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The Developing Workforce Problem: Confronting Canadian Labour Shortages in the Coming Decades

Posted in Discussion Papers

Atlantic Institute for Market Studies
January 2009

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Executive Summary: 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. 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. There will still be unemployed people, but their numbers
will be more than offset by unfilled job vacancies. Simply put, the number of young people entering the labour force is insufficient to sustain economic growth in the years ahead at levels that
prevail today.
The problem Canada faces is one of demographics. In the 1970s and 1980s, the Canadian economy was restructured to meet the challenge of the entry of the huge baby boomer generation into the
employed labour force. With the demographic changes that have taken place since then — a declining fertility rate and declining numbers of future labour force entrants — this design is no
longer working. 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. Modelling the effects of these demographic shifts on the Nova Scotia economy and society out to 2026 shows that they are likely to be significant, featuring an aging, declining population,
dwindling numbers in the traditional labour force ages (15–65), and lower labour force participation rates.
If Canada were facing this demographic challenge in isolation, it might be easier to adapt to the situation. But most of the developed world faces similar challenges. The coming decades will
witness a global competition among the developed countries for labour of all kinds, and the problem will only get worse as workforces in rapidly developing countries such as China begin to age.
There are only three generic ways to close the gap between the demand for and supply of labour in Nova Scotia in the years ahead:
• Find more people — that is, increase the population, by raising the birth rate or by increasing migration from other provinces and immigration from abroad. But the birth rate is unlikely to
change, other parts of Canada would be facing the same challenge, and immigration from abroad would have to occur at far beyond traditional levels.

• Increase labour productivity at a faster rate than the historical average, by encouraging the growth of higher-paying industries at the expense of low-productivity (largely low-wage)
industries, improving business practices and processes, and increasing the skills and education levels of the workforce. But this would only delay the inevitable.
• Increase the labour force participation rate, by encouraging those who have given up working  or who have never worked to become employed or by discouraging early retirement and
encouraging older workers to remain in the labour force longer — no easy task.

A mixture of these approaches might be more practical, but it would involve a rethinking of government policies related not only to work and the workforce, but also to education, certification,
pensions, pay practices, benefits, and capital investment, among others. It would also imply changes in business attitudes toward older workers, the disabled, visible-minority hiring, productivity
improvements, work practices, and the deliberate offshoring of low-productivity and lowpaying operations, among other things.
What is clear, however, is that Canada, and Nova Scotia, cannot afford to do nothing. If nothing changes, in 2026 one job in every eight in Nova Scotia and in the rest of Canada will go begging.
In that case, the market, as it is presently conditioned by business and government, will definitely “solve” the problem for us, but not, perhaps, in a way we might like.

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