Where have all the workers gone? Don't blame COVID, economists say

Canada is in the throes of a serious labour shortage, but economists say it's not all the pandemic's fault — it's the inevitable culmination of a seismic demographic shift decades in the making.

"It's the slowest-moving train on the planet. It was predictable 60 to 65 years ago, and we have done nothing about it," said Armine Yalnizyan, an economist and Atkinson Fellow on the Future of Workers. "We knew this transition was going to happen."

The numbers behind all those help wanted signs are startling.

According to Statistics Canada, the unemployment-to-job vacancy ratio — a key measure comparing the number of Canadians looking for work to the number of available jobs — is currently hovering at a historic low in every province. In fact, the ratio is significantly lower now than it was before the COVID-19 pandemic began.

The reason isn't that there are fewer jobs opening up — remember the help wanted signs? It's that there are fewer workers available to fill them. And the reason for that, economists say, can be traced back to the post-war baby boom.

While those 55 and older have been steadily exiting the Canadian workforce — an exodus that some economists believe was accelerated by the pandemic, as many older workers opted for early retirement — there simply aren't enough younger workers to replace them.

In fact, participation in the workforce among those ages 25-54 approached 88 per cent in May, up more than one percentage point from February 2020, before the pandemic had taken hold in Canada.

"That's what happens when a baby boom finally starts exiting from stage left, and there's not enough people entering from stage right," Yalnizyan said. "We've actually got a higher share of the working-age population working than ever."

That contradicts the theory that some sort of "great resignation" among working-age Canadians, many of whom took advantage of pandemic income supports, is to blame for all those job vacancies, according to Ian Lee, associate professor at Carleton University's Sprott School of Business.

"I just found that very suspicious because unless you're independently wealthy … most of us have to have income to survive," Lee said. "It just didn't make sense."

"Your first suspicion as a labour economist is, well, are people just not in the labour force anymore?" said Gordon Betcherman, professor emeritus at the University of Ottawa's school of international development and global studies. "But that's not the case. It's back up to levels that we had before COVID."

Instead, economists say the data points to the emergence of an employees' market where workers are enjoying an enormous amount of leverage over employers.

"It's undeniable this trend we're in where the balance between job seekers and job vacancies has definitely shifted," Betcherman said.

According to Statistics Canada, that has led to virtually unprecedented labour shortages across nearly every employment sector.