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Opinion: Labour force shortages to become more acute

With a smaller post-pandemic workforce, Thunder Bay economics professor questions the sustainability of the economy
Construction worker pexels
(Photo by Mikael Blomkvist from Pexels)

If the June 2022 Labour Force Survey is part of a trend, Canada’s labour shortage issues are going to be getting worse.  

On the positive side, the unemployment rate reached a new consecutive low of 4.9 percent in June and politicians with vested interests will no doubt seize on this as good news.

On the other hand, total employment fell in June by 43,000 jobs with the employment loss almost entirely due to a decrease in workers aged 55 years and older.

As well, the number of self-employed workers fell by 59,000 (2.2 percent) while the number of employees in both the public and private sectors held steady.  

Dig deeper, and the long-term trend shows self-employment declining while public sector employment has grown over the last few years – not exactly good news for the health of the business sector.  

And, as final points, the size of the labour force between May and June shrank by 97,500 while the participation rate in the economy shrank from 65.3 percent to 64.9 percent.  Remember that this is the start of summer, usually when things pick up.

So, what is going on here? I like to term this the Thunder Bayization of Canada’s economy.  

For quite a few years now, Thunder Bay and indeed much of Northern Ontario has seen low unemployment rates.  These are usually touted by local community leaders as good economic news.  After all, if the unemployment rate is low what could be better news than that?  

Except the problem is that in the case of Thunder Bay, both the labour force and total employment shrank permanently after the forest sector crisis nearly 20 years ago and has never really recovered.  

Moreover, with the aging of its labour force, the local labour force has shrunk faster than employment hence resulting in a decline in unemployment rates.  Total employment has shrunk.  

This continues as even the June 2022 labour force shows that in Thunder Bay since May the labour force and total employment both fell though this time employment fell a bit more than the labour force so that the unemployment rate rose slightly to 4.3 percent.  Think about it – a chronically depressed city-region with an unemployment rate below the national average of 4.9 percent.

There is a lot going on here but basically, the two-year pandemic hiatus of less work with substantial government benefits, the continuation of extended EI benefits and accumulated savings have caused a shrinking of people ready and willing to work.  

Combine that with an aging labour force – about 20 percent of the labour force and employment is people aged 55 and over – and the start of retirements which has probably also been accentuated by the pandemic.  

Indeed, one suspects that for some the CERB (Canada Emergency Response Benefit) was a nice early retirement/buyout package courtesy of the government. Then there is the pandemic toll on small business and the resulting shrinking of self-employment also.  

Put it all together, and you have the start of a growing and continuing labour shortage in Canada. 

Thunder Bay can function in an economy where the number of people shrink, and inflows of assorted government transfers keep the economy going.  

However, can this be a sustainable future for an entire country where more and more people simply withdraw or retire from the labour force and the number of people available for work and employed shrinks?  

Can an economy where everyone wants to enjoy the consumption of goods and services exist alongside one where there are not enough people available to work?  In the absence of immigration, this would probably be worse.  Food for thought.

Livio Di Matteo is a professor of economics and an adjunct professor of history at Lakehead University in Thunder Bay. He is also a senior fellow at the Fraser Institute. As the author of the Northern Economist blog, he comments on Northern Ontario issues and public policy.