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Quebec Premier François Legault took power four years ago with a pledge to fix an ailing education system and close the province’s wealth gap with Ontario. Now, he has to turn his attention to something potentially far more daunting: his population’s inexorable slide into old age.

Polls show voters are poised to hand the leader of the nationalist Coalition Avenir Québec party another mandate on Oct. 3, with the only question being how strong a majority he will win. Mr. Legault is benefiting from his immense popularity with francophone voters outside Quebec’s big cities as well as a divided opposition, whose campaigns have largely failed to capture the imagination of the public.

But even if the plain-speaking, folksy leader managed to steer Quebec through the worst of the COVID-19 crisis without his popularity taking much of a hit, the demographic shift and resulting worker shortage looms as an even bigger storm cloud for his government. It is always the top issue that comes up in discussions with business leaders. And it is a colossal headache for profit and policy makers alike.

Quebec’s population is already older than the Canadian average, with more people aged 65 and older and fewer people under 20 than the country as a whole – a situation that’s already putting untold new pressure on health and public services. Some 1.2 million Quebeckers are expected to retire over a nine-year period to 2026, a wave of departures that threatens the existence of many businesses and could leave a big hole in the province’s economic tax base and growth potential.

As of the end of June, 248,000 jobs sat unfilled in the province. It’s a problem that is colliding with many of the nationalist policies Mr. Legault and his government hold dear, particularly limits on immigration and reinforcing language laws. It’s also putting him increasingly at odds with Quebec corporations, big and small.

Companies want the Quebec government to significantly increase immigration quotas. And they’re expressing worries new rules aimed at bolstering French will scare away talented people who might otherwise be interested in moving here.

Mr. Legault counters that the labour shortage is actually “good news” that illustrates a healthy economy and gives power to workers to negotiate pay hikes. Pierre Fitzgibbon, his economy minister in his last government, insists Quebec already has enough people to fill current job vacancies without resorting to more immigration: It just has to get them working.

How Mr. Legault handles this issue in the months ahead will leave a lasting mark on his legacy. The CAQ’s slogan is <i>continuons</i>, which means “let’s continue.” But business leaders and economists say the government has to alter its current thinking and find more creative solutions to the labour shortage or it risks much deeper trouble ahead.

“Right now, it’s like we’re fishing in an empty lake. There are no workers,” said Karl Blackburn, head of the Conseil du Patronat, the province’s biggest employers’ group. “Do we need a lengthy recession, a slowdown or another crisis to ease this labour shortage? Do things need to go that far? I hope not.”

There are now officially more people leaving the labour market in Quebec than entering it. The number of jobs available without takers is at record levels – the province’s 6.2-per-cent job vacancy rate is currently the second-highest in the country after British Columbia’s. Paradoxically, the pandemic actually made things worse, with the number of available jobs exploding upward during the past two years as many people simply left the work force outright.

The problem is long known, but the consequences are now plainly on display every day. Restaurants and bars close early because of a lack of workers. Emergency room patients face rage-inducing waits to see a dwindling pool of nurses and doctors. Bus services for commuters and school kids have become guessing games, with shortages of drivers forcing last-minute cancellations.

At a Tim Hortons outlet near St-Bruno-de-Montarville, a Montreal suburb, a handmade sign in the drive-through window serves as a pre-emptive plea for understanding as you pay for your double-double coffees and doughnuts: “The whole world is lacking employees,” it states in French. “Be nice to those who came to work.”

A shortage of workers means many of the basic goods and services we’ve come to expect are being upended, raising fears of yet more instability to come if it’s not corrected. Yet the province’s political leaders have often chosen not to look too far ahead, preferring instead the comfort of selective statistics. Those confirm, by many measures, that Quebec’s economy is holding up, even if it is slowing as inflation bites.

The latest research by National Bank of Canada shows the province’s gross domestic product has outperformed the national average since the start of the pandemic and is expected to rise 3.6 per cent this year before slowing down to 1-per-cent growth in 2023.

The unemployment rate stood at 4.5 per cent in August, the lowest of Canada’s four largest provinces. More than 86 per cent of Quebeckers aged 25 to 54 have a job, higher than the employment rates in Canada nationwide and the United States – a fact the bank explains by the higher participation of women in Quebec’s labour market.

The province has a resiliency to build on as well. Among North American states and provinces, Quebec is the third-most diversified economy after Manitoba and Pennsylvania, according to National Bank. That means less volatility during economic cycles and less vulnerability to industry shocks.

Lower home ownership in Quebec compared with other jurisdictions means it is less interest-rate sensitive than the other three largest provinces, which in turn implies less collateral damage from the Bank of Canada’s rate tightening campaign, National Bank’s research shows. Quebec households are also less indebted than the national average and have a higher savings rate, giving them a bigger cushion to deal with the rising cost of living.

Meanwhile, Quebec’s public finances are under control. Gross debt as a percentage of GDP trended downward in the five years to 2019. It climbed again during the pandemic, but thanks to stronger-than-expected growth in nominal GDP early last year, the government now has room for stronger spending and debt repayment, National Bank says.

Some of that spending has already been earmarked to help fight the labour shortage. Last year, the CAQ government identified health and social services, construction and information technology among its priorities, and pledged an additional $3.9-billion to retrain and improve the qualifications of people in those sectors. The measures include an allowance of $475 a week for unemployed Quebeckers willing to study in sectors needing labour.

Whoever gets elected next week should devote more attention and effort to the problem, says Jimmy Jean, chief economist at Desjardins Group. Quebec’s working-age population is no longer expanding and will be in decline by the early 2030s, he says. Businesses, especially in outlying areas, are struggling to figure out how they’ll find the workers they need, he said.

“The big concern is that Quebec is going to be dragging over the long term versus other places because of demographics,” Mr. Jean said. “It’s still an uphill battle.”

Many of the possible solutions to the labour shortage are known, but complicated by constraints unique to Quebec. Letting in more immigrants, for example, comes with challenges on integration and learning French, and the Legault government has been reluctant to open the floodgates.

On the campaign trail, Mr. Legault has said too many non-Francophone immigrants are a threat to “social cohesion.” And he told a business audience this past week it would be “suicidal” for Quebec if it welcomed more than 50,000 immigrants a year if it wants to protect French. Quebec is the only province to have partial control over its immigration, with the authority to set permanent resident levels and choose all economic class immigrants.

The Conseil du Patronat wants admissions boosted to 80,000. The Chamber of Commerce of Metropolitan Montreal says a minimum of 64,000 immigrants should be welcomed, while Quebec’s Liberal Party, the official opposition when the Legislature was dissolved, has proposed an initial immigration target of 70,000 a year. All of them say the new government has to be more pro-active in introducing incentives encouraging people over age 60 to keep working.

Immigration levels should simply be tied to job offers, says Michel Kelly-Gagnon, head of the Montreal Economic Institute, an independent public policy think tank. In other words: Have an offer, pass a security check and you’re in. “This way, your entrance is dictated by the job market,” he said. “There could be other criteria but you start from an objective basis.”

Newcomers still have a higher jobless rate than long-term Quebec residents, on average, but the disparity has shrunk over the years. The same is true of pay. Just a few years ago, there was a 40-per-cent gap in starting salaries between immigrants and residents. This year, it has narrowed to 1.3 per cent, according to data from the Institut du Québec, a public policy research group.

“The tightening of the labour market has allowed for a better integration of newcomers into the Quebec economy,” says Emna Braham, the Institut’s executive director. “The indicators are pretty positive.”

Still, there’s another issue, she says: Roughly 80 per cent of immigrants continue to settle in the greater Montreal area. This does little to address labour shortages in more remote regions.

“The jobs are there,” Ms. Braham said. “It’s how to get the right workers in the right place.”

Once workers are in Quebec, though, you also have to keep them here. And Quebec isn’t particularly good at that, says National Bank chief economist and strategist Stéfane Marion. The latest figures show Quebec’s retention rate for economic immigrants after five years is 72 per cent, versus 92 per cent for Ontario, 89 per cent for Alberta and 87 per cent for B.C.

That’s a big deal, the economist says. And at a time where you’re competing for talent with other provinces, cutting income taxes to make your province more attractive – as the CAQ has pledged to do – needs to be considered.

“Clearly there is something wrong when your retention rate is 72 per cent,” Mr. Marion said. “It’s like having a bucket with a hole in it. You say, ‘Look, I’m putting 50,000 in there.’ No. Your retention rate is 72 per cent, so there’s 30 per cent of your bucket that’s empty after five years.”

Quebec’s most sweeping language law overhaul in nearly half a century isn’t helping ease the labour situation, either.

Passed by the Legault government in late May in a bid to correct a language pendulum it says is swinging too far away from the use and adoption of French in daily life, Bill 96 compels companies with 25 to 49 employees to meet French-language certification obligations under the same stringent standards that previously applied to companies with 50 to 99 employees. Already, small businesses are saying it will burden them with unnecessary paperwork.

Among the most crucial changes is that immigrants who settle in Quebec won’t be able to deal with the government in any language other than French once they’ve been in the province longer than six months.

Top executives with technology companies say that’s not enough time and that it has thrown their recruiting efforts into chaos by discouraging international workers from choosing Quebec as a place to build a life and grow a family. The executives say they’re often unable to find tutors to help their employees learn French and that a new government unit slated to co-ordinate French learning services under the law won’t be launched until next summer, meaning the government is imposing a mandate to learn French without offering additional support.

“They are worried in the business community, all of them,” said Michel Leblanc, president of the Chamber of Commerce of Metropolitan Montreal. “They’re worried because they do not know what it will imply in real life.” People are demanding the six-month timeline be extended, he said.

The government is expected to release the law’s detailed regulations in coming weeks. CAQ ministers have been trying to reassure the business community the law will be workable and the outcome will be positive.

Their political opponents think otherwise. “It’s a rather worrisome development,” said Carlos Leitao, an economist who’s leading the Quebec Liberals’ election effort as campaign chairman. “The consequences are not yet being felt but I think will be felt in the years to come.”

Looking ahead, the Legault government has two main pillars in its economic development vision for the next 10 to 15 years, says Pierre Fitzgibbon, the former economy minister who’ll likely resume his post should voters give the CAQ another mandate. The pillars are innovation and energy.

Quebec is behind Ontario and other jurisdictions in applied research, and in how innovation funnels into commercialization and real world businesses, and it recently earmarked $7.5-billion over five years to catch up. More innovation means more business productivity, and that in turn will help address the demographic issue, he said in an interview.

Mr. Blackburn of the Conseil du Patronat is skeptical. “Productivity can help. But the fact is that we need access to a bigger basin of workers,” he said.

Quebec also intends to use its vast hydroelectric generation capability and growing wind power assets to fuel local industries and reposition its economy to become less carbon intensive. The province could be the first place in the world to produce green aluminum and one of the few to make green iron, Mr. Fitzgibbon said. It will continue using its renewable energy to attract investment and reset its economy in key segments such as electric vehicle battery production in the years to come, he said.

For that to work and to really change the composition of its GDP, however, Quebec still needs to have decent population growth, decent immigration flows and more attractive taxation, Mr. Marion said. He cited Statistics Canada figures showing that of 300,000 Canadians who left their job for retirement in the past 12 months, 70,000 were Quebeckers.

“I think the province is not badly positioned. It’s just repositioning some of these policies” that’s needed, Mr. Marion said. “And again, how do I stress the importance of it: How do you cope with the 70,000 people that are leaving their jobs to retire every year?”