Labor shortage in Canada

Labor shortage in Canada

Labor shortage in Canada

Pandemics and lockdowns are brutal physically and economically. Disruption of the economy and the loss of workforces across the globe have been common to almost all countries across the globe. While millions of people have lost their jobs due to their workplaces shutting down completely, Canada is facing a dilemma. Canada, one of the leading developed countries, is facing a dire shortage of skilled labor force. Businesses are open and running post the lifting off of the C0VID-19 lockdowns, but the workforces are nowhere to be seen in the same number and quality. Although 20 percent of the labor lost their jobs at the start of the pandemic, most of them switched to other professions by the end of the lockdowns and started new jobs. Small and medium sized businesses across the country, having weathered the COVID-19 storm, are facing the lack of labor. With over 800,000 job vacancies open since the start of 2021 and no one applying for the posts, the small businesses are left with no option but to cut down hours and working days while minimizing the number of stores and outlets to cater the customers. The question which comes to mind is:  Why is there a sheer lack of skilled labor and how it is impacting the overall businesses operations?

 

Remote and automated job opportunities

With lockdowns severely affecting the Services sector, including food services, healthcare, beauty salons and parlors, grocery stores, and clothing and apparel businesses, employees have opted for unskilled jobs. The employees in these sectors have either switched professions or have started to work in industries which offer more remote job options. The automation in the services sector and the persistent emergence of the new COVID-19 variants have been the leading reason behind people option for jobs where less and less interaction and public gatherings have to be encountered. Small businesses including retail stores have to close down branches due to lack of labor to operate and run the operations.

 

Over-skilled or mismatched labor

Canada is a highly educated society. People averagely have a Bachelor’s degree at most. So the companies who seek people for the retail stores or simple grocery stores are met with applications from candidates who are way overqualified or don’t have the matching skill set for the job. Upskilling has allowed people to seek high quality and high paying jobs but the services sector has suffered the most due to this. Although there are over 800,000 job vacancies in the services sector with an increase of 22 percent vacancies since 2019, the unemployment rate has dropped to 6.7 percent. It is a clear indication that there are no more people who could apply for the jobs being offered. As much as it is a delightful sight for the economy, the small and medium sized businesses are at the losing end.

 

Lack of trust in the industry

As per the research done by Canadian Federation of Independent Business (CFIB), over 55 per cent of small businesses don’t have the required number of employees to run their operations while only 16 percent of these businesses have enough funds to continue their operations if they increase their running costs. The major reason for the lack of labor is the loss of trust in the industry by the employees with repetitive opening and closure of the stores. The last 19-20 months have been a repetitive cycle of people applying for jobs, getting through all the stages, and then eventually sitting at home due to lockdowns. This lack of trust is causing the employees to apply for jobs which offer more perks, job security and a remote job option which is a cherry on top of everything about the job.

 

Wages increase isn’t lucrative enough

Although wages were never a major reason for employees to give up on jobs in the current times, businesses in the services sector have increased the wages by over 3.7% to lure in more employees. Despite the financial loss which the businesses have bear during the pandemic, this increase in wage is a brave and bold step. However, it is going in vain. No matter the increase in wages, the perks of the high-end and high paying jobs are keeping the employees stick to them. Small businesses will be bearing more losses in the coming times due to over reliance on the employees.

 

Limited number of immigrants and aging population

Canada’s workforce is in a disproportion owing to the country’s aging population and the limited inflow of the skilled immigrants who have entered Canada during the COVID-19 Times. Job vacancies are highest in the provinces of Ontario and Quebec with over 200,000 job vacancies in each of them. The retiring workforce and the aging population isn’t compensated and replaced by younger workforce. The problem is aggravated by the lack of the immigrant workforce as well. Although many small businesses have employed Temporary Foreign Workers (TFW), their problems aren’t over yet. The skeleton crew of the TFW are a short term solution and finding them is even harder. The country is facing the need to allow more and more immigrants to migrate to Canada for work to offer their services.

 

High employee turnover and loss of clients

If you are a small business, the best thing that you need right now is a stable employee with the required skill set. But if you are a small business in Canada, this is your major priority since employee turnover is at an all-time high in Canada. The report published by BDC in September, 2021 highlighted that 55 per cent of entrepreneurs are unable to reduce the employee turnover and haven’t been able to fill in their open vacancies for the last six months. Over 26 per cent can retain the employees due to lack of job security and healthcare situation. Over 40 percent have lost clients, delayed orders, and missed deadlines. While 61 percent have reduced working hours for employees to retain them.

As per Pierre Cléroux, BDC’s chief economist:  “It’s slowing down economic growth right now, that’s the worst part, and this labor shortage is not going to go away. This is going to stay with us”.

 

Changing workplace dynamics among the Baby boomers

Not only has the aging population declining and the shutting of the border have led to an immigrant workforce shortage, it has changed the dynamics in the working perception of the baby boomers. Canada will be witnessing a grave situation with baby boomers retiring early. In the coming five to ten years, millions of baby boomers will retire and will leave the workforce to pursue their jobs or passions in the digital media. It is a very long term issue and the small businesses have to accept its presence for real. There is a need for them to adapt to the different solutions and find the permanent solution as well. It’s not a temporary problem. If they still consider it temporary, they might be shutting down altogether sooner than later.

 

What can be done to solve the labor shortage

Labor shortage is real and it is here to stay. Canada will be witnessing a major labor shortage for the next decade. So for the small bruises, it’s time to find a solution. When it comes to the hiring of the employees, the business has to adapt in two ways: they need to adopt the new technologies and automation, secondly, they must formulate a formal and detailed hiring process to regain the trust of the employees.

Businesses who have already automated their services have been able to attract more employees. The hiring has been 1.9 times higher in such businesses where the automation is in process. The sales growth of such businesses has increased 2 times in comparison to businesses following the same old operational layout. However, the adoption of new technologies and automation is a very challenging process for many small businesses and entrepreneurs. The major reasons are the lack of the investment costs which are already very high, the concerns around the security and safety, and the lack of the awareness around the selection of the right tools and the technology to implement.

Similar concerns have already been shown by Cléroux in his interview. He stated:

“Businesses who have invested their funds in the technology to minimize the tasks which need the employee intervention, are the ones who have been successful in the pandemic and in the future, they will be having the easiest time in getting over the crisis such as a pandemic.”

He further stated:

“But only 10 percent of businesses have been employing this strategy which is a disappointing uber to quote. Automation has to be the No. 1 strategy for the small businesses since it will not only support them in running their operation despite the workforce shortage but will also increase their overall productivity and efficacy which is the desired outcome expected from a workforce.”

This is a clear indication that the small businesses are at the right stage of the time where they can invest in automation to save themselves from the grave realities of the economic markets.

 

Sources

Labour shortage hampering post-pandemic recovery for businesses in Canada, study finds

Job vacancies and job vacancy rate, unadjusted for seasonality

Over half of Canadian businesses struggling to find workers: report

Posthaste: Canadian businesses say they can’t find employees because applicants are lacking these crucial skills

How to Adapt to the Labour Shortage Situation

Posthaste: The labour shortage in Canada is getting worse, companies say

Canadian employers, facing labor shortage, accommodate the unvaccinated

‘Short-handed every day:’ Businesses face widespread labour shortages

labour shortage [Download PDF]

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