Posthaste: Labour shortages are set to get worse in Canada — and you can blame immigration

Victoria Wells 

© Provided by Financial Post Canadian firms are starting to catch up with the U.S. when it comes to labour shortages.

© Provided by Financial Post

Good morning!

Canada may not be suffering from a labour shortage the way the U.S. is, but that doesn’t mean it won’t in the near future.

And the reason isn’t because available workers lack skills, but rather, because of muted immigration levels.

According to Capital Economics, Canada’s job recovery is in pretty good shape. The labour force has rebounded faster than in the U.S., thanks to a quicker reopening of schools, fewer retiring workers and also because many returning employees are able to keep collecting the Canada Recovery Benefit.

In fact, Capital Economics expects employment in Canada to return to its pre-pandemic levels by October. It’s after that, though, that things start getting dicey.

Stephen Brown, senior Canada economist at Capital Economics, points to the Canadian Federation of Independent Business’s latest small business survey , which shows that Canadian firms are starting to catch up with the U.S. when it comes to labour shortages. Forty-one per cent of businesses surveyed in the June CFIB Business Barometer said a lack of skilled labour was limiting sales and growth. Another 28 per cent said a shortage of un- or semi-skilled labour was affecting operations.

Brown says the reason for these shortages is ultimately a lack of newcomers to Canada.

“The big issue is immigration has slowed sharply,” he said.

Last week, Canada announced it would begin letting 23,000 people who’ve been approved as permanent residents into the country. But, it will take some time to get those people into the workforce.

“For the past year, they have only been processing applications for people working in Canada,” Brown says. “So while the government announced last week that migrants are allowed to travel to Canada again, the processing backlog means immigration will remain low into 2022.”

A report from RBC Economics breaks down the immigration issue a bit further and explains why getting more people into Canada is so critical for the labour market.

Before the pandemic, an aging population was one of the biggest problems facing the Canadian economy. That hasn’t changed. And while Canada has some of the highest immigration inflows in the world, it’s still not enough to offset the decline in the working-age population.

The report says the country will need a steady stream of immigrants with “future-focused skills” post-pandemic. Jobs in advanced tech, skilled trade and health care will be more important than ever. And training current Canadians won’t be enough to meet demand.

Tapping into Canada’s temporary resident population — people who come here as international students or to work short-term — might be one way to increase immigration numbers and make sure skilled workers fill jobs. Historically, only 25 per cent of these people go on to become permanent residents. And, RBC says, evidence has shown that immigrants with prior experience in Canada go on to do “significantly” better than those that don’t.

“Over the longer term, Canada would benefit from a more responsive approach to immigration: one that addressed labour-force gaps and targeted the world’s best talent all while helping to offset domestic aging,” Andrew Agopsowicz, a senior economist at RBC, said in the report.

In the meantime, labour shortages appear inevitable.