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Alberta wage declines rippling through non-resource sectors

An oil pump jack pumps oil in a field near Calgary, Alberta, July 21, 2014.

Todd Korol/Reuters

The commodities slump has driven down wages in Alberta, with declines spreading from the natural resources sector to other parts of the province's economy.

The average weekly pay in Alberta fell 2.4 per cent to $1,130 in the year ended in November, according to Statistics Canada's survey of employment, payrolls and hours released Thursday.

Earnings for mining, oil and gas employees fell 4 per cent and other sectors such as construction and real estate also saw a drop in wages.

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"It was inevitable that the longer the oil slump lasted, the wider the net would be spread in terms of weakness," said Douglas Porter, chief economist with Bank of Montreal.

"We clearly are beginning to see that weakness spread to other sectors," he said.

The average weekly pay in transportation fell 1.65 per cent to $1,269.

Accommodation and food services fell 4 per cent to $413, real estate fell 4 per cent to $1,129 and construction dropped 5 per cent to $1,443.

Saskatchewan, a province plentiful in oil and potash, also saw weakness in wages. The average weekly pay fell 1.2 per cent to $980 in the year ended in November, Statscan said. Mining, oil and gas wages dropped 8 per cent and the accommodation and food services sector was down 3.6 per cent.

Although earnings in those two provinces have dropped, they still top the rest of the country. Alberta's average weekly pay, for example, is 18 per cent higher than the national average.

The shortage of labour during the decade-long commodities boom was responsible for driving up salaries in Alberta, Saskatchewan and Newfoundland and Labrador. Now that trend has reversed. "Wages are poised to correct towards the national norm," Mr. Porter said.

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Resource-rich provinces are on track to shoulder more job losses and wage declines this year. Potash Corp. of Saskatchewan Inc. and Penn West Petroleum Ltd. were the latest commodity producers to announce spending reductions. Potash Corp. cut its dividend for the first time in its history and announced the closing of its New Brunswick potash mine. Penn West slashed its spending for this year by 90 per cent.

The loss of employment in the energy and mining industry has pushed Canada's jobless rate to 7.1 per cent. Over the past year, the unemployment rate in Alberta jumped to 7 per cent from 4.8 per cent. In Saskatchewan, the rate rose to 5.5 per cent from 3.8 per cent.

Lower-paid employees and labourers have taken the biggest hit in the natural resources sector. The loss of jobs among lower-income earners is nearly quintuple the losses among the highest-paid workers since oil prices started plunging a year and a half ago.

"Last year was the year that energy was hard hit. This year will be the year that weakness spreads more broadly across the oil-producing provinces," said Robert Kavcic, senior economist with Bank of Montreal.

The payroll survey lags the Labour Force Survey by nearly two months, though it is considered a better gauge of the labour market because it relies on payroll deduction information. Oil is trading around $33 (U.S.) a barrel compared with $100 a barrel in 2014.

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About the Author
Economics Reporter

Rachelle Younglai is The Globe and Mail's economics reporter. More

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