‘THERE IS NO ONE AVAILABLE TO WORK’
Kevin Carmichael explains how labour pool woes are crimping Canadian growth.
I hope no one thinks Canada’s only economic problems are NAFTA and pipelines. If those two issues magically disappeared, we’d be obsessing over a different crisis: an embarrassing inability to take maximum advantage of an impressive run of global economic growth.
Our notoriously weak commitment to productivity and innovation has caught up with us. The latest evidence comes in a new report from Business Development Canada (BDC), which finds that about 40 per cent of smaller companies are struggling to find workers.
As demographers predicted, Canada’s labour pool is shrinking because more men and women are retiring than are joining it. Not so long ago, the ratio of retirees to younger workers was one to two; it now is one to one, according to Pierre Cléroux, chief economist at BDC.
“What does that mean? It means it’s a limit to growth,” he said in an interview.
“They refuse contracts. They refuse orders. Exporters are not exporting as much as they could because they don’t find people to work for them.”
This phenomenon can create cognitive dissonance. The jobless rate in July was 5.8 per cent, the lowest in contemporary history, according to Statistics Canada records that date to the mid-1970s. Prime Minister Justin Trudeau and his cabinet ministers like to boast about having orchestrated the lowest unemployment rate in at least 40 years.
However, it’s easier to achieve a low jobless rate when the labour force is shrinking and the number of workers is increasing. The excitement about record employment distracts from the fact that companies could be doing so much more. BDC reckons that a company afflicted by labour shortages faces a significant risk of getting stuck in a low-growth trap, constantly turning away orders and correcting the mistakes of ill-trained or overworked staff.
The BDC report, based on a survey of 1,208 entrepreneurs, supports other research of which government officials are well aware.
Patty Hajdu, the federal labour minister, earlier this year called the shortage of skilled trades workers “deep and profound.” Within a decade, about 250,000 construction workers will retire, more than double the projected number of new entrants, said Mandy Rennehan, chief executive of Freshco, a Toronto-based contractor, citing BuildForce Canada data. The Canadian Federation of Independent Business estimates about 400,000 jobs were unfilled at the beginning of the year.
“The thing that worries me the most right now is employment; there is no one available to work,” Élisabeth Bélanger, co-founder of Maison Orphée, a maker of organic and natural olive oil, mustard, and vinegar based in Quebec City. “This is a very, very, very important issue. We feel it every day.”
Bélanger is feeling the pressure because a couple of years ago Maison Orphée decided to expand beyond specialty food shops and compete against established brands for shelf space at mainstream grocers. The company invested $2 million in technology and equipment to reduce the numbers of workers needed, and it recruited immigrants.
Those are among the strategies that Cléroux said smaller companies should use when their traditional pools of labour run dry. The BDC report also emphasizes the importance of “image” in the Google age, as younger workers will shun companies that don’t take work-life balance seriously. Another key is training.
For whatever reason, Canada is poor at matching its education systems with the jobs on offer. Many American states have no qualms about letting employers write the curriculum at local community colleges and technical institutes if the return is jobs. Canadian authorities are less inviting, and employers have been reluctant to do it on their own.
This bothers Stephen Poloz, the central bank governor, who has raised the issue several times during his tenure. He has expressed admiration for Germany’s commitment to apprenticeships, and has repeatedly called on Canadian leaders to follow that country’s example.
“People are all mentioning to us now like they’ve got 12 jobs or 20 jobs and they just can’t find people,” Poloz said in a July interview.
“So I’ve been saying, ‘You know, it’s gonna take 10 or 20 years for the education system to somehow remake itself and suddenly turn out people that are turnkey for you.’
“That’s not going to work. You’ve got to go a little bit German here and say, ‘Give me some smart people and I’ll teach them what they need to do.’ … In Germany, they take a much bigger share of the responsibility at the company level and we know well that it succeeds.”
Poloz, of course, is part of the problem, not that any of us should be complaining too loudly about his role.
The central bank has kept interest rates unusually low, in part because officials think executives such as Bélanger will hire and invest, boosting the economy’s ability to generate non-inflationary growth. Poloz has said rates of youth employment and the duration of joblessness suggest to him that there remain lots of candidates for the jobs that employers say can’t be filled.
Business investment has increased, and the unemployment rates of marginalized workers have been falling. But eventually companies will run up against the limits of what is possible under current circumstances.
“I am lucky. I have everybody I need and people are staying,” said Bélanger, who was on her way to a seminar about immigration.
“But say, next year, I need five more people, I don’t know that I’m going to find them.” Financial Post