Where did all the workers go? Economists say: Don’t blame COVID
Canada has a serious labor shortage, but economists say that’s not all the pandemic’s fault — it’s the inevitable culmination of a seismic demographic shift in the making.
“It’s the slowest train on the planet,” said Armin Yalnezian, an economist and Atkinson Fellow on the future of workers. “It was predicted 60 to 65 years ago, and we did nothing about it.” “We knew this transition was going to happen.”
The numbers behind all the signs of help needed are staggering.
According to Statistics Canada, the unemployment to vacancy ratio — a key measure of how many Canadians are looking for work with the number of jobs available — is currently hovering at a historic low in every province. In fact, the percentage is much lower now than it was before the COVID-19 pandemic began.
The reason is not that there are fewer jobs opening – remember the tags for help needed? is that there are fewer workers available to fill them. Economists say this is due to the post-war baby boom.
There are not enough alternatives
While those 55 and older are steadily exiting the Canadian workforce — an exodus that some economists believe has been accelerated by the pandemic, with many older workers opting for early retirement — there aren’t enough young workers to replace them.
In fact, labor force participation among those aged 25-54 approached 88 percent in May, up more than one percentage point from February 2020, before the pandemic hit Canada.
“That’s what happens when the baby boom finally starts to come out of the left stage, and there aren’t enough people entering from the right stage,” Yalnezian said. “We already have a higher proportion of the working-age population working than ever before.”
This contrasts with the theory that some kind of “big resignation” among working-age Canadians, many of whom have benefited from pandemic income support, is responsible for all those job vacancies, according to Ian Lee, associate professor at Carleton University’s Sprout School. Business.
He told me, “I find this very fishy because unless you’re independently wealthy… most of us have to have an income to survive.” “It just didn’t make sense.”
“Your first doubts as a labor economist is, well, are people not in the workforce anymore?” said Gordon Beecherman, Professor Emeritus in the School of International Development and Global Studies at the University of Ottawa. “But that’s not the case. It’s back to the levels we had before COVID.”
Instead, economists say, the data points to the emergence of an employee market where workers have an enormous amount of influence over their employers.
“It’s undeniable that this trend we’re in has definitely changed the balance between job seekers and job vacancies,” Beecherman said.
According to Statistics Canada, this has led to an almost unprecedented shortage of labor in almost all employment sectors.
There are not enough people willing to take on jobs that are poorly paid and marginal at best.Armin Yelnezian, economist
In particular, the construction and manufacturing sectors have difficulty hiring skilled workers, closely followed by accommodation and food services, which include hotels, restaurants and bars.
“People are finding other places to work,” Yalnezian noted. “There are not enough people willing to do jobs that are poorly paid and marginal at best.”
“Workers have a lot of options now,” Lee agreed. “If you had more options and didn’t have to work in this industry, you would go and work in an industry where there is a better career path and where wages are higher and hours are more predictable.”
That could force employers in some industries to raise wages, Lee said.
“I am not suggesting that the demand for these jobs will vanish. It is not,” he said. “It suggests to me that we will see very serious wage inflation in these industries over the coming years.”
Expect higher wages
According to Yalnizyan, this new competitive environment means that employers in certain sectors will need to raise wages if they hope to retain skilled workers.
“We’re losing people trained as early childhood educators because we’re not going to pay them more than we would a pet groomer. Well, why stay if they can get a better job in another sector?”
This is demonstrated by Statistics Canada data showing booking wages – the minimum hourly rate at which job seekers are willing to accept a position – exceeding the current wage on offer in nearly every sector, while Canadian workers have historically been willing to settle for less.
Economists think there are other possible outcomes – increased automation to fill the void created by labor shortages, for example. Some industries can also bring in more temporary foreign workers to help fill in gaps at the lower end of the labor market, which could limit the gains made by domestic workers.
But Yalnezian said higher wages could help erase some of the inequalities caused by the labor market that for years has paid some workers well and the rest poorly.
“If we really improve wages and working conditions, especially at the bottom, we can create the conditions to have a more flexible middle class that can actually buy things. That’s what we’ve been missing for a long time now,” she said.
“Population aging can be our friend, not our enemy. But we have to treat it as more than a labor shortage for business. We have to treat it as an opportunity to make every job a good job.”