BUSINESS
01/17/2019 13:06 EST | Updated 01/17/2019 14:19 EST

Canada’s Labour Shortage Is Actually Harming The Economy At This Point

Job growth might actually be a lot stronger than the headlines suggest.

Canada's record-high labour shortage is getting so bad it's beginning to harm the economy, a new survey suggests.
Darwin Brandis via Getty Images
Canada's record-high labour shortage is getting so bad it's beginning to harm the economy, a new survey suggests.

Canada's record-high labour shortage is getting so bad it's beginning to harm the economy, keeping businesses from making the sorts of investments that are crucial to longer-term growth, a new survey has found.

The survey comes as evidence grows that the country's job situation is even stronger than Statistics Canada's headline numbers would suggest.

The federally-owned Business Development Bank of Canada (BDC Canada) found that 53 per cent of small and medium-sized enterprises (SMEs) say the labour shortage will cause them to limit business investment this year.

Watch: Precarious work is on the rise in Canada. Here are some ideas on what to do about it. Story continues below.

It's the second year in a row that the labour shortage has been the top reason businesses have offered for limiting spending.

BDC Canada chief economist Pierre Cléroux says the problem is most acutely seen in British Columbia, Ontario and Quebec.

Some businesses "will not accept new clients, they will refuse contracts. They just can't do it," Cléroux told HuffPost Canada by phone.

This is a worrisome trend because business investment is key to longer-term prosperity. It's what drives job growth in the private sector, and if it falters, employment prospects in Canada could turn for the worse in the coming years.

Automation on the rise

One impact is that businesses are increasingly investing in automation to overcome the worker shortage, Cléroux said. This is more common among mid-sized businesses, as it's more difficult for small businesses to automate, he added.

According to a survey from the Canadian Federation of Independent Business, Canada had a record-high 430,000 vacant jobs sitting unfilled for three months or more in the third quarter of 2018.

And Cléroux believes the problem isn't going away, because part of it is due to the country's aging population. A great deal of Baby Boomers are reaching retirement age, slowing down growth in the workforce and making it harder for businesses to find employees.

Earlier on HuffPost Canada:


Case in point: In 2000, Canada's working population grew by 260,000 people. By 2018, that growth had slowed to 140,000 new workers.

According to Statistics Canada's closely-watched Labour Force Survey, the country added 163,000 new jobs in 2018, slightly more than enough for all the new workers.

But other measures of employment suggest Canada actually created double that number of jobs. A survey of business payrolls from ADP Canada,released on Thursday, shows the country added 343,000 payroll jobs in 2018.

Statistics Canada also does a payroll survey, although it comes out with a delay and 2018 numbers are not yet available. However, the October numbers show payroll jobs rose by 380,900 in the prior 12 months.

Skills mismatch?

If Canada really is creating twice as many jobs as there are people entering the workforce, that would help explain why the jobless rate has fallen to 5.6 per cent, the lowest level in records going back to 1976.

But many job-seekers continue to struggle. Data suggests that the amount of time it takes to find a job in Canada spiked during the last recession, and has basically not come down since. Many experts say that implies a skills mismatch in our economy.

Canadian businesses looking to find workers might actually find what they're looking for in that pool of struggling job-seekers, Cléroux suggested.

Businesses can "look at the sub-group of the population that have more difficulty finding jobs," he said. "Look at non-traditional networks to find people — for example, in immigrant communities, (among) young recent graduates and older workers as well."