February 3, 2014

Canada’s construction labour costs are advancing, but with decorum (Part 1)

I’m often asked how to access hourly labour rates for construction trades in Canada.

Statistics Canada’s Capital Expenditure Price Statistics (catalogue no. 62-007-X) includes several tables setting out data on union wage agreements in the industry.

This publication is freely available at the government agency’s website by entering the title or catalogue number in the search function.

The print schedule is quarterly. Therefore, the data may not be as up-to-date as one would wish.

Thankfully, there are additional sources. The same series, with more current updates, are also available in two Cansim tables, 327-0003 and 237-0045.

Cansim is currently showing data for November 2013, whereas the latest Capital Expenditure Price Statistics has information only up to June of last year.

Comparing construction labour rates in Canada is complicated by several factors. For example, in some provinces, a great deal of the work is undertaken by non-union work forces.

Also, in regions with mega resource construction projects, owners sometimes negotiate project-specific agreements with their field staff in order to reduce the risk of work stoppages and cost overruns.

Union agreements specify basic hourly wage rates, but these are augmented with “supplements” that can add 30% to 50% in total.

To quote from Statistics Canada, supplements include “vacation pay, statutory holiday pay, health and welfare charges and employers’ contributions to pension plans and industry promotion and training funds.”

For the sake of being realistic, the analysis in this article will focus on hourly rates that include supplements.

In what follows (especially in the tables), sometimes only a representative city or two will be chosen from a province, since nearby centres will often follow the same pattern.

Calgary and Edmonton labour rates are exactly the same. Toronto sets the standard in Ontario. In Quebec, wage rates are province-wide

Statistics Canada calculates a composite index for 16 construction trades. In November 2013, that index was +0.8% year-over-year. That was a little slower than the latest year-over-year change in Canada’s all-items Consumer Price Index (CPI), +0.9%.

A single year is too short a time frame to consider for union contracts. A number of unique features of union agreements can distort the timing of adjustments.

For example, when new contract signings occur well beyond the previous contract’s expiration date, the issue of retroactivity rears up.

Also, inflation escalator clauses may ultimately change agreed-upon percentage hikes.

Extending the analysis over a longer period of time diminishes those out-of-the-ordinary influences.

Table 1 sets out percentage changes over the past five years. The starting point is November 2008, just as the Great Recession was taking hold. (In Canada, it lasted from Q3 2008 to Q2 2009; in the U.S., its duration was from Q1 2008 to Q2 2009).

The total Canada percentage change of +13.1% over the five years compares favorably with the all-items Consumer Price Index (CPI) increase during the same time frame, +7.8%.

(The word “favourably” has been used in the sense that workers in the industry have kept ahead of inflation.)

The results in Table 1 showcase how dramatically circumstances have changed in Newfoundland and Labrador. Resource wealth in energy and minerals, with accompanying mega construction projects, has contributed to a giant leap in union wage rates, +36.7% over the past five years.

The next five finishers are all in western Canada, where raw-materials-related construction projects also rule.

Regina and Saskatoon union wage rates in construction, including supplements, are up by one-fifth versus 2008. Winnipeg, Edmonton and Calgary are in a tight band between +16.6% to +17.1%.

Cities in the Atlantic region and Quebec form the next tier, with gains ranging from +13.0% to +16.0%.

Ontario, as represented by Toronto and Ottawa, is near the bottom, only +11%.

The low percentage changes for B.C.’s two biggest centres, Vancouver and Victoria (+10.2% and +10.6% respectively), may be misleading since much of the work in the province is open shop.

Table 2 is a corollary to Table 1. For Canada as a whole, it sets out the percentage changes in basic rates plus supplements for major construction trades, both year-over-year and dating back to 2008.

The degree of variation is much less than in Table 1. The bracketing at the top and bottom has reinforcing steel erectors recording the highest increase (+17.8%) over the past five years, with structural steel erectors trailing with the lowest (+11.4%).

To be continued in Economy at a Glance Part 2.

For more articles by Alex Carrick on the Canadian and U.S. economies, please see his market insights. Mr. Carrick also has an economics blog.

Table 1: Indices of union wage rates
including supplements (per cent change),
composite of 16 major construction trades

Table 2: Indices of union wage rates
including supplements (per cent change),
16 major construction trades, total Canada

Data source: Statistics Canada.
Tables: Reed Construction Data – CanaData.

Print | Comment