The labour deal that ended a historic strike by federal government employees is expected to serve as a catalyst for workers across Canada to push for higher wages in an inflationary environment.

The Public Service Alliance of Canada and the federal government reached a tentative agreement early Monday to bring 120,000 striking employees back to work after one of the largest work actions in Canadian history.

PSAC said the deal includes a 12.6-per-cent, compounded wage increase over four years, a one-time lump sum of $2,500, and new language surrounding remote working that the union lauded as a step forward.

The wage increase, expected to cost Ottawa $1.3-billion a year, will spur other unions to seek richer wage settlements as workers try to keep up with inflation that has eroded Canadians’ spending power over the past couple of years, labour experts say.

Kendra Strauss, director of labour studies at Simon Fraser University, said the wage increases in the deal are higher than what other public-sector workers have achieved in the past few years, and are significant considering that many public employees have had little or no wage increases for years.

“Unionized public-sector workers had actually fallen behind quite considerably over the last few years,” she said.

Successful strikes have historically created a domino effect, prompting other unions to immediately take action, said Larry Savage, a labour studies professor at Brock University. While this deal was a compromise – PSAC had been seeking a 13.5-per-cent wage increase over three years – he said high inflation has led to an uptick of “union militancy,” where members are more willing to take strike action.

“Other unions will absolutely try to replicate and improve on this settlement,” he said.

The workers that were on strike are part of five major PSAC bargaining units. They are largely administrative personnel across various federal departments and agencies, maintenance workers in government buildings, port workers and firefighters. About 60 per cent of these workers earn less than $70,000 annually, according to data provided by PSAC, while 24 per cent earn between $40,000 and $60,000, and 20 per cent earn more than $80,000.

Union negotiations have become more contentious of late amid prolonged inflation and a cost-of-living crisis that has sent food and housing prices surging.

Over the past decade there was a uniformity of sorts in the way wages were negotiated, with most public servants getting increases of between 1.5 per cent and 2 per cent annually, in line with inflation. But the return of inflation is affecting both private- and public-sector compensation, even for non-unionized workers.

Consumer prices have surged over the past two years, and the annual inflation rate reached a four-decade high of 8.1 per cent last June. The rate of inflation has since fallen to 4.3 per cent in March, and the Bank of Canada expects it to drop to around 3 per cent by this summer.

But over this period, wage growth has lagged inflation, eroding the purchasing power of workers. This, combined with low unemployment and high demand for workers, has given unions significant leverage.

Last year, unionized workers in the public sector had wage gains averaging 3.8 per cent annually, according to government data, a significant bump from previous years. In 2022, Ontario private-sector unions – led mostly by construction unions – negotiated wage increases averaging almost 4 per cent, again a substantial jump from prior years.

The PSAC negotiations came at a delicate moment in the push, led by the Bank of Canada, to get inflation under control. Wage growth can feed into inflation, and central-bank officials have argued in recent months that wages across the country are growing too quickly to bring inflation all the way back to the bank’s 2-per-cent target.

But Nathan Janzen, assistant chief economist at Royal Bank of Canada, said that the wage settlement announced on Monday is not necessarily inflationary. “This is more a case of wages adjusting to inflation that has already happened than something that will drive further inflation going forward,” he said in an e-mail.

Still, large public-sector wage settlements could become more normal in the coming months and years, he said.

“Wage growth for unionized workers has been significantly lagging non-unionized, so we should expect to see more larger-than-usual wage increases coming as prior contracts that didn’t anticipate the inflation of the last couple of years are renegotiated,” he said.

Bea Bruske, president of the Canadian Labour Congress, said the agreement will set a precedent. The CLC represents 51 national and international unions operating in Canada.

“It will be referred to by employers, whether public or private, who will look to this particular settlement to set the bar in terms of their own rounds of bargaining,” Ms. Bruske said, adding that the members’ success through picketing is also significant.

Strike action continues for 35,000 PSAC members at the Canada Revenue Agency, but the union said Monday that in-person negotiations had resumed, signalling that it could be approaching an agreement. The union has been seeking a 22.5-per-cent increase over three years for these employees.

More than 3,000 unionized workers at Canadian National Railway Co. recently ratified two-year agreements that provide a 7.5-per-cent raise over two years, in addition to improved benefits.

Bruce Snow, national director at Unifor, which represents the largely blue-collar employees, said it is hard to compare the agreements with that of PSAC, which generally comprises clerical workers. In the transportation industry, which includes workers at both major railways, negotiations have generally yielded annual raises of between 3 per cent and 4 per cent, Mr. Snow said.

He called the PSAC agreement a “significant gain” for employees coming out of the pandemic.

PSAC had pushed for work-from-home policies to be included in the new collective agreement, which could have allowed individual government workers to file formal grievances if they were not satisfied with their personal work arrangements.

Treasury Board President Mona Fortier told reporters Monday that the government’s commitments to the union on work from home have been made outside of the collective bargaining agreement, meaning it will not open the door to grievances over telework.

The government said the four-year deal is an increase of 11.5 per cent, a figure that is lower than the 12.6 per cent the union cited. Both sides said the difference in their numbers relates to whether compounding is considered, as well as the accounting of a 0.5-per-cent wage adjustment that applies in the third year of the deal. Both sides said the tentative deal includes a pensionable lump-sum payment of $2,500.

The agreement must still be ratified by PSAC members. The deal was announced in the early hours of Monday morning, giving affected public servants just a few hours to switch plans from striking to resuming work.

The Globe and Mail, May 1, 2023