Some salaries up ‘drastically’ as Canada feels impact of labour shortages

After leaving millions jobless in the spring of 2020, the COVID-19 pandemic is once again upending the labour market. And this time, workers may have the upper hand.

As the threat from the virus retreats amid soaring vaccination rates and business activity picks up, employers are finding it increasingly difficult to fill vacancies. In the U.S and the U.K., whose economic recovery is further along than Canada’s, companies and policymakers are grappling with the worst labour shortages in decades.

In Canada, which just recently started to emerge from a third wave of the pandemic, there are signs the country is headed in a similar direction.

The economy added 230,700 jobs in June as restrictions put in place to slow the pandemic were rolled back across the country, Statistics Canada said on Friday.

The gain came as the number of part-time positions rose 263,900, while the number of full-time jobs fell 33,200.

The unemployment rate fell to 7.8 per cent for the month compared with 8.2 per cent in May.

“There is a shortage. We’re seeing it,” says Julie Labrie, president of BlueSky Personnel Solutions, a bilingual recruiting firm.

The labour market was already tight before the pandemic, Labrie says. Now, she’s hearing from companies that have been unable to fill positions for three or four months, she says. Competition to attract new staff is fierce, qualified candidates are routinely receiving multiple offers, and workers are driving a harder bargain, she adds.

The mismatch between demand and supply in the labour market was already visible in the spring, Mikal Skuterud, a professor of economics at the University of Waterloo, said speaking before the release of the June job numbers.

“There are more job postings available in the labour market than there are workers who are willing to fill those vacancies,” Skuterud says.

The number of vacancies per job seeker surpassed pre-pandemic levels in April, according to Skuterud.

While aggregate numbers do not show yet whether that’s pushing up wages, anecdotal evidence suggests employers are willing to pay more for the right candidate.

From where she sits, the shortage has already driven up salaries “drastically,” Labrie says, with some employers willing to hike pay by as much as $10,000 for new hires. To sweeten the deal, companies are also increasing paid time off — with many now offering four weeks of vacation — and readily acquiescing to requests to work from home at least part of the time, a demand that has become a deal-breaker for most job candidates, Labrie says.

If the virus continues to retreat, Skuterud says, the labour shortages are bound to become more acute.

As more people begin to feel confident that the economic recovery is here to stay, Labrie expects a wave of resignations as people quit the job they’ve held onto during the pandemic and search for better opportunities.

The current labour shortage, she says, “is only the beginning.”

While many employers are scrambling to ramp up staff, the economy has yet to bridge a gap of around half a million jobs to make up for the labour market losses it suffered in March and April of 2020, at the onset of the pandemic, according to Skuterusd. Despite the growing number of vacancies, there are still around two million Canadians who say they want to work but don’t have a job, he says.

That’s what Skuterud calls a “wedge” in the job market. The discrepancy is likely tied to some people’s lingering reluctance to rejoin the workforce, he says. Many may still have concerns about whether it’s safe to return to work, especially in customer-facing positions, amid uncertainty about the efficacy of vaccines against the delta variant COVID-19.

Labrie says job candidates are still concerned about accepting front-line jobs in sectors like hospitality, retail and the restaurant industry.

A lack of childcare options may also make it difficult for some parents to return to work, Skuterud says. After prolonged shutdowns, some daycare centres have gone out of business, while many summer camps decided to stay closed in 2021 to limit costs.

The COVID-19 income supports rolled out by the federal government also make it easier for some Canadians to push back their return to work, both Skuterud and Labrie say.

Many front-line service sector jobs have low pay, may not feel safe and may be more demanding than they were before due to the need to wear a mask and abide by COVID-19 safety protocol, Skuterud says. Some workers may be thinking they can continue to rely on government benefits through the summer, making sure there isn’t a fourth wave of the virus, he adds.

“That’s not a criticism of workers at all,” he says. “That’s the decision they’re making.”

Canadians will be able to apply for Canada Recovery Benefit until Sept. 25, with benefits decreasing from $500 to $300 before tax during the summer. The pandemic-linked enhancements to the Employment Insurance benefits for jobless workers will also be in effect until September.

Both benefits require that claimants be actively looking for employment while on claim.

The labour shortages may represent a reversal of fortunes for young workers especially.

Canadians under the age of 35 were among the hardest hit by the wave of job losses in the spring of 2020. And young workers made up the bulk of the 1.3 million Canadians who had been jobless for more than six months as of September of last year, according to data previously provided to Global News by Skuterud.

Recessions can have a significant impact on the earning potential of young workers. Those who graduate into an economic downturn, for example, may take more than a decade to catch up financially to whether they would have otherwise been, Skuterud says.

But that’s largely because economies often take a long time to bounce back from a typical recession, he adds. By contrast, barring any further setbacks tied to a resurgence of the virus, the recovery from the COVID-19 economic slump may prove to be very fast, he notes.

And as economic growth quickly gains momentum, labour shortages may provide some “payback” for young Canadians, Skuterud says.

While freshly-minted graduates may be forced to accept lower pay and jobs that don’t match their qualifications in a normal recovery, this time they may get an opportunity to start at a higher corporate rung simply as employers become more willing to train inexperienced employees, Skuturd says.

In the retail sector, for example, businesses are coping with a significant loss of experienced staff, who moved on to jobs in other industries as stores and malls remained closed or operating a limited capacity for prolonged periods of time since the start of the pandemic, says Diane Brisebois, president and chief executive officer of the Retail Council of Canada (RCC).

And while a dearth of experienced hires is a challenge, the sector is seeing increased investment in employee training, a trend that also reflects a need for new roles and skills after the industry’s dramatic pivot toward e-commerce during the health emergency, Brisebois says.

The restaurant sector also saw a notable exodus of experienced staff, according to Olivier Bourbeau of Restaurants Canada, a national association that represents the foodservice industry.

Job postings in the foodservice sector on Indeed Canada were 37 per cent above their pre-pandemic level in mid-June as restaurants reopened across Canada with demand for workers especially high in Western Canada and Quebec, the job search site noted in a recent report.

Still, it remains to be seen whether any widespread wage increases stemming from the labour shortages will translate into lasting gains and higher living standards for workers or feed inflation, Skuterud says.

To foot the bill for higher wages without raising prices for customers, businesses generally need to increase productivity — that is, raising output per worker, he notes. That sometimes requires an investment in new technology, he adds.

But for retailers that have suffered heavy losses during the pandemic, the cost of training new staff and offering higher compensation makes it more difficult to invest in expanding the business, Brisebois says.

In the restaurant sector, where margins are often razor thin, some establishments are choosing to operate at reduced hours because of the challenge of finding or affording additional staff, Bourbeau says.

And small businesses in the retail sector and the foodservice industry alike are burdened by debt accumulated during the past 14 months, a financial drag that often leaves little room for investing in growth, both Brisebois and Bourbeau say.

Ottawa’s new Canada Recovery Hiring Program is meant to help companies overcome the initial financial hump of ramping up hiring and operations. The program, which began accepting applications on July 7, covers part of employers’ added expenses as they boost their payroll to take on new hires or increase pay for employees.

But small business groups warn the federal government’s current timeline for phasing out other pandemic-era supports for businesses like the Canada Emergency Wage Subsidy and the rent subsidy is too optimistic. Like the wage subsidy, the Canada Emergency Rent Subsidy, which helps businesses affected by COVID-19 pay their rent or mortgage, is currently set to end on Sept. 25.

Ultimately, if the mismatch between labour demand and supply persists, it could hamper economic growth, Skuterud says.

“When you have jobs that are wanting to be filled and workers that are jobless, who are not filling them, for some reason, that’s inefficiency. We’re losing output,” he says.

“We want to do as much as possible to try and encourage and support that matching process between workers and jobs.”

— With a file from the Canadian Press