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What’s driving the labour shortage for Canadian business

What’s driving the labour shortage for Canadian business

4 Minute Read

Understanding the “what” and the “why” behind the labour shortage in Canada can lead business owners to broaden their thinking on how to manage it.

Leader, Consulting – Organizational Renewal

Labour shortages are top of mind for Canadian business leaders across the country. As you know all too well, maintaining success and growing your business means hiring and retaining high-quality people.

As you assess the labour landscape, and why this monumental challenge exists, you’ll gain new insights about how your company can manage it.

What are Canadian businesses dealing with?

The data helps separate facts from myths as you build your workforce strategy.

The Business Development Bank of Canada (BDC) released a report with labour statistics and insights for multiple industries. Here are some key takeaways.

Across all industries:

  • 55 percent of entrepreneurs say they are struggling to hire
  • 64 percent say that a worker shortage limits their growth
  • 57 percent of employees leave their job for better wages
  • Transportation and warehousing, retail and wholesale, and the manufacturing sector report the most difficulty with hiring

While the current economic volatility can be attributed to pandemic disruptions, these employee shortages are long-term trends — they began long before 2020 and will continue long after.

Why is there a labour shortage in Canada?

So how did we get to this point?

Aging population

Baby Boomers are still the most populous generation in Canada; according to Statistics Canada, Millennials (people born between the early 1980s and the mid 1990s) won’t outnumber them until 2029. As Baby Boomers age, they’re leaving the workforce faster than Generation Z (people born between the mid 1990s and late 2000s) is entering.

COVID prompted many people approaching retirement age to exit a few years earlier than planned. We’ll continue to see a significant number of retirements over the next few years.

Behavioural trends among younger generations

Generation Z are taking longer to finish school and start their careers than previous generations. Labour force participation among teenagers, including summer jobs, is much lower now than in decades past.

This, combined with the fact that Generation Z are less numerous than Millennials and Baby Boomers, creates a natural reduction in the total labour pool.

Shifting priorities

The pandemic prompted many people to think big picture and ask themselves what they truly value in their careers and their personal lives. What’s commonly called the “Great Resignation” is a result of this mass re-evaluation of priorities.

Young people joining the workforce care more about factors like environmental impact, diversity & inclusion, social involvement, and work-life balance than the retirees leaving the workforce. This trend pre-dates COVID and should be treated as central to your hiring strategy.

Addressing myths

Some managers and decision-makers believe COVID subsidies and EI programs are de-incentivizing people from entering the workforce. In reality, COVID programs have ended, and people are working; unemployment in Canada is near record lows.

Many also believe worker shortages are a direct result of the pandemic and will be short-lived. The truth is more nuanced. While the pandemic sped up many of the trends that led to the current shortage of skilled labour, it did not create them.

What can I do about it?

Your business needs to tailor its own approach to dealing with labour shortages. Here are some examples of solutions you can consider.

The full picture of compensation

Yes, money talks, but it’s no longer the only one in the conversation. Young people with ambition are looking for good jobs with advancement opportunities, benefits packages, flexibility, and great working conditions. If your situation permits it, leveraging employee share ownership or profit sharing programs can build a sense of loyalty and buy-in among your people.

If your solution to the problem is to throw money at it, you’ll find it expensive and inefficient. Your competitors can easily poach employees who are only motivated by their salaries.

Purpose and wellness

Your staff want to feel that their employer shares their values. Invest in clarifying and communicating your company’s reason for being, and show your workers the positive impact their work is having. If your projects benefit communities, talk about it. In fact, talking with your employees regularly will help you find out what they enjoy doing and give them more opportunities to do it, while ensuring appropriate transfer of knowledge and skills.

Make wellness inseparable from your corporate culture and, if possible, compensation. Think outside the box when creating wellness packages that encompass mental, physical, and emotional support. Not every employee will take advantage of these benefits, but even just having them available creates goodwill and shows your people they’re valued.

Contact us

To learn more, contact Mary Larson, Partner and Organizational Renewal Leader at MNP.


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