RBC, Canada’s largest bank, unveiled this week that it will spend more than $200 million to increase salaries and expand benefits for its employees in a bid to retain talent in a tight labour market. According to Bloomberg News, RBC chief executive officer David McKay said in a memo to employees that the company is “committed to be a leading employer of choice – one that supports your unique life and career goals, in addition to being an inclusive culture and a great place to work.”
On this episode of Editor’s Edition, Yahoo Finance Canada’s Alicja Siekierska and the Public Policy Forum’s Sean Speer discuss what RBC’s decision says about the state of the Canadian labour market. As Speer explains, it’s yet another signal that the labour market has shifted from a consistent surplus of labour, where the power was in the hands of employers, to a shortage of labour where the scales have tipped in favour of the employees. “Workers ought to have greater power in a labour market where supply is not meeting demand,” Speer says. “That is starting to translate into practice.”
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ALICJA SIEKERSKA: Speaking of labor shortages, I wanted to dig into the idea of retaining talent and making sure you have enough people on staff. RBC has decided it will spend more than $200 million on pay increases, retirement benefits, and other incentives in a bid to try and retain talent. Workers in the four lowest levels of the company's pay scale will receive a 3% raised to, quote, "address the market pressures and the rising cost of living."
RBC CEO said a tight labor market and that massive imbalance we're seeing between supply and demand is one of the biggest issues facing businesses right now. And RBC is not alone. TD has also signaled before that it will offer a 3% pay raise to employees. Sean, what do you think this response from the banks shows about how difficult it is not only to attract talent these days, but to retain them in such a tight labor market?
SEAN SPEER: It's a big signal, Alicja. You know, the story of the Canadian labor market, really since the Baby Boomers graduated and entered the workforce, has been one of surplus labor. You know, we've had through the 1970s into this century, relatively high rates of unemployment, which was a reflection of this supply-demand disequilibrium.
That put a lot of power in the hands of employers. And due to aging demographics, that power dynamic, at least in theory, ought to flip, that as the Baby Boomers retire and aren't fully replaced for various reasons, that workers ought to have greater power in a labor market where supply is not meeting demand. And so that's what economic theory tells us.
And I think a lot of people have had the position that they're waiting to see if theory translates into practice. And, you know, what these two examples show is it is starting to translate into practice. And that should lead to upward pressure on wages not just in the financial services sector, but really across the economy.
The one area that I'm especially looking at, Alicja, is the care economy, you know, that I think one of the things we learned in the pandemic is that those in long-term care homes, those in other parts of the health care system, including roles like personal support workers were long kind of undervalued in the labor market. And as the gap between supply and demand only continues to grow, we ought to see upward pressure on wages in those occupations as well, which, it seems to me, is a good thing.
So, you know, I think this is something we've talked about in the past. But this change in the relative power of workers is probably one of the most important economic stories in the country. And it's a story that's just starting to unfold. It's going to be with us for a long time.