A recent study from the Canadian Federation of Independent Business titled “Labour shortages are back with a vengeance” found that 54% of businesses could not find all the staff they need, with only 42% reporting being able to fully staff their operations.
Some small businesses have made changes to increase their competitiveness in the job market, such as increasing wages, but only 22% of those who increased wages found it effective. Almost two-thirds (63%) of businesses reported that a lack of candidates with the necessary skills/experience was the main bottleneck to their labour problems. While jobs may be available, employers still need to have employees with the skills to meet their business’ needs.
Lack of candidates, qualification mismatches and labour market disruptions continue to drive labour shortages.
Small businesses were already experiencing a significant labour shortage at the beginning of 2020, and the pandemic has only exacerbated the situation. Industries that were locked down for prolonged periods, like hospitality, have seen a mass exodus as workers upskilled or switched to other jobs or sectors.
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Social services and hospitality saw a respective, 37% and 48% of their employee’s switching fields. While virtually all sectors have been facing major demographic upheavals—nearly 24% of small businesses reported that employees switched industries due to the pandemic—the major concern now is that there are currently not enough new workers coming in to replace those who are retiring or switching fields.
COVID-19 lockdowns and restrictions hit small businesses hard. Now that most of the country is opening back up, we need governments to address labour shortages quickly to ensure a strong recovery.
Wage increases have not been the expected silver bullet for retention or enticing new employees
More than four out of five businesses (82%) experiencing staffing shortages have already raised wages in their business. While this worked for some, half reported that they did not find it helpful in attracting workers. These businesses said that they received no qualified applicants, or no applicants at all for positions available at their business, even after raising their wages.
Business owners are in a tough position and have to balance the expectations of job seekers with their ability to remain competitive
One reason for the lack of applicants is that the distribution of job seekers to jobs in different education categories is imbalanced. In Q1 2021, 22% of the unemployed had a level of education equal to or higher than a bachelor’s degree, while only 15% of the market requires this level of education. Currently, the majority of job vacancies in Canada are concentrated at lower education levels. However, job-seekers that wish to come to Canada are at higher education levels—leaving a mismatch in skills and expectations. This overqualification can leave job-seekers to expect different working conditions—salary or role— then what an employer may be prepared to offer.
The Temporary Foreign Worker Program has the potential to be one of the best solutions to the labour shortage
The most successful solutions in dealing with the shortage of labour reported were increasing the level of automation used in the businesses (81% success rate) and the Temporary Foreign Worker Program (TFWP) to bring in additional workers (52% success rate). However, while the success rate of the TFWP is comparatively high to some of the other methods, the utilization of the program is comparatively low. Only 16% of small businesses reported having used the TFWP. The low utilization to high success rate ratio suggests that temporary foreign workers could be a promising solution for Canada’s labour shortages, especially if the program were expanded to other sectors. Opening the TFWP to a larger subset of the business community would allow for a tempered influx of labour—while retaining the necessary skills to match what the employers and what the employees are looking for.
The TFWP also allows for those businesses in the most direct need to apply for additional workers themselves, without having to worry about competing for the labour pool directly. Throughout the pandemic, the shifting of workers has added a great deal of competitiveness to the labour pool. For many positions in Manufacturing, Agriculture, and Professional Services (e.g., information technology, copy writing, mechanics), it is much harder to compete for the same labour. By having a direct application pool these sectors and others will be better able to find the employees that they need.
For the TFWP to become a key solution, certain fixes to the TFWP should be considered. Currently, the TFWP is very time-consuming—and expensive for most small businesses to use, costing up to $1,100 per application and potentially taking months for processing if not longer. This price point can marginalize some businesses from participating in the program before they have even applied, as they are not guaranteed to be matched with a temporary foreign worker even after paying for the Labour Market Impact Assessment (LMIA). For businesses in the hardest-hit sectors, any additional barriers or delays mean they cannot look to hire temporary foreign workers easily, especially at a time when they need a solution to their staffing problems now.
The government should make the following changes to the TFWP to help address the immediate shortage of labour within Canada:
- Improve and simplify the process for the Temporary Foreign Worker Program and permanent immigration system to bring foreign workers to Canada faster, including developing a pathway for permanent residency for these workers.
- Ensure that job-seekers match the demands in the job market found within Canada to create a good fit between immigrants and the positions they are coming in to fill.
- Open the TFWP to all types of jobs and all sectors, regardless of the prevailing regional unemployment rate as a temporary measure to address the immediate labour shortages caused by the pandemic.
- Establish a Trusted Employer system to streamline the application process for Canadian companies hiring temporary foreign workers to fill labour shortages and make sure that smaller firms with lower-wage positions are also able to qualify.
- Temporarily waive employer fees for small business owners seeking to use the TFWP.
Small businesses have a long and steep climb to recovery and having the right workers in place or other tools to address labour shortages is a big part of that. Small businesses have been doing all they can to attract workers, but they need the government to do their part by adopting policies that increase productivity, connect job seekers with employers and do not put the cost of hiring out of reach for businesses.