Wages for non-union workers in Canada are expected to climb by an average of 3.9 per cent in 2008, with the highest raises in labour-starved, oil-driven Alberta.

Booming Alberta's worker shortage is creating a "ripple effect" that's forcing wages up across the country, according to a report released Tuesday by the Conference Board of Canada.

Conference Board of Canada
 Average forecast wage increases (per cent)
 Alberta  5.2
 Saskatchewan  4.6
 Manitoba  4.6
 British Columbia  4.2
 Quebec  3.6
 Ontario  3.4
 Atlantic provinces  3.2

All four western provinces are expected to see average wage increases above the national average, with Alberta coming in on top at 5.2 per cent.

Wages for Quebec, Ontario and the Atlantic provinces are forecast to rise as well but less than the national average.

Unionized workers are forecast to get an average increase of 3.1 per cent in wage settlements in 2008.

In terms of industry, oil and gas workers are expected to receive the highest wage hike, 5.7 per cent, next year. The lowest average increases, at 3.1 per cent, are projected in communications and services sectors.

The rosy numbers come amid a gloomy forecast for the Alberta oilpatch. Two energy service groups predicted Tuesday a dramatic drop in oilfield production in 2008.

Oilfield drilling activity forecast to slow

The Canadian Association of Oilwell Drilling Contractors said drilling activity is expected to fall, with an average of only 34 per cent of rigs in use, its lowest level since 1992.

Blaming weak natural gas prices, high operating costs and a strong Canadian dollar, the group also said uncertainty over Alberta's royalty review has slowed the normally busy winter drilling season to 445 active rigs out of a fleet of 890.

Roger Soucy, president of the Petroleum Services Association of Canada, says a "fairly significant" drop of 25 per cent is expected nationally, from 17,550 wells drilled in 2007 to 14,500 next year.

The Conference Board predicts an even tighter labour market in Alberta, with fewer people moving there in the face of high costs of living and more attractive opportunities in neighbouring provinces.

The Ottawa-based think-tank's compensation outlook — its 26th edition — is based on responses from 319 Canadian groups in the summer of 2007.