Causes of labour shortage go beyond COVID-19
Shortly after the beginning of the COVID-19 pandemic, policies like the Canada Emergency Response Benefit (CERB) were implemented to address the high levels of unemployment and encourage workers to stay home. Since then, the discourse on economic policy in Canada has continuously shifted. In recent months, during which most Canadians have been vaccinated, issues like inflation and labour shortages have become more prominent.
In fact, the huge amount of “We’re Hiring” signs posted across Winnipeg are part of a broader trend. According to Deloitte Canada, “30.3 per cent of Canadian businesses are reporting labour shortages.”
Janice Compton, associate professor in the University of Manitoba’s Department of Economics, says that “what drives a labour shortage is a period of transition.”
“What we’re seeing now is not a result of the pandemic, but the pandemic sped things up,” she says.
Compton cites demographic shifts and people moving between employment sectors as the two main causes of the current labour shortage.
“This transition started before the pandemic, and the big issue here is the ageing population,” she says, adding that this will lead to lower employment levels in Canada.
According to the Organisation for Economic Co-operation and Development (OECD), the employment rate for Canadians in the ages 55 to 64 cohort is already lower than the G7 average.
“A lot of the loss of labour supply that we’re seeing is coming from older workers,” Compton says.
“We knew they were going to be retiring, and we don’t have enough people to fill their spots, because the older demographic is larger, but now they’re exiting earlier than we had thought,” she says. Many commentators have called this the “Great Resignation.”
Workers shifting between industries also played an important role in the labour shortage. In fact, Compton says many people who lost employment positions or hours during the pandemic saw this as an opportunity to move to another sector.
For example, workers in the restaurant industry may have taken this opportunity to look for other employment, given the devastating impact the pandemic has had on frontline hospitality workers.
“Once things start to open up in those areas that were shut down, now they’re finding that their employees have moved on to different areas,” Compton says.
Labour unions, which have a mandate to represent workers, have less to do with the issue of labour shortages than firm management does. However, as Jeff Traeger, the president of UFCW Local 832, writes in a statement to The Uniter, there are advantages to being in a unionized workplace in this economic context.
“We remind employers that we still have the right to enforce our collective agreements and ensure that employers treat workers fairly,” he says. In fact, research has shown that unionization leads to higher bargaining power for workers.
Additionally, Traeger says the COVID-19 shutdowns and restrictions, which interrupted normal business activity, gave workers time to reflect on their lives and their workplaces.
“Many workers decided they didn’t want to go back to places where they didn’t feel respected or were not well-paid,” he says, adding that “these are two key ongoing struggles that unions work the hardest to fix in every workplace.”
“For those (union) members that decided they wanted to do something else, we would try and connect them with alternate employment opportunities in more stable industries or provide them with any resources and training opportunities that we could,” Traeger says.
“A union’s priority is to focus on how workers are affected, and this pandemic only highlighted the importance of that role.”
Shifting between industries is a normal feature of labour markets, but Compton emphasizes that labour supply moves more slowly than demand.
“Demand can increase with the snap of a finger, but it takes a lot longer for supply chains to adjust,” she says, “and that’s true with labour, as well.”
“Because we’re still in an uncertain phase, starting a new job, investing all that time and energy into learning a new job that you don’t know if it’s going to be there in a few months is hard,” Compton says.
This mismatch can partially explain why the unemployment rate remains relatively high during this period of labour shortage.
Wendy May, owner of The Oakwood, a restaurant located in Winnipeg’s Riverview neighbourhood, says her experience with the labour-shortage crisis has been a mixed bag.
“We’ve been really lucky that we haven’t had to hire anybody (to replace existing staff), but on the flip side, getting everyone up to the hours that they need has been a challenge,” she says. “Going forward, retaining everybody that works for us may prove to be tricky.”
While labour markets are difficult to predict, the Bank of Canada’s Business Outlook Survey shows many firms anticipate these challenges will persist in the coming months.
“I’d hate to lose anybody, but I completely understand if they’re not getting the hours that they need to earn what they need,” May says.
The labour shortage situation “could, in the next few months, prove to be really tricky,” she adds.
One possible consequence of this is that Canada will not see the “V-shaped” COVID-19 recovery many have hoped for.
“The pace of the recovery may be slower than we had anticipated at the beginning of the pandemic,” Compton says.
However, she says there might be some benefit for workers, since firms may start to offer higher compensation packages in order to get labour. In fact, the aforementioned Bank of Canada report noted that a growing number of firms “plan to increase wages to address challenges in attracting and retaining labour.”
“Firms are going to need to think more long-term about the stability of their unemployment, not just about raising hourly wages, but about perks that come over time, increasing the wage path and increasing promotion opportunities,” Compton says.
Published in Volume 76, Number 07 of The Uniter (October 28, 2021)