We’re losing workers, not jobs

Posted on September 17, 2022 in Policy Context

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TheStar.com – Business/Opinion
Sept. 17, 2022.   By David OliveStar Business Columnist

Inflation-causing labour shortages set to worsen before they improve, David Olive writes.

Canada’s string of three straight months of job losses raises some tough questions.

The latest job numbers, reported by Statistics Canada last week, show that the country has lost a total of 114,000 jobs since May.

Imagine that, an economy losing jobs amid a skills shortage crisis.

Does that mean an abrupt end to the economic recovery’s remarkable job-creation record, with 3.4 million jobs gained in the short space of two years ending in May?

And will that apparent labour-market weakness halt recent impressive wage gains?

The answer to both questions is probably not.

A loss of 114,000 jobs in a Canadian workforce of 19.5 million is only a modest setback.

It suggests that the Bank of Canada is on track for minimal job loss as it cools an overheated economy to get inflation back to three per cent next year from the current 7.6 per cent.

And a careful look at the job numbers shows that we are losing workers, not jobs.

The Great Resignation continues, with an estimated one million Canadians still on the sidelines waiting for improvements in job conditions before returning to the workforce. Their absence puts upward pressure on inflation.

Add to that a more recent phenomenon that can be called the Great Retirement. Hundreds of thousands of older Canadians who postponed retirement during the pandemic now feel free to quit the workforce.

An especially worrying example of that is the 34,000 jobs lost in health care since May, even as nurses continue to report having to work overtime hours.

That is a case not of job cuts but of above-average rates of retirement. The retirees are among the highest-skilled workers, whom the health-care system cannot afford to lose. But they are exhausted and feel they can retire now that the pandemic has ebbed.

And the wave of health-care retirements is about to become more evident across the economy.

In StatCan’s report last week for August, there were 307,000 Canadians that month who had retired at some point this year. That was up almost 32 per cent from the same period a year earlier, and a 12.5 per cent increase from 2019, the last pre-pandemic, or normal year.

It turns out that inflationary pressures are caused by pent-up retirements as well as pent-up spending. And those inflation-causing labour shortages are set to worsen before they improve.

During the main pandemic years of 2020 and 2021, more than 650,000 Canadians joined the 65-plus age group poised for retirement, a 9.7 per cent increase.

And that largely accounts for continued, often acute, shortages of skilled labour in trades and professions, rather than job cuts resulting from economic slowdown.

There are exceptions.

The loss of 28,000 workers in construction in August, due to higher interest rates, wouldn’t surprise Torontonians who’ve seen so many real estate projects stalled or scrapped in recent months as the cost of borrowing has soared.

And a financial sector bracing for increased loan and credit card delinquencies due to those same interest-rate hikes has trimmed its employment levels.

But more indicative of continued health in the Canadian economy is the growth in high-tech jobs in a Toronto that is emerging as a leading North American tech hub.

In the Ontario cities of Ottawa, Toronto and Waterloo, tech jobs now account for roughly as large a portion of the total workforce as Silicon Valley’s 11 per cent, and eclipsing New York’s less than four per cent.

And wage gains throughout the economy continue at a near-unprecedented pace. They have “exploded over the past four months,” Derek Holt, an economist at Bank of Nova Scotia, said in a client note when StatCan reported its latest jobs numbers on Sept. 9.

Those wage gains last summer ranged between 8.5 per cent to almost 12 per cent on an annualized basis.

Just the same, labour disputes — strikes and lockouts — have claimed about 1.5 million lost person-days so far this year. That’s almost double the lost work from that source in all of 2021. Which means that soured labour-management relations also figure into the labour shortage crisis.

Meanwhile, in the white-collar workforce, recent surveys show that most employers are planning above-average salary increases of 3.8 per cent next year, with some increasing their pay budgets as much as 20 per cent.

The larger pay budgets are required in retaining employees when workers are in short supply, and of upgrading promotion practices and rewards for high-performance workers.

Just the same, outsized pay gains are most unusual ahead of a recession long anticipated in 2023.

They are characteristic of a workforce suffering a scarcity of workers, not jobs. The worker shortages hold back economic growth and keep Canada’s productivity growth rates at notoriously low levels.

Solutions include fast-tracking immigrants into jobs; experimenting with four-day work weeks and other hybrids; luring retirees back into the workforce; and closing the gender pay gap.

The stakes have seldom been higher in rethinking the nature of work and of workplaces.


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