By Jennifer McPhee • Bankrate.com
Attention all nervous employees. Today, you may be worried about your job security, but be patient — a critical, long-term labour shortage is on its way, according to a new report.
“Sometime toward the middle of the next decade, and for the first time in at least a century, the number of people willing and available to work in Canada will be smaller than the number of jobs potentially available for them,” says the report written by Dalhousie University professor Jim McNiven, and published by theAtlantic Institute for Market Studies.
“After that point in time, a general labour shortage — not just in specific geographic areas or for particular skilled trades, but throughout the economy and in all provinces — will become a normal fact of Canadian economic life that will continue for as far ahead as demographers are able to forecast.”
Changing demographics is the reason behind the labour shortage, says the report. The birthrate in Canada has been declining for decades, and Canadian women now produce roughly two children for every three needed to replenish the population, according to the report.
The baby boom generation is starting to reach retirement age, so it won’t be long before the number of people leaving the workforce exceeds the number of people entering it. When that happens, the workforce will begin to shrink.
To employees who’ve suffered through several recessions, this might sound like the best news ever. Yes, jobs will finally be plentiful, says McNiven. But the shortage will create a different set of problems if Canada does nothing to prepare for it.
Outdated policies must change
In the 1970s and 1980s, the economy was restructured to accommodate the baby boom generation that flooded the labour force. The redesign created more low-paying, entry-level jobs at the expense of productivity gains. Older workers were encouraged to retire — sometimes even fired — to make room for younger workers, and post-secondary institutions expanded programs to keep people temporarily out of the job market.
This design remains pretty much the same today, even though it no longer works, according to McNiven. “Indeed, continuing to adhere to it threatens Canadians’ standard of living, and could lead to unrest, outmigration, and slow-to-nonexistent economic growth coupled with high inflation.”
“If you are in the job market, there are going to be lots of jobs, no question,” McNiven says . “But what happens when you can’t get your cable television or plumbing fixed? What are you going to do when there aren’t enough school teachers or hospital workers? People are going to get a little upset.”
The workforce will shrink, but the population won’t decline by nearly the same amount, he adds. On average, people retire around age 62 but live for roughly another 20 years, says McNiven. The large number of retired baby boomers will earn and consume less and pay fewer taxes. On the other hand, they’ll require more medical services. “How do you deal with these things?” McNiven says . “That’s really going to be the fundamental question from now on.”
Canada can avoid the worst-case scenario in his report by redesigning policies for the world we now live in, he says. The government has made some changes, but lots more needs to happen, McNiven says. “Let’s just say it’s a slow job turning around a great big ship.”
The report identifies three broad solutions — boosting the population mainly through immigration, increasing the labour force participation rate and increasing productivity by stimulating growth in high-productivity, high-paying industries, training workers and relying on machines to do more work. There’s no one magic bullet — Canada will need all three solutions, McNiven says.
No more foreign doctors driving cabs
Garth Turner, a former Member of Parliament and financial commentator, says politicians and the Canadian government are “doing nothing” to prepare for the coming changes. “There’s no ministry of long-term planning,” he says. “There’s no human resources master plan. We have governments that stagger from election to election.”
Canada needs to start actively recruiting good people from other countries, he says. “We haven’t been doing that. We’ve had a restrictive labour and immigration policy. We’ve made it difficult for people to come to Canada who are eminently qualified in so many fields.”
“All we do is give them hassles and throw up road blocks. Government after government has talked about the need to recognize foreign credentials — to have a mechanism so people can come here and immediately start to contribute. But we haven’t done it yet. I think that is probably the most immediate policy or recommendation that anyone could make.”
But not everyone is worried about future labour shortages. “Bring it on, we’re ready for it,” says Mike McCracken, chief executive officer ofInformetrica, an Ottawa-based economic consulting firm. The unemployment rate has been too high for decades, he says. “That’s a huge waste of people’s talents.”
He says Canada won’t have a labour shortage — just a different allocation of workers than employers want. “What employers want are people who would like to work for nothing, for long hours, with no benefits, forever, and to pocket all the profits from the activity. But that’s not going to happen.”
Cranking up immigration and maintaining a reserve of workers for low-paying jobs would simply allow employers to avoid adopting more productive processes and to avoid paying competitive wages, he says.
Canada may need to focus on producing and exporting different things, but that’s a good thing, he says. “Not only will this sort itself out, but it creates exactly what you want to have happen,” he says. “That is: real incomes for those who are doing their work in a productive fashion. It puts a big premium on coming up with smart ways to do things.”