Labour shortage one of the main factors holding back business growth in Canada

While business sentiment and outlook are trending upwards over the next twelve months into 2020, the main factor holding back full potential growth is a shortage of labour — according to a new survey from the Bank fo Canada. The ratio of job openings to unemployed workers rose, especially in skilled trades, management, and engineering professions. 

In the new 2019 survey of businesses, the Business Outlook Survey[1], both the hiring and investment intentions of Canadian companies are strong. While this seems like good news, businesses indicated clear reservations on labour-related constraints to full growth. 

This combination of increased hiring with a shortage of skilled labour inevitably leads to complex HR management and recruiting issues, including competition, increased migration of existing team-members, production gaps, and higher salary expectations. 

 

Bank of Canada report data indicating pressures and constraints to growth by Canadian companies. In the report “Respondents often pointed to labour-related constraints as a key obstacle to meeting a sudden rise in demand. Some businesses in Central Canada expect capacity pressures to intensify because of continued strength in demand.”

 

In a previous survey at the beginning of the year, BDC found that 53% of small to medium-sized businesses faced a labour shortage.[2] The HR shortage trend continues to be a constraint on growth, especially in Ontario, British Columbia and Quebec. “Some businesses in Central Canada expect capacity pressures to intensify because of continued strength in demand,” says the report from BDC.

Capacity pressures in 2019: mostly human resources

In the second quarter of 2019, 34% of companies faced production-hampering pressures, mostly HR-related, while another 8% faced “significant” challenges.

 

“Reports of labour shortages increased from a low level (Chart 6, blue bars) but are not widespread. Firms often reported shortages of skilled or specialized labour (e.g., skilled trades, management positions, engineers). The balance of opinion on the intensity of labour shortages is roughly the same after falling in the spring survey (Chart 6, red line). Nearly half of all respondents judged labour shortages to be unchanged compared with 12 months ago, with some indicating that hiring has been difficult for more than a year. Views that labour shortages are more intense than a year ago are most evident in Quebec.”

 

While a shortage of human resources may seem like a “job hunters” market, the primary demand is for “skilled labour.” With production capacity set to increase in 2019-2020, active HR Management is critical to achieving production goals. Retaining employees through healthy HR Management practices is as important as quality HR recruiting. Expected production capacity shortfalls will also increase demand for temporary human resources.

 

 

“Intentions to increase employment are positive and similar to the spring survey (Chart 4). Plans to hire are still widespread across most regions and sectors. Businesses often noted expected sales growth and expansions as the reasons to add to their workforce.”

Increases to workforce

 In the Business Outlook Survey, 35% intend to increase their employment requirements and capacity over the next 12 months, based partially on projections of sales and production growth. Aside from human resources, 20% of businesses plan to increase investment spending. 

Skills mismatching makes tight HR Management critical.

The situation is tighter in many markets than generally indicated in the survey due to skills mismatch. The jobless rate is not a good indicator of available human resources. Finding skilled human resources is becoming one of the most sought-after services— increasingly partially outsourced by even larger companies.

 

Canada unemployment rates. As of Aug 31, 5.7%.

 

 

Even something as fundamental as trucking is fiercely competitive. Walmart, recently raised trucker salaries to $90,000 to retain and recruit much-needed logistics team members. The median pay for technology and programming positions continues to climb sharply. Health care is one of the highest demand areas for skilled resources. 

More jobs than workers: ratios

Without a robust recruiting resources, most companies are facing “more jobs than workers” scenarios across many sectors. Even last year, at the end of 2018, the Bureau of Labour Statistics reported alarming “jobs to unemployed worker ratios” for various industries, with Education and health services at a staggering 2.26 openings per unemployed worker, and business services at 1.9. [3] Financial activities struggled at 1.78 openings per unemployed worker, and mining and logging competed at 1.63. 

 

End of 2018 data from US Bureau of Labour reports on ratios of openings to available workers.

 

Shortages: lead to migration, wage demands, benefits

The ongoing shortages, especially in skilled fields, tend to lead to more migration — competitive job hunting — a tendency to encourage labour actions (strikes), higher wage demands, and a need for better human resources management and benefits. 


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NOTES

[1] Business Outlook Survey Summer 2019, Bank of Canada

[2] Business Development Bank of Canada (BDC) report.

[3] More jobs than workers, Bureau of Labour Statistics Nov 2018.

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