Financial Post Magazine
July 10, 2009

Dan Bortolotti

Here’s a suggestion for people with a death wish. Stroll through Windsor, Ont., or a Newfoundland outport, and chat up the older residents about their employment prospects. After you’ve listened to their tales about massive layoffs in the automotive sector and dried-up opportunities in natural resources, tell them that Canada is facing a labour shortage. Then start running.

Along with sticks and stones, your pursuers will hurl statistics at you. In May, the country hit its highest level of joblessness since 1998 – 8.4% – and staffing firm Manpower Canada reports that a mere 16% of companies are planning to hire new workers in the third quarter of 2009. Canada’s GDP shrank by an annual rate of 5.4% in the first quarter of this year, its worst contraction since 1991. Those are dramatic numbers. But they’re merely snapshots of the recent past, not a trailer for the feature film. What’s coming soon to a city near you are workplaces that will be desperate for young, highly skilled workers. Unlikely as it sounds, Canada is actually in the midst of an ongoing labour shortage.

It’s a shortage that will have a substantial impact across wide sectors of the economy as we pull out of the recession, and will grow over the years to follow. According to predictions from the Conference Board of Canada, Ontario may face a shortfall of 190,000 workers by 2020, while Quebec may be short 363,000 workers by 2030. The think tank predicts that British Columbia may be in need of 160,000 employees by 2015, while Alberta may have 332,000 unfilled positions by 2025.

The apparent contradiction between the unemployment rate, which is at an 11-year high, and a labour shortage can be explained by separating the current economic woes from the people in the workforce. The economy can turn around – for better or worse – in mere months, but overall skill levels and demographic patterns take years or decades to change, and it’s these long-term trends that are behind the coming crunch. “Right now, with unemployment where it is, labour shortages are the furthest thing from people’s minds,” says Jim Milway, executive director of the Martin Prosperity Institute, a Toronto-based economic think tank. “But mark my words, this recession will end – whether in six, or nine, or 12 months – and those ‘Help Wanted’ signs will be going back up.”

To understand why, it helps to point out that the current overall employment situation is not nearly as bleak as the headlines suggest. The numbers are highly skewed by the carnage in manufacturing and construction. Since the spring of 2008, Canada has shed more than 200,000 manufacturing jobs, a staggering decline of about 10%, and lost an additional 100,000 jobs in construction. “Manufacturing of both durable and non-durable goods is the weakest we have seen in our surveys since the first quarter of 1978,” says Lori Rogers, vice-president of staffing services for Manpower Canada. It’s a rotten time to be a middle-aged auto worker, but routine-oriented physical jobs have been in decline for decades. These occupations have unemployment rates approaching 13%, with little hope for improvement.

The big picture looks quite different, however. Statistics Canada divides the Canadian workforce into two broad categories: the goods-producing sector (manufacturing, construction, agriculture, natural resources and utilities) and the service-producing sector, which lumps together everything else. This latter sector – which employs three and a half times more people than the goods-producing sector – has seen a net increase of 24,000 jobs in the last year. So while the demise of manufacturing jobs has meant hardship for thousands, the service economy is providing livelihoods for more than 13 million Canadians, and that number is growing.

True, recent job gains in the service sector have been modest, well off the growth we saw from 2006 through 2008. But that was during an economic boom and was unsustainable: We had three straight years of unemployment under 7%, a streak we’ve not seen since the 1960s, before women entered the labour force in significant numbers. In fact, the average annual jobless rate over the past 33 years has been 8.5% – a tick higher than it was in May. We’ve merely come down from Mount Everest and settled at sea level.

The current hiring freeze at many companies is not going to change the long-term trend. “The recession is actually masking a talent shortage, not only in Canada, but globally,” says Manpower’s Rogers. There’s already a dearth of skilled workers in a wide variety of occupations. Many economists would classify a level of unemployment under 3% as an acute labour shortage, and creativity-oriented workers – a diverse group including scientists and technologists, managers and analysts, lawyers and accountants – now have a jobless rate of just 2.7%. “Unemployment among this creative class is up a bit because of the recession, but it’s nothing compared with what you see among blue-collar workers,” says Milway.

For example, in high-tech fields such as IT, demand for highly skilled workers remains strong. “I don’t think it’s ever easy to find good people,” says Sarah Weiss, manager of campus programs for IBM Canada. Another sector where worker demand is strong is public administration – local, provincial and federal government departments and agencies, as well as courts and correctional institutions. In nursing, meanwhile, unemployment levels are a minuscule 0.6%, far lower than in any other profession. “There is a well recognized global nursing shortage,” says Dr. Sally Thorne, director of the School of Nursing at the University of British Columbia.

And despite the fact that many Canadians seem eager to run their investment advisers out of town, the labour market for business and finance professionals is also tight. A 2009 Manpower survey ranks financial jobs number eight among hard-to-fill positions. Statistics Canada confirms that unemployment in the sector is a mere 2.7% – up from 1.9% in 2008, but still very low. “When it comes to business and finance, contrary to the general perception, in Canada it seems there is still a shortage,” says Roger Sauvé of People Patterns Consulting, which specializes in the labour market.

It’s worth stressing that creativity-oriented jobs like these are not a lone bright spot in an otherwise dark economic future. On the contrary, they are Canada’s economic future, and will be the engine of growth in the years to come. As the number of creative jobs grows, Milway says, they create other opportunities in the service industries. More high-tech workers means more office cleaners to vacuum the cubicles; more accountants working overtime means more take-out restaurant visits on the way home. The Martin Prosperity Institute estimates that creativity-oriented jobs and the services they spawn will make up almost 90% of new positions by 2016. According to Milway, it will be difficult to fill all these new jobs, and while immigration will help, it won’t be enough to prevent worker shortages.

Another major factor driving the shortage is our aging population. According to Sauvé, the number of workers aged 55 to 64 has doubled since 1989, while the number over 65 has increased by an astonishing 129%. When the Baby Boomers finally retire, they will leave enormous career opportunities in their wake.

The recession has merely slowed down this demographic inevitability. In many jobs, workers with seniority are the least likely to be laid off, and some workers have delayed retirement so they can rebuild their savings. All of which is creating obstacles for younger people getting jobs – but only temporarily.

The labour shortage will create winners and losers. On one hand, a tight labour market can create big problems for businesses. As companies are forced to raise wages to compete for fewer skilled employees, their costs go up. At the same time, however, a backlog of unfilled positions leads to a drop in production levels. This double whammy of rising costs and lower production is what economists call “wage-push inflation.” It can slow economic growth, contribute to a lower overall standard of living, and make the country less competitive in the global marketplace.

The real casualties in Canada’s evolving labour force will continue to be those who work in the goods-producing sector, especially manufacturing. Some will successfully complete retraining programs and find work in new fields. Many more, unfortunately, face years of hardship as they compete for a shrinking number of jobs in industries that continue their steady decline.

The winners, of course, will be those with the schooling and skills suited to the new economy. As companies demand more creative, highly skilled workers – a trend already well underway – young, well-educated Canadians can look forward to a fertile job market in the months and years ahead. In the sectors with the greatest needs, the small number of qualified workers should be able to demand higher wages and better working conditions. When the economy improves and these young guns are in high demand, look for them to push back against their employers, lobbying for more flexible hours and family-friendly policies.

The cloud of recession is still hovering above us, and there may be more rain in the coming months. But young Canadians and people in skilled fields can look forward to their day in the sun. “It sounds heartless to say this now,” Milway says, “but high unemployment is not a long-term problem.”


Reference: Financial Post Magazine