Canada’s aging work force root of labour crunch: ‘This was always going to bite us’

When Dan Gallagher looks around his company, he sees a lot of retirement parties in his future.

Although it’s not something he formally tracks, the CEO of Mikisew Group _ a Fort McMurray, Alta.-based company specializing in oil sands site services, maintenance, logistics and construction _ knows he has more employees nearing the end of their careers than just starting out.

“I walk around our store, and around our field services workforce, and I can clearly see that demographic. It’s getting old,” Gallagher said.

Its implications make him nervous.

Mikisew Group is already struggling with a labor shortage, recruiting as far away as Australia just to keep its fleet of heavy equipment running. And basic demographics suggest the company’s problem is going to get worse, not better.

“The ratio of apprentice to older worker here has been so low for so long that there just isn’t the banking power to offset the people who are leaving,” says Gallagher.

Experts have been warning for years of a looming wave of retirements as baby boomers — those born between 1946 and 1964 and Canada’s largest generation by size — age and begin leaving the workforce in droves.

This country’s labor force growth rate has been trending downward since 2000, but the trend has accelerated in recent years. This “grey wave” has been on the horizon for a while, but experts say it is now crashing ashore.

According to Statistics Canada, more than 1.4 million Canadians entered the ranks of those aged 55 and over between 2016 and 2021.

Last year alone, one in five Canadians of working age was between the ages of 55 and 64 – a record high in Canadian census history.

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“It’s like a truck pulling up in your rearview mirror. You see it there, and it’s moving slowly, and then you look away for a while and suddenly it’s right on your tail,” says Mike Holden, chief economist of the Business Council of Alberta.

The coming of the gray wave is happening at the same time that businesses of every size, in every industry and in every province are complaining about labor shortages. As of the second quarter of 2022, there were more than a million job vacancies in Canada _ the highest quarterly number on record.

It is no coincidence. While the COVID-19 pandemic did disrupt labor markets, it bore much of the blame for continued labor shortages.

But Canada’s labor force participation rate is currently only slightly below where it was pre-pandemic. In fact, young and middle-aged Canadians have returned to the workforce at levels close to or well above those observed in 2019, a Scotiabank report shows.

The same report says the decline in overall labor force participation that does exist is entirely due to Canadians aged 60 and over leaving the labor force. This means that the real root of the current problem is Canada’s aging population, and this has broad implications for the country’s economy.

“I think the most important thing that gets overlooked is, what are the consequences of these labor challenges?” says Patrick Gill, senior director of the Canadian Chamber of Commerce’s business data lab.

He points out that about one in three Canadian businesses (36 per cent) already report that they are currently facing a labor shortage. This figure rises to around 45 per cent within the manufacturing and construction industries and 58 per cent in the food and accommodation sector.

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“This means that everyone works more hours, and this ultimately affects quality of life. This means slower growth, and it is also a factor in supply chain delays.”

Concerned business groups have suggested a number of possible solutions to the looming demographic crisis, from boosting immigration levels to finding ways to keep older Canadians in the workforce longer. (Some observers have even suggested that the government should raise the age for Old Age Security, partly to discourage early retirement).

But even a significant increase in immigration will not be enough to stem the coming tide, says Rafael Gomez, director of the University of Toronto’s Center for Industrial Relations and Human Resources.

The last of Canada’s baby boom generation will turn 65 in 2030, and once this cohort is completely out of the workforce, the working-age population _ those aged 15 to 64 _ will make up a smaller share of the overall Canadian population.

“It’s always going to bite us,” Gomez says. “Demographic trends are not easy to shift in a short-term way. In fact, it’s true that we’re going to see a decline (in the workforce) for 20 years.”

While governments must use every policy lever at their disposal to address labor shortages, says Gomez, employers must also accept the fact that the challenges they currently face in filling vacancies are not going away.

“This is your new normal. And even if the economy goes down, it won’t change the working conditions,” he says.

“We’re entering a time where we’re going to have a younger workforce _ that will do more, be asked to do more, be bid for and be competed against,” adds Gomez.

“Labour is going to be very difficult to find and employers are going to have to work hard to attract employees.”

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