Labour shortages to become the new norm in future

An aging workforce and job market shifts are causing a skills gap that is expected to endure far beyond the pandemic (Kelvin Murray/Getty Images)

COVID-19 has affected the economy in many areas, but none more profoundly than the job market. Pre-pandemic labour and skills gaps have only continued to grow, and new ones have emerged, creating challenges for businesses of all sizes.

Here, Pierre Cléroux, vice-president of research and chief economist at the Business Development Bank of Canada (BDC), shares his thoughts on how the labour market has changed and what we can expect over the short to medium term.

Cléroux leads a team of experts who analyze economic data to tease out trends that affect Canadian entrepreneurs and he also provides analysis and advice to the BDC’s senior management. He presented research conducted by the bank at CPA Canada’s Mastering Money virtual conference on November 4, 2021.

CPA CANADA: How has the pandemic changed the labour market in Canada?
PIERRE CLÉROUX (PC): Even before the pandemic, employers had difficulties in recruiting. That’s mainly because we have an aging population in Canada. Many people are retiring and there aren’t a lot of people entering the job market. 

Even so, the pandemic accentuated the problem in two ways. First, it caused immigration to be reduced by half in 2020 and 2021. According to our calculations, that means we had 400,000 fewer immigrants in those two years. Obviously, that’s a lot of people who are not joining the workforce. 

The second thing is that Canadians have changed. During the pandemic, some people retired early. They might have been planning to do so in the coming two or three years but decided to move up the date because of the difficulties caused by the pandemic.

Also, according to our research, 20 per cent of Canadians who lost their jobs during the pandemic changed sectors. For example, when restaurants closed, some workers decided to move to other sectors where there were more opportunities. And that exacerbated the problems the restaurant industry was already experiencing.

All in all, the pandemic has changed the reality of the labour force. Employers will have to manage their businesses in a different way than they did before the pandemic.

CPA CANADA: In the U.S, it was reported that four per cent of the workforce changed jobs in August alone. Have we seen a similar phenomenon in Canada?
PC: Tech has been especially hard hit. But data from Statistics Canada shows that the overall turnover is actually smaller today than before the pandemic. So, generally speaking, people in Canada are not moving to other jobs more than they were before.

CPA CANADA: Many people who are forced to change sectors lack the necessary skills. Going forward, do you see more investment in training and education?
PC: Yes. When we ask businesses what they are doing to cope with the labour shortage, they say one of their top measures is to hire young people and others who don’t yet have the proper skills, and to train them internally. 

We’re going to see more and more of this because it’s simply no longer possible to find the perfect candidate with 10 years of experience. So, you have to find and hire people who might not have the right skills for you, but who can learn those skills with your help.

CPA CANADA: The Toronto Transit Commission and others are pulling people out of retirement to combat the skills gap. Do you see this happening on a more widespread basis? Do you see older people deciding to re-enter the job market and acquire new skills?
PC: Definitely. In fact, over the past five years, we have seen an increase in the percentage of Canadians over 65 who are still working. So, as we live longer, people are working longer. And since it’s so difficult to fill positions, I think this is a trend that is going to accelerate.

CPA CANADA: What other solutions are businesses adopting to deal with labour shortages?
PC:  We conducted a study where we looked at the strategies that have the biggest impact in coping with the labour shortage and investing in technology and automation came out on top. Put another way, businesses that are investing in automation are the ones that are the most successful in solving their labour shortage issues. 

In our view, the skills gap is not a short-term problem that is going to disappear at the end of the pandemic; we’re going to need long-term solutions. And, in our view, technology is a long-term solution. 

As a result, I think we’re going to see a lot more investment in technology over the next five to 10 years than we did in the past. Businesses are going to realize that it’s necessary for their survival in a world where labour shortages are the norm. 

LOOKING AHEAD

Want to know more about issues facing small businesses during the pandemic and beyond? Look to CPA Canada’s resources for strategy and planning advice. Plus, learn more about how CPAs can help small businesses to get back on track, what to think about before starting your own business and how to protect your business from fraud. 

Also, CPA Canada’s Mastering Money virtual conference 2021 featured many notable speakers, including Pierre Cléroux. In case you missed the conference, you can access it on demand.