A strike by Canadian federal civil servants is one of the largest in the country’s history, and it may last long enough to put a dent in economic growth for the second quarter.
(Bloomberg) — A strike by Canadian federal civil servants is one of the largest in the country’s history, and it may last long enough to put a dent in economic growth for the second quarter.
More than 155,000 federal workers walked out on Wednesday in a wage dispute with Prime Minister Justin Trudeau’s government. They’re looking for pay increases of at least 13.5% over three years; the government has offered 9%. The sides have been negotiating since June 2021.
Derek Holt, an economist with Bank of Nova Scotia, says the strike could cost as much as C$200 million ($149 million) in lost output per day. Adding knock-on effects resulting from the subsequent impacts to households and businesses, Holt estimates a maximum 1% hit to growth to nominal gross domestic product, on an annualized basis, if it lasts for a month.
Economists surveyed by Bloomberg already expect the economy to enter a technical recession in the second and third quarter — and a prolonged labor dispute could make things worse.
The Bank of Canada would look past the temporary growth hit, but it may be more worried about “potential spillover effects” of any pay settlement on other parts of the economy, Holt said Wednesday in his daily report to investors. “A very tight labor market risks seeing public-sector wage gains being copied in other parts of the public and private sectors and flowing through toward higher-for-longer core inflation.”
The union’s walkout will disrupt a broad swath of government services, from passports to immigration applications to economic statistics to the Canadian Coast Guard. It may slow the movement of grain, according to agriculture groups in Western Canada, because it affects government employees involved in inspections and export certification.
If there’s a lack of grain inspectors at work, “we will see delays starting today. It would be immediate,” Ian Boxall, president of the Agricultural Producers Association of Saskatchewan, said by phone. Boxall said he’s also worried about delays in getting temporary workers in who can help farmers for the spring planting season.
The strike also includes about 35,000 people who work for the country’s tax and revenue agency, less than two weeks before the May 1 income-tax filing deadline. Tax workers have asked for an increase of more than 20% over three years, the government said.
It’s the first widespread strike by the Public Service Alliance of Canada in nearly 20 years.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.