Why Canada will see wage growth and better jobs into 2025 — without triggering inflation

In this three-part series, contributing columnist Armine Yalnizyan explores the connection between wage growth and inflation, and what it means for our future costs of living.
As an eruption of high-profile strikes heighten anxiety about more price hikes, the public mood is shifting on wage growth.
What was once widely viewed as essential — catching up to inflation — is now seen as potentially hazardous to our economic health. Echoes of the Bank of Canada’s warning in 2022 that wage growth could lead to another wave of inflation ring loud in the ear of businesses, shoppers and even workers who have fallen behind inflation. 
But let’s check the facts: Yes, average hourly wages are growing at twice the pace of inflation in Canada. And they’ve been growing consistently at the same pace, around five per cent from the previous year, since February 2023. But inflation has been falling all the while. Last month it hit 2.5 per cent.
As the chart shows, this isn’t the first time wage growth has eclipsed inflation for a protracted period without triggering a rise in inflation.
Not only is wage growth not driving inflation — when you look at whose wages are rising it’s a good news story: fewer people working in the poorest-paid quartile of jobs, even as those jobs pay more; more people working in the top quartile, as more high-skill and higher-paid jobs get added to the mix. People aren’t just bargaining for more. They’re getting better jobs.
Of course newsworthy union-negotiated collective agreements grab attention, but overall it’s not unions driving up wage growth. Rather, it’s the changing composition of the job market. How (and why) would you make that stop?
What happens next will be profoundly shaped by politics, and how our chosen leaders narrate how the world works.    
Political upheaval in the United States potentially portends a fresh wave of progressive politics that support workers’ and human rights, and the freedom to associate, including organizing unions. 
Or, we could be on the threshold of a massive rollback of workers’ rights under the guise of making manufacturing and oil production great again, in our own backyards. 
These two diametrically opposed political tendencies chart starkly different trajectories for wage growth in 2025 and beyond as administrations enact or axe rules that systemically shape bargaining power.
Ultimately, though, it will be the constantly evolving economy that drives wage growth.
The Bank of Canada recently said there’s a good type of wage growth, the kind that is tied to productivity growth. Looks like compositional change (fewer jobs in hotels, restaurants and bars and retail, more jobs in professional, scientific and technical businesses and health) has packed a wage-growth punch as powerful as productivity growth.
Occupational changes also affect productivity and inequality. For example, over the past five years jobs in management swelled by a third. If management means focusing on attracting and retaining needed labour, lower-paid jobs could continue to see rapid increases in pay and benefits, reducing inequality.    
Or, if economies slow further, those same managers could be tasked with making those further down the totem pole pay for tougher business conditions, increasing inequality. 
Indeed, the economy is slowing, and unemployment is rising as a direct result of the Bank of Canada’s attempt to tame inflation. Normally less economic security increases the number of poorly paid, unstable jobs and suppresses wage growth.
Yet, despite tumultuous politics and erratic economics, I see three reasons solid wage growth and better jobs may continue in 2025:    
• The federal Liberals’ long-overdue decision to roll back some elements of the use of temporary foreign workers, in particular the exploitative low-paid workers parts of the program, and tightening intake of international students will likely improve wages for the poorest paid. And there will be more pressure to extend these rollbacks to industries still struggling with labour shortages, such as health care, construction and food processing, while creating more paths to permanence.
• Due to demographics, we’re at the point that the labour force would shrink if it weren’t for newcomers. They’re not the problem; in fact, just the opposite. It’s possible to both add newcomers to avoid the economic impacts of bona fide labour shortages throughout the skills and pay spectrum, as well as improve skills development and on-the job-training for Canadians, improving outcomes for all workers and businesses.   
• A wave of corporate concentration and profitability has spurred a surge in the fight against corporate power, from workers organizing in individual workplaces for the first time to regulatory fights against price-fixing and insufficient competition. Working for workers is not just a slogan. It’s a meaningful industrial strategy.
I’m hopeful for better because it’s becoming increasingly obvious that the economic orthodoxies of the past 40 years are no longer delivering on their promises.
The “olds” are being challenged. Youth are feeling the electricity of the moment. In their workplaces. On the streets. On campuses. In campaigns.
They are seeing that when they organize, they can nudge change. They’re experiencing first-hand, to paraphrase a slogan, when they fight, they win.
We’re so wired to feel outrage — about temporary foreign workers, about strikers asking for too much, about how unaffordable life is particularly for the young — we are overlooking the light for the heat.
This moment offers us the chance to make every job a good job, without triggering inflation.
And who wouldn’t want to be part of that kind of growth?