The tightness of the Canadian labour market is most apparent in the elevated level of job vacancies across the country, says a new report released Monday by TD Economics.
“This is causing upward pressure on wages and complicating the Bank of Canada’s ability to bring down inflation,” said the report. “We find that vacancies are most pronounced in low wage sectors that were hardest hit by the pandemic. With many workers having left these sectors in search of higher pay, firms may be unable to fill these job openings.
“The most likely solution to the job vacancy gap in Canada is an economic slowdown that reduces demand for workers and brings the labour market back into balance.”
“Some have argued that posting a job online has become so easy that hiring managers have become trigger happy. This points to the argument that many of the postings aren’t ‘real’, and that firms have learned to operate without filling certain jobs. In this case it will just be a matter of time before employers get around to canceling their excess job postings,” it said.”There is also the broader argument that there is a skills gap, where the current Canadian labour force isn’t equipped to do the jobs that are in demand. When Statistics Canada recently surveyed businesses on the skill level of their workforce, most industries reported they had a significant skills gap. Though this can explain why employers are struggling to find employees with the right skillset, the existence of a skills mismatch within their current workforce argues that this is not preventing firms from hiring.
“The arguments made above certainly explain the reasons for the vacancy gap from the perspective of employers, it is also important to look from the perspective of workers. When the pandemic hit, many workers in low wage sectors lost their jobs. And with numerous lockdowns that slowed demand in the hardest hit sectors, many of these workers looked for jobs in other industries. Fortunately, a rapid rebound was occurring outside of high-contact sectors. This gave workers a tremendous opportunity to increase their pay. Indeed, when we look at where the employment gains have been over the last two years, we can plainly see that employment growth has concentrated in higher wage sectors. At the same time, the sectors with the most job losses are in the lowest wage sectors. This explains why there is such a disparity in the size of the vacancy gap across industries and points to the fact that many workers have been able to move up the wage curve by changing industries.”
For businesses that have high vacancy rates (vacancies relative to labour demand) and are offering lower wages, the obvious solution is to increase pay, said TD
“And we’d note that wages have been rising, but they have not been nearly enough to compete for workers (the average wage gain since the pandemic is 10.3% in high vacancy sectors compared to 8.6% for low vacancy sectors). In order to make the wage rate in these sectors competitive enough to draw workers back, the wage adjustment would need to be several multiples of the current wage growth rate, and that is just not viable,” it said.
(Mario Toneguzzi is a veteran of the media industry for more than 40 years and named in 2021 a Top Ten Business Journalist in the world and only Canadian)
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