Commentary,  Employment & Unemployment,  Wages

Employer Complaints of ‘Labour Shortage’ Lead to Attacks on Income Security

Employer organizations are stepping up complaints about a purported ‘labour shortage’ that they say is holding back Canada’s employment recovery. These complaints are typically accompanied by demands that government push more workers into the labour market – by cutting back income support programs (like Employment Insurance and the CRB), and increasing inflow of temporary foreign workers (hired in insecure roles with limited protections and low wages). In this commentary (originally published in the Toronto Star), Centre for Future Work Director disputes whether a labour shortage truly exists (given persistent high unemployment), and argues that improving wages and working conditions are better strategies for recruiting and retaining workers.

Hard Data Does Not Support Claims of Labour Shortage

by Jim Stanford

Relaxed health rules are allowing thousands of restaurants and stores to reopen. But employers are already complaining they can’t find enough workers, especially in hospitality and retail. Some are offering signing bonuses, redistributing tips, and making other special efforts to attract staff.

Employers like to point the finger at government income supports which helped people through the pandemic: like emergency recovery benefits (now extended to October) and expanded eligibility for EI payments. Employers complain these programs reduce the ‘incentive’ to accept low-wage, irregular work in restaurants and shops. Many also want Ottawa to expand the Temporary Foreign Worker program, so they can access low-cost labour from other countries.

To be sure, it is an operational headache for restaurants and stores to reconnect with former employees after months of closure – and they’re all trying to do this at the same time. But the hard data does not support the claim of a generalized labour shortage.

After all, unemployment remains elevated: the latest Statistics Canada report pegged the official rate at 7.5%. And other pools of ‘hidden’ unemployment (including people working very short hours, and people who left the labour force during the pandemic) push the true unemployment rate towards 15%. 

Wages in stores and restaurants remain very low, and are not rising – which should happen if labour was genuinely scarce. In hospitality, for example, the median wage is $15 per hour (barely matching the legal minimum in many provinces), and average weekly earnings are just $500 per week (reflecting inadequate hours of work as well as low wages).

And there is no sign wages are improving, despite anecdotes in the media. To the contrary, wages have grown more slowly in retail and hospitality than the overall economy since the pandemic. Thus the wage penalty for workers in these sectors is getting worse, not better.

When your industry offers less than half the going wage, you shouldn’t be surprised you have trouble attracting workers.  That’s like me offering $100,000 for a Lamborghini (under half the list price), and then crying ‘shortage’ when no-one will sell me one.

It’s no mystery how to recruit and retain a more stable workforce: offer better pay, stable shifts, decent benefits, and improved training and safety. Inadequate and irregular hours are actually a bigger disincentive than low hourly wages (almost half of hospitality staff work part-time). Reorganizing schedules to allow predictable shifts, and more full-time roles, would support genuine career opportunities in these industries, rather than a culture of lousy precarious work.

Other countries have shown that service sector work can offer stable middle-class career paths. Canada could do the same, but only if we prevent employers from taking the ‘easy out’: namely, providing them with still more desperate workers willing to work for any wage. If governments respond to complaints about a labour shortage by cutting income supports or importing migrant labour, that will only short-circuit the improvements in job quality these sectors ultimately need.

Only once did Canada’s economy truly ‘run out’ of workers: during the Second World War, when a massive, government-funded war effort ended the Depression and put every able worker into a productive job. We aren’t anywhere near that situation today – but we could be, if we wanted to. We could launch an ambitious post-COVID national reconstruction plan, featuring massive and ongoing investments in green energy, affordable housing, and human and caring services. That would create hundreds of thousands of jobs, end mass unemployment, and improve living standards in the process.

But creating hundreds of thousands of good jobs is actually the last thing low-wage employers want. That would only make it all the harder for them to recruit cheap, desperate labour. 

In sum, there’s no ‘labour shortage’ in Canada today, nor is one on the horizon. Governments should ignore these phony complaints, and instead encourage employers to respond to staffing problems like any other hard-to-find commodity. When something is truly scarce, smart businesses find ways to use less of it (in this case through automation and efficiency measures). They emphasize quality over quantity. And at the end of the day, they pay more.

In the long run, this will drive productivity growth, innovation, and better jobs. And that’s a good thing, not a bad thing.

Jim Stanford is Economist and Director of the Centre for Future Work. He divides his time between Sydney, Australia and Vancouver, Canada. Jim is one of Canada’s best-known economic commentators. He served for over 20 years as Economist and Director of Policy with Unifor, Canada’s largest private-sector trade union.