Debunking The Labour Shortage Myth
In recent months I've heard this supposedly imminent event mentioned plenty. Like last week in an article by Yahoo Canada HotJobs, an online job bank ('As the job market continues to grow, employers should be aware that the much discussed coming labour shortage could significantly impact their business.") In a report from the Canadian Council of Technicians and Technologists ('Canada Faces 'Worst Ever' Labour Crisis). Even over lunch with colleagues from the human resources field, who opined that the 50+ crowd will soon be in such demand again that companies will have to accommodate their return.
Would that this were all true. It'd be so great to see a return to the days when employees had more power. Like in the DotCom boom, where employers were forced to woo job seekers with better pay, flexible hours, and less threat of downsizing.
Unfortunately, the labour shortage myth bamboozles us with voodoo mathematics. For example, predictions of a shortage are mainly based on a projection that, in the next five years, close to a million members of Canada's aging workforce will retire, according to the Canadian Labour and Business Centre.
Let's put this into perspective. Each year, for the next five years, 200,000 Canadians are expected to retire. And this is supposed to make employers battle one another like Sumo wrestlers when searching for new talent.
Don't think so. Not when you look at past trends. About 150,000 people retired over each of the last five years, yet the labour forced managed to grow, even after figuring in the retirements, by more than 1.3 million people!
Flawed Logic The problem with the logic of the labour shortage myth is threefold. First, the retirement age is rising, up from 61 to 62 since 1998. This will jump dramatically if legislation such as Bill 68, Ontario's Mandatory Retirement Elimination Act, begins to pass. That means a whack of older folk staying in the workforce longer.
There's another major flaw in the logic. The myth focuses on how many people leave the work force via retirement, but ignores the influx of fresh recruits. Included here are all those graduating students, people returning to work after pregnancy or extended illness, job seekers who'd given up but who are taking another crack at it, immigrants who've come to Canada seeking better lives, retirees taking part time jobs, etc. All of which add up to a net increase in the labour force of some quarter million job seekers each and every year. In a country where nearly 1.3 million people are already looking for work.
The third error in the labour shortage argument is the assumption that our economy is motoring along merrily, and the jobs bonanza is just around the corner. When the onrush starts, unemployment will plunge as employers scrounge for available bodies.
This is the ultimate dream scenario if you're downsized or under-employed. Unfortunately it's not likely to happen. Especially given that, of the ridiculously minuscule job growth in Canada this year, most has come from self-employment, or from jobs in the public sector (which are paid for out of our taxes, and can be increased or trimmed arbitrarily by local, provincial and federal governments).
What's Confusing Us So if there's no labour shortage on the immediate horizon, why do many of us think there is? In part, it's due to self-serving press releases and the media's penchant for eye catching headlines.
Case in point, back in January this year a slew of articles, radio bits, and TV segments appeared out of nowhere, featuring news of a pending 'severe labour shortage' nationwide. All of them were quoting a study from Watson Wyatt Canada, a workforce and financial consultancy. Now for the amusing part. While the study does warn of an impending crisis, here's the original headline from the Watson Wyatt press release: 'Canada Faces Severe Labour Shortage, Strain On Pension System, By 2030' (italics added). I'll repeat the salient part -- by 2030!
As a colleague said when I pointed this out to him, 'Geez, Mark, I can barely figure out where I'll be 25 hours from now, never mind in 25 years!' Succinctly put.
Does this mean, then, that we've fallen hook, line and sinker for the hype? Not necessarily. Because there's already a labour shortage in Canada, of sorts. Highly skilled people in certain very specialized areas, such as the more esoteric fields in medical and scientific research, are needed more than ever. So are skilled blue collar folk.
Less so in the more mundane realms. Ironically, the very same Canadian Labour and Business Centre referred to earlier, issued a press release of its own just last month, saying 'Canadian manufacturers are facing a skills crisis unless they take action now to head it off, a new report says.' The report points to the potential retirement of 400,000 skilled employees in the manufacturing sector. Time frame for this emerging calamity? Sometime over the next 15 years! (That's assuming there's any manufacturing left in Canada by then--a tenuous prospect given foreign competition).
All in all, then, it would seem that concerns over too few employees chasing too many jobs is, at best, a flight of exaggerated optimism. At worst, it gives false hope to job seekers at a time when good positions are scarce, and there are hundreds of applicants for every posting.
So with the greatest respect for the pundits who have raised their red flags, here's a mid-year prediction of my own. If anything, the tight employment market will become gradually tighter, what with increased foreign competition, outsourcing, offshoring, and the rise of our dollar against the U.S. greenback. (You can see the effects of this most starkly in the manufacturing sector, where another 12,000 positions disappeared here in June alone.)
On the other hand...maybe, just maybe, they'll still find those weapons of mass destruction.
- 151,000 retired in 2003, and 148,000 in 2002. So, if an average of 150,000 people retire each year, that's 750,000 in a given five year period (that's in today's market, where age 65 retirement is mandatory -- that'd shrink if the retirement age is lifted).
- Every five years, you have about 2.1 million new entrants into the full-time workforce (that is, a brand new crop of people reaching the ages of 20-24, the most likely time for people to be seeking their first full-time jobs) That's about 420k new entrants each year!
- Hence, every five years, you have a net increase of 1.35 mm new domestic workers, most of whom are seeking full time jobs (or approx. 270k per year).
- Add to this immigration of 250,000 people per year, of which at least 100k are seeking work, and that adds another 500,000 new jobseekers every five years.
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