Talent Quarterly is The Logic’s regular series on employment trends. 

Hiring new talent was once a simple enough task. Recruiters would interview their favourite candidates from a pool of applicants, negotiate a salary and begin the onboarding process. 

That role has become more challenging amid fast-rising wages—a trend that has persisted for most of the year but intensified in the third quarter. As businesses grapple with rising costs across the board, rapid wage gains are complicating hiring as companies buckle down on costs in an uncertain economy.

Recruiters expecting to find bargains in the talent pool amid dwindling private-sector investment levels are often surprised to find salary requests are well above company budgets, said Nathan Wawruck, vice-president at HR consulting firm Robert Half.

“It’s a bit of a reality check for people who are hiring,” he said.

Wages take off

Labour markets have been tight for some time, but new inflationary pressures have begun to bite more recently in the form of rising salaries. According to Statistics Canada, wages increased five per cent in the third quarter, significantly outpacing inflation. Average per-hour salaries leapt $1 in the three months from July to September alone, hitting $29. 

Wage growth was so buoyant that some economists expect it could take on an emphasized role in the Bank of Canada’s upcoming interest-rate decision on Oct. 25, potentially leading governor Tiff Macklem to return to monetary tightening after last month’s pause. 

“Wages scream ‘hike’ to the Bank of Canada,” Scotiabank economist Derek Holt wrote in a research note earlier this month. The 64,000 jobs created in September—and the 40,000 jobs in August—are “certainly nothing to spit at,” Holt wrote. 

According to the central bank’s own business outlook report released Monday, which surveyed over 700 business leaders throughout the quarter, wage increases are expected to continue climbing over the next 12 months, despite rising at a slower pace than last year’s peak. 

Calling all cyber experts

According to Robert Half’s 2024 salary guide, which surveys the tech sector’s hiring and labour trends, 58 per cent of managers said they expect to use more contract workers in the coming year to sidestep the rising costs associated with paying full-time workers. Another 23 per cent are considering hiring people on an interim basis. 

Cybersecurity workers received the largest pay bump, according to the study. Next up were cloud-computing experts, AI and machine learning experts and development opportunity engineers who specialize in making existing systems leaner and more efficient. 

The clawback

September marked the eighth consecutive month where wage growth outpaced inflation, reversing a 23-month trend of lagging pay growth. With that, workers are finally beginning to make up for several years of above-average price increases in everything from groceries to lightbulbs. 

“Workers are clawing their way back,” said David Macdonald, senior economist at the Canadian Centre for Policy Alternatives. 

Still, it’s not clear how long that trend can continue. Even as some economists expect a Bank of Canada rate hike later this month to temper wage growth and broad-based inflation, real GDP growth has remained flat over the last 10 months, and “hints of cracks” are beginning to show in the labour market, Macdonald said—for example in the form of higher levels of part-time work. 

A (modest) respite from high prices

But those cracks are hairline fractures. In an economy where inflation has fallen from its pandemic peak, employment levels have surged in the opposite direction, confounding experts. 

“We’ve just seen dead-flat real GDP growth—the economy isn’t growing,” Macdonald said. “That hasn’t translated yet to the labour market.” 

Prices for household goods and other services, he said, aren’t about to return to their pre-pandemic levels. Therefore, wage growth is the only way that workers’ purchasing power will catch up with the last few years of runaway prices. 

“The question is whether economic growth starts to turn negative as a result of the impact of much, much higher interest rates, and whether workers ever manage to square that circle.” 

It’s an (office) dog’s life

To combat rising salary pressures, many firms are opting for a more tailor-made approach to hiring. 

“There’s literally no one-size-fits all,” Robert Half’s Wawruck said. “In the past, employers were like: ‘All right, here’s our company policy. Here’s our handbook. Take it or leave it.’ … That doesn’t really apply anymore—it’s [become] a lot more granular.” 

“It pushes the burden onto the managers and onto the employers to really slow down and figure out what is each person’s unique set of circumstances,” he said.

There are various ways in which companies can adopt a more tailored hiring approach, including offering more flexible work hours or remote-work arrangements, Wawruck said. But it might also involve providing specific health benefits, or additional supports to help employees look after elderly family members. 

In some cases, businesses have introduced more pet-friendly offices where employees can bring Fido to work, or the ability to leave the office during specific time slots to tend to their puppies and cats. 

“A lot of people bought pets during the pandemic,” Wawruck said. “They’ve got dogs and cats at home that aren’t very independent because they’ve just been coddled so much.” 

With files from Sebastian Leck