Pandemic exodus could spur wage hikes

OTTAWA • A pandemic-driven exodus of young families out of Canada’s largest cities has depleted a core age group of workers from the already tight labour market, which experts say risks accelerating wage inflation in certain industries.

Leading the rush out of Canada’s big cities were children under 10 and millennials, or young families, Reuters analysis of official data shows, many who moved to smaller cities or rural areas in search of more space to live and work.

The drive-until-youqualify trend has shifted mid-career workers — a key segment of the labour force — out of big cities, making it difficult to find established talent in sectors where in-person work is essential or preferred.

“That’s a whole sort of cohort of workers missing,” said Mike Moffatt, an economist and senior director of the Smart Prosperity Institute. “You’ve got the sort of entry level people, but that middle, people in their 30s and 40s, they’re moving out.”

Intraprovincial migration data from the federal government released last month shows 64,000 people left Greater Toronto for smaller locales within their own province from 2020 to 2021, while Greater Montreal lost 40,000. Vancouver lost 12,000 people.

The rush was sparked by young families. Toronto lost some 15,000 children under 10 from 2020 to 2021, along with 21,000 adults between 25 and 44, the data shows. At the same time populations surged in smaller cities past Toronto’s outer suburbs.

Driving the shift was home price and type. Half of Toronto’s home sales are condos and the average price is C$1.2 million ($946,074). In smaller cities outside Greater Toronto, a typical home is detached and costs under $800,000. Indeed, the race for space has led to faster price gains outside Toronto and its suburbs.

Back in the big cities, the very tight labour market has forced employers to offer higher wages to lure workers. That is sparking rapid wage escalation, as companies compete for the skills they need.

“People are leaving (jobs) today, because they’re being offered large packages to go elsewhere. That’s how that war for talent is right now,” said Koula Vasilopoulos, district director for Robert Half.

The worry for the Bank of Canada is fast-rising wages could start driving inflation, which hit a 30-year high of 4.8 per cent in December, something that it says has not happened yet.

“There could be this self-fulfilling cycle where we’ve had inflation running at a 30-year high now, so ... employees start to ask for higher wages to compensate for that inflation,” said Stephen Tapp, chief economist at the Canadian Chamber of Commerce. “That increases labour costs, that increases the cost of output and that further drives the inflation spiral.”