Canada's currency has been banged up, showing its dents now at 90 cents to the U.S. dollar. Noteworthy domestic reasons for the dollar's retreat include a lack of giddy-up (gross domestic product) and limp inflation numbers. But these are not universal themes across Canada. For one thing, worker wages in British Columbia are showing signs of inflating quite rapidly.
With respect to oil and gas, Canada's industry is fairly polarized. Geographically, the industry's wage rates look quite different at the bookends of the country's land mass. Newfoundland and Labrador on one end, and the three western provinces on the other, hand out considerably more robust paycheques than the populous central regions in-between.
Robust industry activity and well-paid workers go hand in hand. Figure 1 shows provincial wage trends for mining, quarrying, and oil and gas extraction workers, going back to 2001. Alberta has been the land of milk and honey when it comes to resource sector paycheques.
Ten years ago, average Alberta oil field workers were depositing $1,300 into their bank accounts every week. A sudden surge of capital investment into the oil sands – nearly $100-billion (in aggregate) between 2005 and 2010 – drove Alberta worker wages up by 40 per cent. Newfoundland was a source of labour for Alberta, but is also a competitor with its own offshore oil projects.
Oil price recovery after the financial crisis continued to drive investment momentum. Today, average Alberta wages are not rising at the same 6-per-cent rate as in 2006 to 2008. But the pay is good; Figure 1 shows that jobs like wielding a welding torch or pulling on a pipe wrench now pull in over $2,000 a week, on average.
Resource workers in Alberta have generally been the best paid in Canada, but the interprovincial gap has narrowed considerably of late. Equivalent workers in Newfoundland are now getting paid the same as Alberta brethren, as are those in Saskatchewan, give or take a hundred bucks a week.
B.C. was the wage laggard, but it now looks like the worker bees are heading west. Paycheques are getting sweeter as whiffs of liquefied natural gas (LNG) project expenditures are becoming stronger. Multinational consortia ramping up their operations in the gas fields of B.C. have had to boost their compensation to attract skilled labour to the potential of the biggest energy megaprojects Canada has ever seen (see ARC energy chart, Jan. 13).
So, who said there was no inflation in Canada? The latest numbers from Statistics Canada show that worker wages in B.C. have jumped $250 a week (15 per cent) between January and October of last year (assuming no major revisions). Wage parity with Alberta, Saskatchewan and Newfoundland will be inevitable.
The real question is whether B.C. wages will exceed those in Alberta, recognizing the former's dearth of skilled labour and more geographically challenging operating territory. Undoubtedly the answer will be "yes," once the first of the 14 LNG consortia start spending their billions on pouring concrete, welding steel and fitting pipes.
And what will happen to resource worker wages in the central lower-paid provinces if B.C. pulls hard? In Ontario right now, the average weekly pay for Statistics Canada's equivalent grouping is only $1,700. That's nearly 20 per cent lower than the prosperous bookends of the country. The interprovincial wage gaps can't get much wider before the old adage "Have torch, will travel" starts to resonate in Central Canada. Then we'll start to see inflation.
Peter Tertzakian is chief energy economist at ARC Financial Corp. in Calgary and the author of two best-selling books, A Thousand Barrels a Second and The End of Energy Obesity.
Peter Tertzakian