As the COVID-19 recession continues to destroy jobs and incomes across Canada, some employer lobbyists are complaining that federal government income security programs (like the Canada Emergency Response Benefit, or CERB) are undermining the “incentive to work” and making it difficult to attract workers to their businesses. In this column, originally published in the Toronto Star, Jim Stanford refutes these complaints – and suggests that the CERB is placing desired pressure on employers to improve the wages and hours they are offering to prospective workers.
As health restrictions ease and stores, restaurants, and other services start to reopen, some employers complain they cannot entice workers back to their old jobs. Perhaps their employees changed careers or enrolled in higher education; others may be reluctant to come back while community spread of COVID-19 is still widespread.
It’s another headache for business owners trying to restart after the shutdowns. The President of the Canadian Federation of Independent Business went so far as to declare that Canadian employers now face a “shortage of labour.”
Canada has just recorded the highest unemployment rate in its entire postwar history, so claims of a labour shortage seem far-fetched. The official unemployment rate is 13.7% – and that’s just the tip of the iceberg. Statistics Canada’s broader measure of joblessness (called the “underutilization rate”) is 35%.
In other words, more than one worker in three wants work but can’t find it. That’s as bad as the worst years of the 1930s. What’s in short supply is jobs, not workers.
But employers’ grumbling reflects a genuine issue that will have to be confronted as the economy regains its footing. Even before the pandemic, low-wage service industries (the very ones that shut down first during the pandemic) already faced big challenges recruiting and retaining workers.
According to Statistics Canada data for late 2019, the industry with the most unfilled job vacancies was not engineering or computer science or some other high-tech specialization. It was accommodation and food service: with 77,000 unfilled positions. The next-highest industry was retail trade, with 72,000 vacancies.
Even then, these employers complained about “labour shortages.” But those purported shortages never translated into improved wage offers. Indeed, the average wage offered by hospitality employers for those hard-to-fill vacancies was just $14.35 per hour: the lowest of any industry. Retailers offered $15.60. How curious that the industries with the most job vacancies also offered the lowest wages. Maybe there’s a connection there.
In theory, if something is in short supply, its price should increase. But the laws of supply and demand are suspended whenever employers complain it’s too hard to fill job openings – and then inevitably demand that government do something about it.
These long-standing recruitment challenges were exacerbated by the COVID-19 pandemic. First, workers are understandably reluctant to accept the health risks of serving customers and traveling on public transit while the virus is still spreading. Second, the Canada Emergency Response Benefit (CERB), paying a flat rate of $500 per week, has complicated employers’ low-wage strategies. CERB is not “rich” by any stretch of the imagination: it’s equivalent to less than minimum wage for full-time work. But CERB’s flat-rate benefit reduces the desperation of workers to accept any job, regardless of the wage or the risk. That’s a good thing, not a bad thing.
Employers’ recruitment problems are partly due to stingy wages. But their failure to offer decent, reliable hours is actually the bigger issue. Most retail and hospitality workers are scheduled for inadequate and irregular hours. As a result, weekly incomes are very low: a median of just $450 per week in the hospitality sector. Who wants to return to work and risk infection, for a handful of hours’ work at minimum wage?
Nevertheless, expect to hear a growing chorus of complaints in coming weeks from employers that Canadians have become addicted to “handouts” and lost the incentive to work. Business lobbyists will push Ottawa hard to roll back the CERB, and restore strict requirements on the unemployed to seek and find work – no matter the pay or the risks. Their opposition to income supports is doubly ironic, because without the $146 billion in benefit payments Ottawa provided during the pandemic, business conditions for retailers and restaurants would be much worse than they are.
Employers’ complaints of “labour shortages” are not credible; and a more universal approach to income protection (as partly reflected in the CERB) should be maintained. Ultimately, we must find a better “incentive to work” than compelling people to accept low wages, uncertain hours, and risk of infection on pain of destitution. And by pressuring service employers to improve the quality of the jobs they offer, this pandemic just might have a modest silver lining.