November 1, 2021

Skilled Labour Crunch in the Canadian Economy

Written by:
Marc Witney
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The Canadian economy is emerging from the Covid-imposed restrictions with Canadians eagerly looking forward to getting their lives back to normal. Canadian businesses are equally interested in getting their business operations to pre-pandemic levels, with hiring as the strongest indicator of their efforts in that direction. But Canadian businesses are facing persistently hard-to-fill job vacancies in their hirings. There are simply not enough applications coming through for the available job openings due primarily to an aging population, decline in labour force growth, lacking hard and soft skills, and voluntary changes in lifestyles due to the pandemic and subsequent lockdowns. And, with the recovery ramping up, this shortage is bound to intensify.  

The situation above is outlined in detail in a recent report by the Business Development Bank of Canada (BDC). In the report entitled “How to Adapt to the Labour Shortage Situation”, BDC sheds a much-needed light on the hiring woes of Canadian businesses today and what they can do to mitigate them. At a quick glance, hiring challenges in Canada are bound to worsen due to factors related to retirement, immigration, resignations, and college graduation rates. 

More than half (55%) of Canadian entrepreneurs are struggling to hire the workers they need, leaving them with no choice but to work more hours and resort to delaying the deliveries and refusing new orders. In addition, more than a quarter of them (26%) are having difficulties retaining their employees. According to the report, which is the result of a survey of 1,251 Canadian entrepreneurs on labour market conditions, Canadian entrepreneurs have outlined the most significant difficulties in their hiring efforts as follows: 


 Adapting to New Methods

Canadian entrepreneurs, however, have not sat idly. Most business owners in Canada have responded by offering upskilling to workers to prepare them for evolving roles. They have also given more flexibility to their workers to incentivize greater participation of aging workers and to offer opportunities for internal training of less-qualified workers so that they can gain the required skills they currently lack. 

 Another factor that is compounding the shortage is the elephant in the room known as digitization. Thanks to the pandemic, the rapid pace in the digitization of business operations caught many business leaders by surprise. Over the years, many Canadian workers and tradespeople have fallen behind digital trends in their professions. At least one quarter of Canada’s four million trades people will need to upgrade their digital literacy in their respective fields over the next five years lest they fall short of meeting industry needs. Technological changes brought about by the pandemic have led to the emergence of digital skills that are becoming critical for many tradespeople. For example, industrial mechanics, electricians, construction and automotive technicians need to gain
digital skills to operate the electronic-testing equipment, 3D technology, and diagnostic tools.

So what options are available to Canadian businesses? One solution, according to the BDC report, is to tap into the underutilized workforce in youth and newcomers by integrating them effectively into the workforce. This means offering and enrolling them in vocational training and upskilling programs for the hard and soft skills that the labour markets need. 

Another proposed option is to emulate the Japanese model, which involves keeping aging employees active for longer times and offering phased retirements to incentivize continued participation in the workforce. But there lies another challenge that can offset these well-intentioned approaches: a wave of voluntary job departures. 

Resignation Wave

The Canadian economy, similar to that of the United States, is facing a wave of resignations fueled by the greater availability of job opportunities, a need for career change, and a desire to keep new lifestyles that many discovered during the lockdowns; lifestyles that pre-pandemic were not available to them because of stressful nature of their work schedules. The number of people who left their jobs in Canada in June of this year tripled compared to the same period in 2020. Voluntary resignations, combined with the existing labour shortages are making the job market even more difficult for employers and resulting in inflationary pressures. 

The BDC report finds a significant untapped opportunity in the Canadian workforce that many businesses have yet to discover and tap into: the talent diversity in the labor force. Its findings suggest that full utilization of Canadian diversity could add as many as 2 million jobs. The two million potential is made of the following pools: 

- Younger workers: 998,000

- Aging workers: 753,000

- Newcomers: 246,000

Integrating these groups into the Canadian workforce would certainly be a tall order, but a giant leap forward for Canada’s tight job market. 

Investment in Automation and HR Tech

Another measure that has helped Canadian businesses mitigate hiring difficulties is investing in automation. The BDC report shows that most business sectors in Canada have witnessed that investment in automation improved hiring 2x. For example, take accommodation and food services, an industry that was dealt a near-fatal blow in the pandemic. It is now experiencing great difficulties in filling open positions. Investment in automation and HR Tech in this sector has seen 86% of employers in the accommodation and food service sector hire twice as fast. The report, however, shows that adoption rate and investment levels remain low throughout the economy with only one in four Canadian SMEs having fully automated at least one business function. 

The report emphasizes that the current labour crunch in Canada is here to stay and bound to get worse. It suggests that it is time Canadian entrepreneurs embraced formal processes in their talent acquisition and human resource operations, which according to BDC, help employers find strong matches faster.

A Renewed Approach to Finding Skilled Talent

Fear of virus, stimulus payments, people seeking new types of opportunities for better pay, benefits, and childcare, and steady decline in the supply of talent due to an aging population are among the key factors that have made hiring a growing challenge for Canadian businesses. 

With the tight supply of talent, Canadian businesses can nonetheless take measures that, similar to adopting formal processing in HR, can contribute to mitigating their hiring woes. One such measure is focusing on the transferable skills of many in the labor force, including those who seek new and different opportunities. A renewed look at the existing skills pool of a company can uncover opportunities in the labour force that had been hitherto overlooked due to lack of technology. Skills-driven approaches to talent acquisition can lessen the burden of finding the right talent for the right job, a task that has been traditionally encumbered with heavy reliance on candidate resumes, business titles, and academic pedigrees. Resolving, or at least mitigating the challenges of hiring in the Canadian labor market needs a renewed approach to finding skilled talent. Employers have an opportunity to see how technology can validate an applicant’s knowledge of the required skills in a job. 

Human Resources Today