An unfair wage offer that amounts to a pay cut and other issues have driven the unionized City of Yellowknife employees into a strike position.

While there are several disagreements between the city and its staff, this column will concentrate on how inflation erodes wages.

This is a simple issue to unravel. Any pay raise less than inflation is a pay cut in real wages and purchasing power. According to the NWT Bureau of Statistics, the inflation rate for Yellowknife in the 2022 calendar year was seven per cent.

For reasons unknown to me, the city is apparently proud of the two per cent per year it has put on the table. But let’s be real, the City of Yellowknife is asking for concessions when it comes to wages.

To understand why a two per cent increase is a concession, you need to understand the difference between a “nominal” wage and “real” wage. A nominal wage is the money you are paid by an employer for your labour. A nominal wage is not adjusted for inflation, while a real wage is.

If your nominal wage increases slower than the rate of inflation, then your purchasing power will decline. In this case, the city’s proposal of a two per cent increase is five per cent less than the 2022 inflation rate for Yellowknife. This results in a roughly five per cent fall in the employee’s purchasing power.

If you do not work for the City of Yellowknife you might wonder, “Why should I care?” Here’s why: first of all, the Northwest Territories is a very small place in terms of population. What happens in one bargaining unit always impacts other bargaining units.

The result at the City of Yellowknife bargaining table will undoubtedly come up at every other bargaining table this year. In turn, a rising tide lifts all ships and should support employees who are not unionized in keeping up with inflation.

I can already see the comment section filling up with nonsense about an upwards wage spiral, which, in the case of the NWT is an unfair distraction. Yes, the prices we pay in the North are expensive, but those prices are, for the most part, set by global markets and the cost of transporting goods here. In addition, if the people of the NWT continue to lose purchasing power, that will trickle down very quickly to the local economy.

The first thing to be hit will be local businesses – the places where people spend their money on food and entertainment. Then people will start delaying the purchasing or repair of things they need, like transportation and housing. It leads to a belt tightening that impacts each and every person in the territory. One might call it a purchasing power downward spiral.

In 2021, public employees (11,200) made up 51.9 per cent of all employees (21,600) in the territory (source: NWT Bureau of Statistics). A significant drop in purchasing power of those employees will have a far more significant impact on the local economy than any increases in wages, whether nominal or real.

Will a percentage wage increase have an impact on the city budget? Yes, of course — everything does. The truth is that any percentage increase is one of many things that contribute to the city’s increasing budget, including costs of upcoming capital projects, such as the new pool the city is building, the urban sprawl that does not generate enough tax revenue to pay for itself and the GNWT’s refusal to fund NWT communities according to its own funding formula to the tune of approximately $11 million per year. It is unfair to scapegoat city employees who just want fair wages.

Ironically, one of the least discussed but most looming aspects of the fight over wage increases is that every bargaining unit in the territory is coming to the table to hear the employer tell them they are struggling to staff positions.

This is while proposing what are real wage concessions at bargaining. If you are struggling to staff your service, basic economic theory tells you that you are not offering the right incentives, including competitive wages.

What good is a $71-million dollar pool running at a 15 per cent cost recovery rate (excluding construction cost) for operations and maintenance if you cannot staff it?

City residents could get a sample of what this situation will be like if the city does not come back with a fair proposal before the bargaining unit goes on strike.

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