Canada’s labour shortage has been brewing for more than a decade, predating the start of the pandemic. While COVID is having a pent up (and somewhat explosive) effect on the labour market, hiring challenges already existed and are forecasted to continue until at least 2030. To successfully recruit candidates in this recovering economy, employers will want to look beyond the pandemic to the broader forces driving the current and continuing labour crisis.
While some sectors have borne more of the brunt, losing thousands of jobs during the pandemic, BDC’s chief economist Pierre Cleroux says the pandemic isn’t the main cause of Canada’s labour shortage — it just exacerbated the problem. According to Cleroux the key problem is demographics. “Today, 16 per cent of Canadians are over 65. In the next five years, many Canadians are going to retire,” Cleroux said. “And not a lot of young people are entering the job market.”
In the BDC study entitled, “How to Adapt to the Labour Shortage Situation,” published in 2021 the BDC wrote:
“Canada’s labour force problem did not begin with the pandemic. It is the result of the ageing population and related declining labour force participation, which started over 20 years ago. The pandemic has amplified the problem by destabilizing an already-precarious situation.”
Clearly, COVID-related government subsidies and health regulations are not the only driving forces behind our current battle to fill job vacancies. To get a full understanding of why it’s so hard to find, let alone hire, employees beyond surface-level pandemic-related contributors, we must look deeper, starting at the demographic make-up of the workforce in Canada.
Canada’s demographics and the slump in labour force participation
Let’s take a closer view of the workforce today. It will reveal a sizable discrepancy between the number of younger workers entering the workforce and the number of older workers leaving via retirement. The pandemic has had very little impact on Canada’s age structure
While the pandemic affected population growth in 2020/2021, its impact on the age structure of the Canadian population was not as pronounced.
Canada’s population continues to age, with the average age increasing from 41.4 years on July 1, 2020, to 41.7 years on July 1, 2021. Almost one in five (18.5%) Canadians are now aged 65 and older, and the number of centenarians rose 1,100 year over year to 12,822 as of July 1, 2021.
In normal times, if Canada lacks in its domestic workforce, it compensates for through immigration. Immigration is a key piece of the country’s labour market; about 1 in every 4 workers in Canada are immigrants.
However, when the coronavirus hit, the number of immigrants, foreign workers and foreign students allowed or willing to enter the country went down significantly. Immigration to Canada in 2020 fell 46% — the lowest it’s been since 1998. This radically increased the strain on the already struggling labour market and the effects will be felt for some time to come.
The last time Canada attracted more than 400,000 people in one year was in the early 1900s. According to a recent Reuters article, the government has said it hopes to add 411,000 new permanent residents next year.
According to the government, Canada is currently on track to meet its goal of 401,000 new permanent residents this year after adding record numbers in June and July,
Canada counted 39,500 new permanent residents in July after 35,700 in June, both monthly records… That brings the 2021 total so far ahead of where we expected to be at this point in the year, and we are going to continue to accelerate the pace of landing new permanent residents”
Despite this hard push towards record levels of immigration, current immigration projections are insufficient to fill the existing gap in available workers. It’s expected that by 2030, Canada’s population growth will rely exclusively on immigration.
Due to the decrease during 2020, Canada will take years to replace that loss in active employees. Even taking into account the government’s projected growth of immigration, we can see that the country as a whole, and individual company strategy, must focus on being competitive internationally to attract young, skilled and remote workers.
Yet another contributor to Canada’s labour crisis is the industry distribution change, led by the choices people are making when choosing where to work. It’s clear that candidate preferences have shifted dramatically as we attempt to pull out of the pandemic.
Specifically, the division of labour across industries has changed. Although employment as a whole has returned to pre-pandemic levels, employment in 10 industries is still below February 2020 numbers; among them, wholesale and retail trade, manufacturing and information, culture and recreation. Meanwhile, 7 industries, including health care and social assistance, insurance and real estate and public administration, have surpassed pre-pandemic levels.
Also, according to our research, 20 per cent of Canadians who lost their jobs during the pandemic changed sectors. For example, when retail and restaurants closed, some workers decided to move to other sectors where there were more attractive options. Unfortunately, that exacerbated the problems the service industry was already experiencing.
Overall, the pandemic has changed the reality of the labour force. Employers will have to manage their businesses in a different way than they did before the pandemic.
During the Pandemic candidates reassessed their options, considering remote work options, less exposure to the virus, higher salaries, improved work-life balance all became significant motivations to move jobs. As a result, there’s a discrepancy between what the recovering economy needs and what job seekers are demanding.
Inflation is another key element of the current labour crisis.
Current wages aren’t enough to accommodate the rising cost of living. The Consumer Price Index (CPI) rose 4.4% on a year-over-year basis in September, the fastest pace since February 2003 and up from a 4.1% gain in August..
Inevitably, the rises in gas prices, food and housing costs will put push up wages. To attract and retain talent during a candidate’s market, businesses will have to keep their pencils sharp to meet their candidates’ changing expectations. Compensation packages will be a crucial piece of the puzzle.
In a recent Inc.com article, reporter Mary Yank writes about employers using creative incentives, beyond basic pay increases to increase the perceived value of an employment offer. Many companies are trying new tactics to find and keep candidates — including remote work arrangements, mental health support and employee wellness programs, daycare, flexible work schedules,
The decreasing supply of labour and the high demand for employees willing to fill open job orders is already creating a cost increase for businesses.
One of the best things about the future is that it comes one day at a time. Shelley F. Knight, Positive Changes
Just kidding, we don’t have a crystal ball, but any decent hiring manager can see competition for talent among businesses beyond the pandemic is beyond revved-up. The labour shortage won’t come to an end as pandemic driven restrictions and government assistance wind down. The country’s demographics (ageing population) will continue to push the participation rate of the workforce down while young workers and immigration rates will fail to match the rising numbers of job vacancies in many industries. Meanwhile, inflation will push salary expectations higher faster than you can say “job offer”.
Currently, long-term projections for Canada’s labour shortage extend all the way to 2030. That means they need to adopt creative hiring strategies is crucial. Organizations must adapt quickly to appeal to the available job seekers. Laser focus on branding, AI and agile hiring teams are essential.
While statistics can help us to better understand the “hiring gone mad” labour shortage on an intellectual level, how does your organization make sure it wins the race to hire? If you’d like assistance with your immediate and ongoing hiring challenges, connect with Core Executive Consultants!
Core Executive Consultants is Canada’s rapidly growing recruitment solutions and HR consulting services company. Providing results based recruitment to forward-thinking Organizations. We make it our business to keep up with current industry insight and trends.