The labor shortage is caused by the aging of the population

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La pé Labor shortage is caused by an aging population

Baby boomers are leaving the labor force in droves, leaving more vacancies than there are people to fill them, say economists.

Demography is to blame for labor shortage, economists say. (Archives)

Canada is in the throes of a severe labor shortage, but economists say the pandemic is not to blame. Rather, it is the inevitable culmination of a vast demographic shift that has been brewing for decades, they say.

[This situation] was predictable 60 or 65 years ago and we haven't done anything about it, according to Armine Yalnizyan, economist and member on the future of workers at the Atkinson Foundation. We knew this transition was coming.

According to Statistics Canada, the unemployment-to-job vacancy ratio – a key measure used to compare the number of Canadians looking for work to the number of jobs available – is currently at an all-time low in every country. province. In fact, this ratio is significantly lower than it was before the COVID-19 pandemic began.

There are fewer workers available to fill the jobs available. According to economists, the post-war baby boom explains this situation.

People aged 55 and over are leaving the Canadian workforce, an exodus that some economists say has been accelerated by the pandemic, as many older workers have opted for early retirement. And there simply aren't enough young workers to replace them.

In fact, the labor force participation of people aged 25 to 54 approached 88% in May, up more than a percentage point from February 2020, before the pandemic hit. x27;is moving to Canada.

Baby boomers are leaving [the job market] and not enough people are coming in, Yalnizyan says . We actually have a higher share of the working age population than ever before.

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This contradicts the theory that some sort of big dropout among working-age Canadians, many of whom have taken advantage of pandemic income supports, is to blame for all these jobs vacancies, according to Ian Lee, associate professor at the Sprott School of Business at Carleton University.

I found [this assumption] very dubious, because unless we are financially independent… Most of us have to have an income to live on, Mr. Lee said. [That idea] just doesn't make sense.

My first suspicion as a labor economist is this: are people just not in the labor force anymore? said Gordon Betcherman, professor emeritus at the University of Ottawa's School of International Development and Global Studies. This is not the case. It is back to the levels we saw before the pandemic.

Economists say the data instead points to the emergence of a market where workers enjoy enormous power over employers.

There is no denying that the balance between job seekers and vacancies has totally shifted, Betcherman said .

According to Statistics Canada, this has led to near-unprecedented labor shortages in nearly every employment sector.

In particular, the construction and manufacturing are struggling to recruit skilled workers. The same goes for the accommodation and food service sectors, which includes hotels, restaurants and bars.

“There just aren't enough people willing to take low-paying jobs.

—Armine Yalnizyan, Economist and Fellow on the Future of Workers at the Atkinson Foundation

Workers have a lot more choice now, Lee agreed. If you have more choices and you don't have to work in this industry, you will go to work in an industry where there are better career paths, where the salaries are higher and where schedules are more predictable.

That could force employers in some industries to raise wages, Lee said.

I'm not saying that the demand for these jobs is going to disappear: it isn't, he said. But I believe we are going to see quite substantial wage inflation in these sectors over the next few years.

According to Ms Yalnizyan, this new competitive environment means that employers in some sectors will have to raise wages if they hope to retain skilled workers.

We are losing people who are trained as early childhood educators because we don't pay them more than pet groomers. Why would they stay if they can get a better job in another industry?

This is confirmed by data from Statistics Canada, which shows that the reservation wage – the minimum hourly rate at which job seekers are willing to accept a position – exceeds the current wage offered in almost all sectors, while Canadian workers have always been ready to settle for less.

The reservation wage exceeds the current wage offered in almost every field.

Economists believe that there are other possible consequences, including increased automation for fill the void left by the labor shortage.

Some sectors could also call on more temporary foreign workers to fill gaps at the bottom of the labor market, which could dampen the gains made by domestic workers.

Yalnizyan says higher wages could help erase some of the inequalities caused by a labor market that for years has paid some workers well and others poorly.

If we really improve wages and working conditions, especially at the bottom, we could create the conditions for the emergence of a more resilient middle class, capable of afford to buy goods. This is something that has eluded us for some time now, she said.

The aging population can be our friend, not our enemy. But we need to treat it as something more than just a labor shortage for businesses. We must treat it as an opportunity to make every job a good job.

With information from Alistair Steele, CBC

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