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As job vacancies climb and a growing number of businesses and sectors struggle to find suitable staff, fallout from the pandemic has naturally been the focus of finger-pointing.Chris Ratcliffe/Bloomberg

There’s no question that immigration is a critical part of the solution to Canada’s skilled-labour shortages. But for the moment, immigration shortfalls are a big – if sometimes overlooked – part of the problem.

As job vacancies climb and a growing number of businesses and sectors struggle to find suitable staff, fallout from the pandemic has naturally been the focus of finger-pointing. Some critics say the federal government’s generous income-support programs discouraged workers from returning to jobs, especially at the lower end of the pay scale. Others argue that large numbers of workers who were laid off because of pandemic lockdowns and restrictions moved to other industries and lower-risk workplaces, draining the pool of workers for sectors that have been allowed to reopen only recently.

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There’s probably truth to both arguments, although weighing the significance of each is highly debatable. But in Canada, any story about labour shortages would be woefully incomplete without recognizing that the pandemic-imposed slowdown in immigration – an important source of skills and labour-force growth in this country – has left a conspicuous hole in the supply of workers.

Before the pandemic, the Canadian government had immigration targets of 341,000 for 2020 and 351,000 for 2021. It managed only 185,000 last year.

The government ramped up its 2021 target to 401,000 as part of a plan to make up for last year’s shortfall, and recently expressed confidence that it would meet that new target. But as of the end of August, it had managed only 222,000 – suggesting it will be hard pressed to reach that ambitious goal.

This immigration slowdown means that by the end of this year, the economy could be somewhere between 125,000 and 150,000 working-age newcomers short of what the government had targeted before the pandemic.

That leaves us with a lot of catching up to do.

It’s important to note that while labour supply and skills shortages have been magnified by the rapid and uneven return to work after the profound disruptions of the COVID-19 lockdowns, they were a serious and growing concern in Canada well before the pandemic. The labour-shortage readings in the Bank of Canada’s latest Business Outlook Survey aren’t much different from what businesses were reporting in the second half of 2018. This problem runs much deeper than a pandemic and the dramatic reshuffling of the labour market that has resulted from it.

The country’s aging population is the crucial factor here, and will continue to be long after the pandemic’s impact fades. About a quarter-million employed Canadians will reach the traditional retirement age of 65 in the next year – a number that will continue to creep higher until late in the decade.

“Since 2008-09, an aging workforce has subtracted one million workers from the economy. And longer-run demographic forces will continue to weigh on labour force participation as waves of baby boomers reach typical retirement age,” Royal Bank of Canada economists Nathan Janzen and Rannella Billy-Ochieng wrote in a paper published this week.

They forecast that retirements will remove another 600,000 workers from the country’s available labour pool over the next three years. A lot of those workers will have built up considerable skills and expertise during their careers – expertise that is not easily replaced by the teenagers and young adults entering the work force.

This is where the immigration shortfall may be most critically felt. By design, Canada’s points-based immigration program is tilted heavily in favour of newcomers who not only bring more desirable skills, but who are at their prime working age. In a typical year, about 60 per cent of Canada’s new immigrants are between 20 and 39 – a valuable labour demographic that accounts for just 27 per cent of the country’s overall population. (Last year, that age group accounted for three-quarters of new immigrants.)

In short, immigration is a lever for rejuvenating Canada’s aging work force – and it has fallen behind at a time when the country’s demographic snowball is approaching critical mass. From a labour standpoint, this was particularly bad timing for a pandemic.

While Ottawa has ambitious targets to make up for the shortfall (in addition to the 401,000 goal for this year, it is aiming for 411,000 in 2022 and 421,000 in 2023), it’s far from clear whether those numbers are achievable.

Still, Canada’s relatively large, economically focused immigration program does afford it a unique capacity to address the current labour shortages.

In an RBC paper published last summer, economist Andrew Agopsowicz argued for a “re-think” of Canada’s immigration goals, to target specific labour shortages and gaps in skills as they emerge in the recovery from the COVID-19 recession.

“The acceleration of digital, AI and green technologies, infrastructure needs, and greater health care investments will create more demand for people in advanced technology occupations, skilled tradespersons and health care workers, among others,” he said. “Labour shortages are already evident in several of these areas. While Canada needs to invest in skills training and education for its current population, immigration is critical to meeting shifting labour market demands.”

That sort of pivot could provide a more efficient solution to the most crucial shortages. Targeting immigration where the need for skills is most severe could buy time to make up for what Canada lost to the pandemic.

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