Worker shortage? Canada’s supply of labour is actually robust

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For many years, the corporate sector in Canada has pointed to labour shortages as a persistent challenge – one that’s getting worse as the country ages and baby boomers head into retirement.

In the Bank of Canada’s latest Business Outlook Survey, published Monday, companies indicated that labour shortages were their second-most pressing concern, behind cost pressures. Small-business owners consistently say that a lack of skilled and unskilled workers is the biggest impediment to increasing sales, according to surveys from the Canadian Federation of Independent Business.

But these responses can obscure a simple fact: The supply of workers in Canada is growing quickly, and among some groups, participation in the labour market has never been higher.

As of February, that participation rate – the proportion of the population 15 or older that is working or looking for a job – was 65.7 per cent. That’s the same as in April, 2018.

To be sure, it has drifted lower from its peak levels of almost 68 per cent in the 2000s as Canada has aged.

Still, that clouds some milestones. The participation rate for Canadians 15 to 64 – what is often called the working-age population – has jumped to record levels, above 80 per cent, in recent months. In raw terms, the sum of labour market participants has surpassed 21 million, a first for the economy.

And with the unemployment rate just shy of an all-time low, it’s generally been a fruitful period for job seekers.

“Across the board – across basically all demographic groups – participation is at record highs or near record highs,” said Andrew Fields, a senior analyst at Statistics Canada.

The macroeconomic environment is certainly a draw for potential workers. Over the past three months, Canada has enjoyed a net gain of 241,000 jobs, despite higher interest rates meant to slow the economy. The Bank of Canada’s survey of consumers, also published Monday, showed that households think a recession is the most likely scenario over the next year. Even so, people are feeling upbeat about the labour market.

“Despite uncertainty about the economy, workers view the job market as strong. Respondents, particularly those not satisfied with their current job, are confident they can find new work,” the central bank’s report said.

Over the long term, immigration has been the main driver of population growth and, in turn, new workers. In a 2022 report, Statscan said immigrants accounted for 84 per cent of labour force growth in the 2010s.

The demographic profile of those newcomers is also helpful. According to the 2021 census, about three-quarters of immigrants who have been in Canada for 10 or fewer years were between the ages of 25 and 54 – prime years for working. Among people born in Canada, the proportion in that age bracket was 46 per cent.

This wave of newcomers is part of a deliberate plan to increase the supply of workers. The federal government is ramping up its intake of permanent residents to 500,000 annually by 2025, more than 60 per cent of whom will migrate through economic programs.

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Lately, however, it’s not been solely a story of immigration. The employment rate of mothers (aged 25 to 54) with a youngest child under 6 was 76.6 per cent in January – a jump of almost four percentage points in a year.

Statscan said women with young children “are typically less likely to be employed, and these increases can reflect a tight labour market as well as a range of factors, such as the need to meet household financial requirements or changing access to childcare.”

The national child-care plan, which the federal government announced in 2021, is already delivering cost savings to parents with children in regulated daycare. Ottawa is betting that more access to affordable child care will boost female labour participation, much as it has in Quebec, which started a low-fee program in 1997.

Martha Friendly, the executive director of the Childcare Resource and Research Unit, said staff retention will be critical to creating more child-care spaces, given that industry wages can be meagre.

“It is absolutely clear that you can’t expand the supply of child care unless you actually address the work force issues. Because the people are the program,” she said.

Another theory to explain rising labour participation is that cost-of-living concerns are pushing more people to look for jobs. “If you have rising prices, some people are more likely to work,” Mr. Fields said.

Brendon Bernard, senior economist at hiring site Indeed Canada, stressed that while workers are broadly available, hiring could still be a challenge for some firms.

The situation is also a matter of perspective: Companies say there aren’t enough workers – but they’re also recruiting far more people than usual. At times last year, there were more than one million job vacancies, roughly double the number before the pandemic.

There are recent signs that the labour market is slackening. Job vacancies have tumbled about 24 per cent since last spring, although they are still elevated by historical standards. And in the Bank of Canada’s business survey, respondents said labour shortages were less intense than a year ago and it was easier to hire the workers they needed.

Despite the threat of a recession, companies have yet to implement widespread layoffs that would push up the unemployment rate, as many economists have predicted.

“Businesses are potentially waiting till the last minute, or waiting until they’re fully certain that the situation is going south, to actually start laying off workers in large numbers,” Mr. Bernard said.

“We haven’t hit that turning point.”