Filling the Labour Gap?

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By Peter G. Hall
Vice-President and Chief Economist Export Development Canada

Forecasting is an age-old profession with mixed results, at best. It’s surprising that on a number of fronts, forecasting has endured the test of time. That’s likely more a testament to our yearning to pre-know the future than the veracity of the visionary. However, there’s a branch of forecasting that, when it comes to accuracy, stands apart: demographics. As a famous Canadian economist said, it’s almost as simple as knowing that next year, we will all be one year older. If so, what insights can we gain from demographic forecasts, particularly Canada’s?

Generations of concern about overpopulation have managed to curtail and even negate population growth across a huge swath of our planet. Japan was first to slide into population decline back around 1990. Western Europe was next, and for years has been feeling the effects of a falling population. Among emerging markets, Russia is already there, and China’s long-standing one-child policy will see it grapple with a shrinking head-count starting in 2015. Only the US stands apart, having maintained an organically growing population in the post-war period.

Canada is on the cusp of demographic change. 2016 is our magic year: according to the medium-case projection made by Statistics Canada, the population aged 15-54 will begin a 5-year decline in 2016. That may just be a segment of the population, but it forms the bulk of the active labour force. Exporters I speak with across the country have for years noted the difficulty they have had hiring skilled workers. If an upsurge of global growth is on the way, current angst could be mere birth pangs. If so, what can be done to bridge the growing gap?

Immigration. This policy is as old as modern Canada itself. It will continue to be an extremely important policy measure going forward, and in very recent years has capitalized on the misfortunes of countries more affected by the global crisis. Going forward, things may not be as easy. As growth resumes, global labour constraints will increase the competition for workers, especially the highly-skilled sort.

Accreditation. Attracting and retaining skilled workers from the rest of the world depends on our ability to employ them in fields of work where they can make their greatest contribution. Coordinated efforts to enable and accelerate the accreditation process would pay immediate dividends in the economy.

Retention. Labour force participation in Canada typically drops off in the 55-65 age category. Raising average participation with creative worker retention programs would go a long way to stemming the drop-off in the Canadian working population.

Education. Looming labour shortages have increased the urgency of matching Canada’s education programs to core business needs. Far from abandoning the eclectic range of programs offered, it likely means some shift the mix of graduates to better match domestic business requirements. It likely also suggests the need for business-friendly graduate integration programs, and thinking carefully about life-long learning.

Mechanization. This used to be a scary word, but no longer. If you don’t actually have labour, then using robots, other machines, 3-D printing and the like isn’t labour substitution, but a survival strategy for preservation of production, and moving labour up the value-spectrum.

Internationalization. This sounds scary too, but perhaps it’s one of the more ready-made solutions. If other means of boosting labour supply fall short, why not grow our labour force outside of our borders – that is, import labour without moving it? In a labour-constrained economy, producing outside of our borders may prove to be one of the more effective ways of preserving domestic business and the jobs it generates. Not convinced? It may come as a surprise that the economy facing the largest net labour constraint on the planet – China – seems to be an aggressive pioneer in this form of labour-augmentation. If China can do it ...

The bottom line? As growth picks up, global – and Canadian – labour constraints will become more evident. It can’t hurt to be ready with a ‘survive-and-thrive’ strategy. It would be a shame to have to lose business to those who are better prepared.


JULY 2018

Vol. 12 - No. 12


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