All HR professionals have to strategically plan the potential and actual costs of wages every year. There are many factors that affect the business cycle of wages, such as the economy, the Consumer Price Index (CPI), and the unemployment rate:
- The economy is doing well with a predicted growth rate of about 1.9%.
- The CPI is trending up.
- The unemployment rate in Canada is at 6%.
If one considers these factors, what does the upcoming 2020 forecast look like for employee wages? Here are some perspectives based on these economic indicators.
The North American economy has been booming for over 10 years. There is always global uncertainly with circumstances that are difficult to predict, such as trade wars, changing politics, and possible pandemics, but most economists say the business fundamentals in Canada are sound. Inflation, although stable, has been trending upward in recent years, and one of the most important economic factors to consider—unemployment rate—has been down in North America. The US unemployment rate was at 3.5% in 2019, which was the lowest it had been in 50 years. In Canada, the unemployment rate was the lowest it had been in 43 years in 2019 at 5.8%.
The low unemployment numbers will be the biggest contributor to wage increases in 2020. A recent wage survey predicts the average wage increase for Canadian employees will be approximately 2.7%, which is just above the current rate of inflation, which means employees’ actual wages will also increase.
All of these factors are going to put great pressure on HR departments. As wage demands increase, it will be more difficult to recruit and retain employees as job openings will outpace the supply of employees.
2020 will be an interesting year for HR departments, which will have to be at their sharpest to maintain their compensation budgets, and still be able to hire employees without too much upward wage pressure.
Review the interactive wage survey from Normadin-Beaudry, and find your provincial data. Identify your province’s predicted wage increase for 2020 and compare it to the average wage increase in Canada. Once you have identified the wage increase, research and identify your province’s CPI and unemployment rates. Using all the data collected, create a 5-minute presentation for your VP of HR on developing a new compensation strategy for your organization.