StatCan report casts clouds on claims of a widespread labour shortage in Canada

What's behind Canada's labour shortage? A new report by Statistics Canada is casting doubt on previous claims of a widespread national labour shortage.

OTTAWA — A new report is casting doubt on the idea that Canada is facing a widespread labour shortage and bolsters the arguments by some labour economists that high job vacancies aren't due to a shortage of workers.

The Statistics Canada analysis finds there are no labour shortages for jobs that require high levels of education, suggesting other factors, such as a mismatch in skills and pay, might be to blame for a high number of empty positions.

In the aftermath of the COVID-19 pandemic, labour shortages have grasped headlines from coast to coast as businesses have advertised more job openings than ever. Job vacancies skyrocketed to more than one million at one point last year.

The perceived countrywide labour shortage has put pressure on governments to help businesses find workers, including by increasing Canada's immigration targets.

But the report published this week compares unemployment and job vacancies by education level and paints a more nuanced picture of the labour market.

"Things look really different depending on whether you look at vacancies that require a high level of education, versus those that require a high school diploma or less," said Rene Morissette, the assistant director of social analysis and modelling division at the federal agency.

The report, which looked at labour data between 2016 and 2022, found for jobs requiring a bachelor's degree or higher education, there were always fewer jobs available than people to fill them.

For example, there were 113,000 vacant positions requiring a bachelor's degree or higher education in the fourth quarter of 2022, but 227,000 individuals who held such an education were unemployed during the same period.

But for positions that required a high school diploma or less, the shortage of workers only started in the third quarter of 2021.

Morissette said the findings don't mean that there are no labour shortages in some markets, but shortages may not be as extensive as previously assumed.

"It's certainly conceivable that there are local shortages in some positions," Morissette said. "What we're saying is that the shortages may not be as widespread as initially assumed in the early discussions about the high vacancy rates in Canada."

For employers trying to fill vacancies that require a post-secondary education, the report says their hiring challenges cannot be attributed to a lack of workers available with those qualifications.

Instead, the difficulties may be the result of a mismatch in skills required for the job and those possessed by candidates. Another factor could be that employers aren't offering wages that are on par with what job seekers expect.

The report also casts doubt on the hiring challenges facing firms trying to recruit workers with lower levels of education.

"The degree to which these job vacancies can be attributed to labour shortages in specific low-skilled occupations instead of relatively low-wage offers and fringe benefits or other factors remains an open question," the report says.

Jim Stanford, an economist and the director of the Centre for Future Work, says the report from Statistics Canada busts "long-standing myths" about labour shortages in the country.

"If you were really short of labour, and you couldn't find someone to do that minimum wage job at a McDonald's restaurant, then why aren't they either increasing the wage or trying to replace the work with machinery?" Stanford said.

"Neither are happening, which suggests to me that employers in general are quite happy with the current state of affairs, no matter how much they complain about labour being in short supply."

So what explains the high number of job vacancies?

Morissette said for low-skilled industries, businesses may be choosing to keep wages low and accept higher vacancy rates.

"For employers that have negligible training costs, a human resource strategy that combines relatively low wages with high worker turnover and some vacancies might actually ... maximize profits," he said.

The federal government has kept an open ear to business groups raising alarm bells about labour shortages.

In the fall, Ottawa announced new immigration targets that would see the country welcome 500,000 immigrants annually by 2025. Immigration Minister Sean Fraser has touted the new plan as a solution to the country's labour woes.

Canada has also experienced a surge in the number of temporary foreign workers brought into the country to help businesses fill vacant positions.

The apparent shortage of low-skilled workers could push policymakers to think that even more temporary workers are needed, but Stanford said that would be a "disastrous" conclusion to draw from the report.

Many economists have reservations about temporary foreign worker programs that they worry can suppress wages domestically, if used excessively.

"The goal of immigration policy should not be to solve the recruitment problems faced by low-wage employers, or any employers for that matter," he said.

This report by The Canadian Press was first published May 27, 2023.