Economists are calling for more immigrant workers to fill job vacancies
RBC economists have issued a warning that businesses across every sector and industry will have to prepare for: Canada’s labour shortage will likely outlive a potential recession in 2023.
The unemployment rate fell to 4.9% in June – the lowest since data collection started in 1976. Now, Canada is experiencing its tightest labour market in more than half a century as it records its highest rate of inflation in 30 years. The rise in wages is doing little to solve the problem, too.
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The working-age population has been shrinking for nearly a decade, with the threat of low workforce participation likely to propel the economy into a state more worrying than a moderate recession. Canada’s working-age population has never been older, Statistics Canada reported, with more than one in five close to the retirement age of 65.
“By the end of this decade, labour force participation is expected to fall to levels not seen since the 1970s,” bank economists Nathan Janzen and Claire Fan wrote in a research note on Wednesday. “The lower the labour force participation rate, the more severe the economic and fiscal strains will be.”
Adding another layer to that concern is Janzen and Fran’s prediction that the Bank of Canada would raise the interest rate to 3.25% by October. However, governor Tiff Macklem reassured the public that the central bank is only front-loading increases to get higher rates out of the way in the future.
“That’ll ease near-term pressure on businesses struggling to hire,” Janzen and Fan wrote. “But the root of Canada’s labour crunch pre-dates the pandemic, and will outlive the next downturn as well.”
Like many other economists, Janzen and Fan have called for Canada’s incoming and existing immigrant population to help fill job vacancies as more seniors head into retirement.
In May, Immigration Minster Sean Fraser revealed Canada’s plans to attract a record number of immigrants and welcome 431,645 permanent residents in 2022, 447,055 in 2023 and 451,000 in 2024 in a bid to provide more qualified workers that businesses are looking for.
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Aside from the infusion of immigrant workers, RBC also urged the federal government to improve childcare affordability and businesses to increase capital spending on machinery and equipment to ease the labour shortage.
“Over the long run, an ongoing flow of immigrants, better integration of their talents and rising capital investment will prove key in successfully addressing the issue of systemic labour shortages in Canada,” Janzen and Fan said.