Why Canada’s labour market is suffering from pandemic

Since the pandemic, job vacancies in Canada have soared to record highs and jobless rates have gone to historic lows, leaving employers struggling to find workers.

In April, the country's job vacancies surpassed 1 million, an almost 45% jump from a year ago, according to Statistics Canada.

In an attempt to answer this question, CIBC economists Benjamin Tal and Andrew Grantham took a deep dive into the data.

The pandemic has thrown a lot of people out of work temporarily, mostly in low-paying jobs in the service industry. The labour market has recovered fully, but it's surprising that the share of low-paying jobs in overall employment has not.

The economists said that it is not because Canadians are slacking off. Labour market participation has been back to pre-pandemic levels for some time.

The share of self-employment in total employment is still 1.5% less than pre-pandemic levels.

The problem appears to be at its roots, demographic. The trend that was accelerated by the Pandemic is because of Canada s aging population with lower education levels who are reaching retirement and not being replaced.

The increase in immigration over the past year has been driven by young professionals, many of whom are already in the country. They have found higher-paid jobs related to their education because they studied in Canada.

The economists said that the pandemic appears to have caused or accelerated structural changes within the Canadian labour market that are causing high vacancy levels, particularly for low-paying occupations.

Aging demographics, particularly among those with less university education, and immigration driven by new university graduates, have contributed to this trend. There have been a greater proportion of people working in higher-paying sectors and labor shortages in many lower wage occupations because of the result. Why that hasn't been translated into the boost of productivity you would expect is another mystery.

The economists said that the problem could be that sectors in which vacancy rates are high need staff in lower paying jobs to reach maximum efficiency. A lack of baggage handlers, for example, would severely hinder the operation of an airport.

A lower level of experience may temporarily limit productivity, they said.

The economists believe that Canada's labour problems could be eased somewhat in the future as immigration becomes more broad-based again, but only somewhat.

The demographic and education structure of the population suggests that companies in lower paying sectors could have more difficulty recruiting than in the past, resulting in higher wages to incentivize recruitment, they said.