Canadian small businesses face labour shortage despite wage hike, report finds

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More than half of Canada’s small businesses are currently unable to hire enough staff to continue operations or meet new demand — a new report says — despite an almost economy-wide raise in wages.

It’s a dilemma small business owner Jason Schnurr experienced since the beginning of September.

Schnurr, who owns and manages a handful of surf and sportswear stores in Sauble Beach and Port Hope in Ontario, said that his businesses, although seasonal, have been running on a “skeleton crew” for the last three months — and will be expected to stay that way until April of next year.

Schnurr’s businesses, Beachin’ and Jack n Jill’s surf shop, have seen extremely high rates of turnover since the onset of the pandemic, and cannot hire or keep employees despite an increase in wages.

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“We have a manager job that has been open since March that we cannot fill, we just don’t get applications for,” said Schnurr in a phone interview with Global News.

“If we weren’t having the labour shortage, we would have filled this position.”

The report, released on Thursday by the Canadian Federation of Independent Business (CFIB), found that 55 per cent of small businesses would not have the staff required to run their stores, though another 16 per cent would be able to continue their operations but at a significant additional cost.

“Small businesses were already experiencing a very significant shortage of labour at the beginning of 2020, and the pandemic has made the situation only more complex,” said CFIB vice-president of national research Simon Gaudreault in a press release.

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“Industries that were locked down for long periods of time, like hospitality, have seen a mass exodus as workers upskilled or switched to other jobs, and virtually all sectors are facing major demographic upheavals with not enough new workers coming in to replace those who are retiring.”

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According to the report, such widespread labour shortage comes despite the “majority” of affected businesses having already raised employee wages. The problem has led many brick-and-mortar stores to try to hire temporary foreign workers (TFWs). Some are also trying to automate their businesses as an alternative.

The COVID-19 pandemic has driven large parts of the economy to the brink over the last two years, and has especially hammered small businesses.

Business owners have attributed both the labour shortages — a majority of which are in food services, health care and retail — to workers choosing to avoid work in a public setting during the pandemic, as well as the previous federal COVID-19 income supports.

According to a report from RBC, the number of job vacancies n Canada jumped by about 22 per cent in the summer as the economy reopened. In June, there were over 800,000 job vacancies in Canada, though the country’s unemployment rate in October dropped to a pandemic low of 6.7 per cent.

Despite the recent uptick in employment numbers over the fall, the CFIB warns that the labour shortages are now “back with a vengeance,” and that more and more small businesses will see the issue persist.

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Wage hikes not the 'expected silver bullet'

According to the report, small businesses with labour shortages had expected to increase their wages by 3.7 per cent over the next year.

Over 80 per cent of affected businesses have already raised their wages, but the CFIB found that their success rate was a “mere” 31 per cent, and that three out five of those businesses that raised wages did not find it helpful in attracting workers or qualified applicants.

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Other businesses have turned to other alternatives in order to fill that labour gap, according to the CFIB, with the most successful ones being automation or hiring temporary foreign workers.

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Schnurr hopes that he’ll be able to fill his shortages in the coming months, or he would have to otherwise take further measures like “reducing hours, reducing days or reducing stores.”

The report found that a third of affected businesses have invested in automation with a success rate of 81 per cent, while over 15 per cent have hired TFWs and have a success rate of 52 per cent.

“The low utilization to high success rate ratio suggests that TFWs could be a promising solution for Canada’s labour shortages, especially if the program were expanded to other sectors,” read the report.

Candidates and qualifications

The report also found that the shortage was being driven by several factors, namely a lack of candidates, qualification mismatches and market disruptions.

About two thirds of affected businesses said they couldn’t find applicants with the right skillsets, while just over half said they had a lack of any candidates at all.

“One reason for this is that the distribution of job seekers to jobs in different education categories is imbalanced: in Q1 2021, 22 per cent of the unemployed had a level of education equal to or higher than a bachelor’s degree, while only 15 per cent of the market requires this level of education,” read the report.

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The pandemic’s disruption in relationships between employers and employees also “pushed” workers out of certain sectors according to the report, with nearly one in four of small businesses stating that their workers switched industries due to the pandemic.

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“Small businesses have a long and steep climb to recovery, and having the right workers in place or other tools to address labour shortages is a big part of that,” said Corinne Pohlmann, senior vice-president of national affairs at CFIB in a statement.

“They are already doing all they can to attract workers, but they need governments to do their part by adopting policies that increase productivity, connect job seekers with employers and don’t put the cost of hiring out of reach.”

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