Business Barometer®: Small businesses plan to increase wages by 3.3% on average over next 12 months amid high inflation and tight job market
Toronto, April 27, 2023 – Small businesses expect to increase wages by an average of 3.3% over the next 12 months, according to the latest Canadian Federation of Independent Business (CFIB) Business Barometer®. While average wage increase plans remain elevated by historical standards, they are down after peaking at 3.6% in June 2022.
“Wage plans would have to further moderate to bring inflation within the Bank of Canada’s target range of 1% to 3%, however they are really not that far off and, quite frankly, show a sensible approach in the current inflationary context. Small businesses, while responding with higher than usual wage increases, are not really the ones fueling the inflation fire at the moment,” said Simon Gaudreault, Chief Economist and Vice-President of Research at CFIB. “This also puts public sector unions’ current wage increase demands into perspective. Small and medium-sized businesses—the backbone of the private sector and an important group of middle-class taxpayers—simply can’t keep up with such requests, which would also put them at a significant disadvantage as employers in a tight labour market.”
On a related note, average price plans remained unchanged at 3.5% in April, but are still on a significant downward path since peaking at 4.9% in May 2022.
“Wages tend to be stickier than prices, so it’s normal for price increases to be ahead of wage increases. It takes more time for wages to adjust. When prices go up, wages don’t go up as much because by the time they do, prices could have already come down. Currently, both price and wage plans seem to be past their peaks and on a general downward trend, which is frankly good news for the economy,” said Andreea Bourgeois, Director of Economics at CFIB.
As for the current business situation and perspectives, slightly more businesses reported their general situation as bad this month (20%), while fewer reported it as good (34%) compared to last month. The long-term small business confidence index in April crept up by less than half a point to 55.7 and, while on a general upward trend in recent months, remains well below its historical average of 61, indicating some way to go before economic perspectives are back to normal on Main Street.
After months of sluggish movement, retail showed significant signs of increased optimism, jumping 11.8 index points to stand at 54.4 in April.
This month’s Business Barometer also shows the two largest provinces, Ontario (54.5) and Quebec (46.6), were at the bottom of the optimism scale, with unusually low long-term indexes.
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Dariya Baiguzhiyeva, CFIB
April Business Barometer®: April findings are based on 625 responses from a stratified random sample of CFIB members, to a controlled-access web survey. Data reflect responses received from April 5 to the 13th. Findings are statistically accurate to +/- 3.9 per cent, 19 times in 20. Every new month, the entire series of indicators is recalculated for the previous month to include all survey responses received in that previous month. Measured on a scale between 0 and 100, an index above 50 means owners expecting their business’s performance to be stronger over the next three or 12 months outnumber those expecting weaker performance. An index level near 65 normally indicates that the economy is growing at its potential.
The Canadian Federation of Independent Business (CFIB) is Canada’s largest association of small and medium-sized businesses with 97,000 members across every industry and region. CFIB is dedicated to increasing business owners’ chances of success by driving policy change at all levels of government, providing expert advice and tools, and negotiating exclusive savings. Learn more at cfib.ca.