Unions Are Winning Protection Against Spiking Inflation

A tight labour market and soaring inflation is giving unions leverage at the bargaining table and bringing a sharp increase in cost-of-living clauses in contracts.

The province’s biggest public sector unions are leading the push for cost-of-living-adjustments, or “COLA" clauses, which link future wage increases to the inflation rate, but private sector unions are also seeking the protection.

The BC General Employees' Union, representing 30,000 government employees, has negotiated a COLA clause in its tentative 2022-25 deal, which members began voting on this week.

“I’ve never seen this kind of upheaval in the labour market,” Mark Thompson said. The Sauder School of Business emeritus professor has had his eye on it since the late 1950s, when he began his undergraduate studies in Indiana.

“This is more than we’ve had in quite a while.”

The COLA comeback

When Graeme Hutchison went to the bargaining table on behalf of workers at Community Savings Credit Union, he wasn’t expecting the employer to offer a benefit that had almost vanished since the 1980s.

Essentially, COLA clauses tie negotiated salary increases to inflation rather than setting a predetermined amount. Agreements often specify a base wage raise, which increases if inflation exceeds a certain level.

COLAs were common in the 1970s and 1980s as runaway inflation threatened to devour whatever unions could win at the bargaining table. But Statistics Canada data show they were nearly extinct until recently: In 1980, the federal data agency counted 185 agreements that had a COLA clause among collective bargaining agreements that covered 500 or more members across the country. In 2021, there were just two.

Now COLAs are enjoying a comeback.

“Really, this year has been the first time it’s ever really come up,” Hutchison said. “And it’s purely around inflation.”

Hutchison is a developer and member of the bargaining committee at the credit union, a Surrey-based lender that caters largely to unions themselves. It’s not a typical employer, Hutchison admits, and is more likely to offer a deal favourable to unionized workers.

But Hutchison recently became the secretary-general of MoveUP, a Burnaby-based union representing about 12,000 workers in the public and private sector across the province. He says bargaining units are all asking for COLAs and similar measures to provide relief from rising costs and protection against future inflation.

The Bank of Canada has put the country’s year-to-year inflation rate at above seven per cent since May, a level not seen since the heydays of COLA 35 years ago.

“All we hear, non-stop, is stories from members whose costs have increased,” Hutchison said. ”Their gas has increased. Their heating bills have increased. And their wages haven’t kept up.”

“A lot of them are just waiting for that opportunity to go back into bargaining to say ‘Hey, we can’t afford to live with these costs.’”

Private sector resistance

The private sector has resisted COLA clauses, citing the need for predictable salary costs. But the big jump in the inflation rate and the gains in the wave of public sector contracts now being negotiated will increase the pressure.

In the BCGEU’s tentative contract, for example, union members are guaranteed a 5.5-per-cent salary increase in the second year of the contract. But if inflation rises beyond that, their pay would increase by the same amount up to a cap of 6.75 per cent.

B.C. negotiates with public sector unions under a centralized mandate, meaning the province’s nurses, teachers and other professionals are likely to be offered a similar deal as they head to the bargaining table this month.

UBC professor Christopher McLeod says he is not surprised to see COLAs comeback.

“We’re experiencing inflation we haven’t seen since the early 80s… we’re seeing and we have seen a labour shortage,” McLeod said. “I think the combination of those two things really creates an opportunity for labour to advocate for a benefit that, to a certain extent, fell out of favour during years of austerity when governments were tightening belts.”

Such benefits are not easy to negotiate. They mean employers cannot perfectly forecast what they’ll spend on compensation in the years a COLA applies. “For sure, employers don’t like being locked into something like that,” Thompson said.

And if that employer is the provincial government, an increase of even a single percentage point would run up public costs in the hundreds of millions — which is why Thompson believes the tentative agreements government has struck with the BCGEU and the Hospital Employees’ Union have fairly modest COLAs with a cap.

“It’ll be interesting to see if the membership accepts these,” McLeod said in reference to the BCGEU, whose members can vote on whether to accept their agreement until Oct. 17. “Some could argue that the COLA clauses in these agreements aren’t enough to keep up with the affordability issues.”

“This is what I would expect the government to put on the table for most of the other unions,” he said. “It’s a question of whether the other unions feel its sufficient, and whether they push for more. That’s where it could become contentious.”