Canada’s worker shortage problem isn’t going away anytime soon

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A prospective client sent an email to Newsam Construction Inc. on Tuesday morning, wanting to build a set of steps at a home in Montreal. It could have been a $20,000 job, with some masonry work, but the general contractor wouldn’t do it.

“I’m constantly turning down projects,” said Brian Newsam, who co-owns the company. “There’s not a day that I don’t say no to a job.”

He just doesn’t have enough people to do the work. His staff of 40 could easily grow to 80, and he could take on more projects, if only he had qualified applicants. Without them, he ends up turning down smaller renovations — new bathrooms, new steps — so he has enough workers for the larger projects.

“We’re trying to find skilled painters, skilled carpenters, even an administrative bookkeeper. I can’t. It’s very difficult to find anybody,” Newsam said.

From construction to manufacturing to hospitality, all sorts of industries are having trouble finding workers, raising questions about how quickly the economy can return to full steam, even as provinces slowly reopen, and whether wage hikes will be needed to entice people back to work, thereby fuelling inflationary pressures.

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Both the health risk of returning to work and the attraction of existing government benefits could keep some workers sidelined, and there are longer-term issues to overcome, such as a lack of immigration and a lack of interest in certain types of work, particularly in the trades. As a result, some economists expect vacancies will only increase as the economic recovery starts to ramp up.

Statistics Canada found 4.1 per cent of jobs in this country — an estimated 632,700 positions — were vacant in March, the latest month for which data is available. That’s roughly 100 basis points higher than pre-pandemic levels.

We’re trying to find skilled painters, skilled carpenters, even an administrative bookkeeper. I can’t

Brian Newsam, co-owner, Newsam Construction Inc.

Other countries that have already opened up are also experiencing the same thing. The United States had a record high job vacancy rate of 5.3 per cent in March, according to a recent report by Benjamin Tal, deputy chief economist at CIBC World Markets Inc. And Israel had a record-high job vacancy rate of almost five per cent in April (before the most recent armed conflict), with the rate rising to 18 per cent in sectors such as hospitality and food services.

To have so many jobs unfilled at a time when so many are out of work — Canada’s unemployment rate was 8.2 per cent in May, with another 68,000 jobs lost, according to Statistics Canada on June 4 — wouldn’t normally make much sense. It’s a concept that economists refer to as the Beveridge curve, which charts the relationship between unemployment and job vacancy: high unemployment should coincide with low job vacancy — at least in a stable, efficient economy.

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But that natural push and pull between the number of people looking for work, and the number of jobs available, has been thrown out of whack in the pandemic, according to Brendon Bernard, a senior economist at Indeed Canada Corp., a job-listing website.

“The thing is, in times of destruction, in times of recession, often these relationships break down,” he said. “We have a pretty elevated number of job vacancies … even at the same time that the unemployment rate was high.”

There are a number of reasons for the breakdown. The pandemic has caused spikes in demand for products and services in some sectors that were already struggling to find qualified workers, including home renovation and manufacturing.

Competition for workers is going to really put upward pressure on wages … Are businesses healthy enough to handle that?

Brendon Bernard, senior economist, Indeed Canada Corp.

There is also the health risk of being exposed to the coronavirus that currently comes with frontline jobs, coupled with enhanced unemployment benefits from the federal government that have reduced pressure to take that lower-paid, higher-risk work.

“Those factors together could mean that someone who might have been jumping at a job in a warehouse is now more reticent,” Bernard said, adding that Indeed has noticed a decline in clicks-per-posting for jobs in retail, cleaning and warehousing.

The hospitality sector posted the highest vacancy rate in March with 7.4 per cent, or 68,400 unfilled jobs, according to Statistics Canada. Construction’s vacancy rate was 5.8 per cent, or 58,300 jobs. Transportation and warehousing has a 3.9 per cent vacancy rate, or 30,600 jobs. Retail had a vacancy rate of four per cent, or 75,300 jobs, while health care and social assistance sector’s job vacancy rate was 4.8 per cent, or 104,200 jobs.

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“That competition for workers is going to really put upward pressure on wages,” Bernard said. “And then the question is: Are businesses healthy enough to handle that?”

Doug Alexander, vice-president of technical services at the Toronto-based Belmont Meat Products Ltd., said his company is rolling out new solutions in anticipation the worker shortage isn’t going to disappear anytime soon.

“It’s driving us to automate more, so our focus now for the long term is robotics and automation,” Alexander said. “We recognize it’s not going to change. This is not a short-term problem … it’s a societal shift.”

Alexander said the difficulty of retaining skilled workers has likely doubled since the beginning of the pandemic as his company competes with the Canada Emergency Response Benefit (CERB) when trying to bring its butchers back to work.

After the pandemic ends, he expects to see a return to normal, but normal means a turnover rate of 25 per cent.

In an effort to attract new workers to the industry, Food and Beverage Ontario has launched an initiative called Taste Your Future.

Such efforts may work, but a lot of people who lost their jobs during the pandemic may not return to them once the economy reopens. A survey in January by U.S. think tank Pew Research Center found that two-thirds of American workers have seriously considered changing their occupation or field of work since losing their job.

A survey of 217 American businesses done by the Economic Outlook Group LLC found that 22 per cent were having trouble finding employees because their former workers had chosen new careers or returned to school, while 46 per cent said attractive unemployment benefits were to blame.

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“All surveys have shown that finding qualified workers, or any workers, is one of the biggest problems businesses face,” Jennifer Lee, senior economist at BMO Capital Markets Economics, said in a research note on June 3.

But Canada’s labour problems, though exacerbated by the pandemic, did not start in the pandemic. In its spring business outlook survey, the Bank of Canada in April warned that “Pre-pandemic labour constraints are starting to return.”

The central bank said businesses were struggling to find new employees at current wage rates. Those shortages appeared to be in the same types of jobs that were already begging to be filled before the pandemic, particularly skilled trades and technology.

“Many firms expect these constraints to persist,” the Bank of Canada said in its report.

All surveys have shown that finding qualified workers, or any workers, is one of the biggest problems businesses face

Jennifer Lee, senior economist, BMO Capital Markets Economics

The shortage of skilled tradespeople has become a perennial problem in Canada, with sagging interest from new generations to enter them and more and more veteran tradespeople retiring.

In a May survey of its members, the Canadian Federation of Independent Business (CFIB) reported a shortage of skilled workers was the most common impediment to sales or production growth, with 38 per cent of businesses reporting difficulties.

“Many of them actually pay quite well,” said Corinne Pohlmann, CFIB’s senior vice-president of national affairs. “But I think there is sometimes a stigma around these jobs.”

The construction sector, for one, blames the stigma around skilled trades for the waning interest among newer generations of students, who are shunning apprenticeships and college trade-oriented courses in favour of university.

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“A career in construction has not been a first choice for many people,” Mary Van Buren, president of the Canadian Construction Association. “There has been a bias toward people going to university.”

The sector has been trying to change that, with recruitment campaigns targeting groups who have been historically underrepresented in the field, including women and Indigenous people.

“The face of construction is really changing,” Van Buren said.

Immigration is another way to fill those gaps, though the number of newcomers has dramatically declined in the past 16 months amid public-health restrictions on travel.

That drop-off only made Canada’s “old-fashioned job vacancies” in construction and manufacturing worse, said CIBC economist Tal, who co-authored the Where have all the workers gone? report released in May.

He predicted vacancy rates will continue to rise in the short term, particularly in lower-paying, service-oriented jobs, as emergency unemployment benefits continue to alleviate pressure to return to the workforce.

The good news is those factors will fade. But the shortages that existed before the pandemic, the old-fashioned ones, will stick around. It’s not even a question of money.

“Plumbers, believe me, make a lot of money,” Tal said. “We simply cannot attract people.”

He said the problem is Canadians, in general, look down on trades jobs despite how badly the country needs them. Unless that changes, those crucial positions will keep going unfilled.

“You go to Germany and say you’re a plumber, it’s like saying you’re a doctor, ” he said. “Try to get a plumber in Canada. Good luck with that.”

Financial Post

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