Prime Minister Justin Trudeau is staring down one of the biggest strikes in Canadian history as his government's workers push for higher wages even as inflation eases.

The country's main federal-employee union will wrap up voting in April on whether to go ahead with a national strike that could see as many as 165,000 workers withdraw their services. Such a work stoppage would delay tax return processing as well as interrupt service at airports and border crossings.

The looming strike comes amid a slowdown in inflation in recent months, but workers are unbending in their demands to recoup purchasing power lost over the past two years. That's adding additional wage pressures to an already overheated job market, and squeezing employers ahead of an expected economic downturn this year. 

“Workers are completely frustrated of being left behind. We've got to fight back if we want to achieve a fair and decent wage increase,” Chris Aylward, president of Public Service Alliance of Canada, said in a phone interview. “Early indication is that the frustration is going to project into a strong strike mandate.”

There's a lot at stake for Trudeau's government, the country's largest employer, which has increased the size of the public service by more than a third since being elected in 2015. Any scuffle with federal unions could draw the ire of the labor-friendly New Democrat Party, who are supporting Trudeau in a minority parliament, and widespread service disruptions would be unpopular among voters. 

For the Bank of Canada, a major strike — especially a successful one that drives other unions to action — risks reigniting wage pressures while policymakers move to the sidelines to assess their progress in curbing demand.

Last month, Canadian wage growth picked back up to 5.4 per cent, the highest since November. The central bank views that as inconsistent with getting inflation back to its 2 per cent target unless matched by strong productivity growth, which is currently negative.

Historically, the period of high inflation in the 1970s and 1980s led to a surge in strikes and lockouts in the country, most of which lagged the run up in prices by several months and remained high several years after pressures abated, data on work stoppages in Canada show. That suggests more strike votes could be coming this year.

The pending clash between workers and employers could “set the stage for some friction in labor-market negotiations in the next six months,” according to Doug Porter, chief economist at Bank of Montreal.

“The inflation story isn't over in Canada,” Porter said by phone. “What we're going to find is it was easy to get goods prices to come off the boil. It's going to be a lot harder to get services prices to ease back. They're much stickier historically. They're driven by wages and understandably wages are still rising fairly strongly.” 

Pushes for bigger pay hikes are ramping up across major advanced economies. This month, the UK's finance minister acknowledged that high inflation is the root cause of the half a million workers on strike, but insisted dispute resolution shouldn't fuel further price pressures. Air and rail services ground to a halt in Germany earlier this week during a one-day strike. In Japan, major firms agreed to the largest wage increases in decades at annual labor talks with unions.

Wage expectations in Canada remain at last year's elevated levels, according to Bea Bruske, president of the Canadian Labour Congress, the country's largest labor organization, which represents more than 3 million workers. “There's a significant frustration out there and a pent-up demand to make significant gains at bargaining tables. People are angry. They have been month over month falling behind,” she said by phone.

The federal public-service union's 35,000 Canada Revenue Agency workers are demanding a 30 per cent wage increase over three years, while more than 120,000 Treasury Board employees are pushing for a raise of 4.5 per cent per year. Their strike votes will conclude on April 7 and April 19, respectively. 

So far Trudeau's government has refused to meet union demands. With a round of mediation set to begin, the Treasury Board Secretariat said this week it's making “every effort to reach agreements at the bargaining table that are fair to public servants and reasonable for taxpayers.”