general upward trend in recent months, it remains well below its historical average of 61.
Despite this, there are some positive signs. After months of sluggish movement, retail showed significant signs of increased optimism, jumping 11.8 index points to stand at 54.4 in April.