Labour shortages have become evident as the economy recovers from the pandemic’s initial shock, and the challenge presented by Canada’s aging population is only getting worse, a report from RBC Economics says.
Even before the pandemic, some sectors were having a hard time finding an adequate labour supply. RBC reported that more than one-third of businesses are now dealing with labour shortages, and there are currently more than 870,000 job vacancies in Canada.
“Much of this can be attributed to job switching,” the report said, noting that “half of unemployed accommodation and food services workers that found employment in the last 12 months did so in other industries according to Statistics Canada.”
This shift in the workforce comes at a time when demographic headwinds were already driving worker shortages.
“Since 2008/2009, an aging workforce has subtracted one million workers from the economy,” the report stated, adding that this trend will continue to afflict the job market as “waves of baby boomers reach typical retirement age.”
Over the next three years, another 600,000 workers are expected to exit the working world, the report said.
As businesses struggle to replace their lost workers, wages are likely to rise. And while rising wages boost workers’ market power, the report said, they also create challenges for businesses that are seeking to find new workers and retain their existing staff.
Alongside pay increases, the pandemic has created new expectations for workplace flexibility.
“So while higher wages will be part of the equation, firms looking to hire from within a limited talent pool will also need to place emphasis, where possible, on more holistic employment offerings,” the report said.
Ultimately, increased immigration should help address some of the expected shortfall in workers, as will companies’ productivity-enhancing investment efforts.
“But those investments take time to bear fruit,” the report said. “In the meantime, it looks likely that labour shortages will continue to intensify, putting a cap on the productive potential of the economy, slowing growth and keeping upward pressure on costs.”