Is Canada Facing a Looming Labour Shortage?

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Abridged version appeared in Business in Vancouver, issue June 1-7, 2004

Response to David Baxter column, February 17-23, 2004, Business in Vancouver

Is Canada facing a looming labour shortage? David Baxter, for one, seems to think we are and that without high levels of immigration Canada will be unable to support current levels of health care and social services.

Few people who have studied the issues carefully agree with him, however. In its annual assessment of our economic prospects last October, the Conference Board of Canada, for example, stated that “contrary to earlier predictions, Canada will…not face any labour shortages over the remainder of the decade. In fact, the challenge will be to find employment for the large number of new entrants.” The Conference Board also noted that “the rising participation rate and solid source population growth as the echo generation enters the labour market results in an increase in average annual labour force growth from 1.6 per cent during 1996-2000 to 2.0 per cent over the 2001-05 time period. All of these factors will ensure that labour force growth remains relatively strong at close to the 1.2 per cent year on average from 2006 to 2010.”

Nor do Canadian demographers share Baxter’s views. Professor Roderic Beaujot of the University of Western Ontario, one of the leading experts on the demographics of immigration in Canada, has pointed out that, even with immigration levels considerably lower than at present, the entry level cohort of workers (15 to 24 years of age) will continue to be larger than the exit cohort (55 to 64) until 2011. The situation will change somewhat in the next decade, when large numbers of people will reach retirement age -- although even then, according to Beaujot, there may not be a decline in the workforce if women’s participation continues to increase, and if the participation for persons 60 and over stops declining.

In referring to Baxter’s statement that “if we didn’t have immigration, we’d stop regenerating our labour force in about four years” Beaujot, notes that “this implies that there is little regeneration associated with the numbers of people leaving Canadian schools to enter the labour force” and that “it is absurd to say that our labour force will not be renewed unless we have immigration.” Beaujot adds that “depending excessively on immigration can also undermine other sources of recruitment, both in terms of appropriate educational investments and population groups that have lower labour force participation.”

This does not mean that there won’t be some gaps in the labour force where foreign workers will be needed -- at least in the short to medium term. The current shortage of doctors is a case in point. What it does mean is that there is no general shortage.

In looking at the situation in this province, Jock Finlayson of the BC Business Council has come to much the same conclusion. In his estimation, construction is probably the only major sector in which there is a significant labour shortage at present. Even here, however, he believes that current gaps will best be dealt with by normal market forces drawing on domestic resources rather than by bringing in people from abroad. He hasn’t seen any data that persuade him there is a general shortage of workers in BC at the present time.

Further evidence that we are not facing a looming labour shortage can be seen from the fact that on average recent newcomers have been faring very poorly. Their earnings have fallen well below those of Canadian-born citizens, as well as immigrants who came earlier, and their poverty levels have risen significantly higher. While this state of affairs can be attributed to a number of factors, one of the most obvious is that new arrivals have been entering a labour market where, for the most part, they are not needed at this juncture. In this regard, economist Arthur Sweetman of Queen’s University, recently recommended a return to immigration intake related to the business cycle -- a policy first abandoned by the Progressive Conservatives when Canada was in the midst of the early 1990s recession.

We are not doing any favour to Canadians or to the newcomers who leave good careers in their homelands in the expectation they find suitable work here when, in fact, the odds are stacked against them. Hopefully the federal government will begin to get this message before too long.

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