Thursday, November 05, 2009

Atlantic Canada's aging population and expected labour shortages

Over at my blog I've linked to a recent study by the Canadian Federation of Independent Business, "The Future of Atlantic Canada: ealing with the Demographic Drought", by Amelia Demarco and Bradley George.

CFIB members have identified several advantages to operating a business in Atlantic Canada. They include the ability to balance work and family life, the region’s proximity to the U.S. market, and the perceived lower cost of living relative to other parts of Canada. Atlantic Canada also offers a highly skilled and educated workforce, with some of the lowest turnover and absenteeism rates in the country.

Unfortunately, the out-migration of youth, an aging population, and fewer labour force entrants due to low immigration levels and declining birth rates have all contributed to a growing labour shortage in Atlantic Canada. With fewer young people entering the workforce, employers are doing more to attract and retain this group, as well as seek other alternatives. In fact, the region’s average weekly wages have increased faster than the national average, as business owners try to compete for quality employees.

While the economic downturn may have temporarily eased labour shortages across the country, the problem is expected to worsen as soon as the economy recovers. As governments unveil multi-million dollar stimulus plans to create jobs, firms hoping to successfully compete for government contracts must first ensure they have enough skilled employees to carry out the work.

While the entire country faces demographic challenges, the problem is more acute in Atlantic Canada and will reach a critical point in the region sooner than in other parts of the country. In fact, Atlantic Canada’s population is aging faster than any other region in Canada; it has the lowest fertility rates in the country, attracts the smallest share of Canadian immigrants, and has the highest out-migration rates in Canada.

These factors will, as the report notes, cause serious issues, is indeed causing serious issues.

Between 2004 and 2006, approximately one in five small business owners in Atlantic Canada reported a longterm vacancy. In 2007, this number increased to nearly one in three.

In terms of the type of job that employers have the most difficulty filling, approximately four out of 10 small business owners in Atlantic Canada are in greatest need of employees with a community college degree or apprenticeship training, such as carpenters or mechanics. Another 45 percent of employers need employees with secondary school or specialized occupation specific training, such as salespeople or machine operators. More than half of business owners need employees to fill positions requiring no post-secondary education, including many entry-level jobs.

The dramatic increase in long-term vacancies demonstrates that Atlantic Canada’s labour shortage troubles are far from over. While cutbacks and job losses, stemming from the current economic downturn, have shifted focus away from the problem temporarily, they are merely delaying the full effect of the labour shortage.

In fact, a number of research reports have attempted to anticipate the effects of labour shortages in Atlantic Canada. For example, a recent study by the Atlantic Institute for Market Studies (AIMS) predicts that by 2016, the number of available workers will be smaller than the number of available jobs and by 2026, approximately 12.5 percent of jobs will be vacant in Nova Scotia. A similar study by the Policy Research Centre at the University of New Brunswick predicts that the province’s labour force will begin to decline as soon as 2011. And in 2007, the Newfoundland and Labrador Skills Task Force released a report that predicted serious skilled labour shortages for many of the province’s large-scale development projects in the coming years.

The consequences of this will be severe, with the erosion of the workforce combining with Atlantic Canada's traditionally low productivity growth relative to the Canadian average to make convergence a practical impossibility. Increaisng immigration and diminishing emigration to other provinces are the authors' main recommendations, but the plausibility of actually implementing this program given the existing economic gap and the tendency of immigrants to cocnentrate in major cities is slim.


Colin Reid said...

Immigrants don't have to concentrate in just the biggest cities. For instance, from what I've read the recent wave of migration to the UK from new EU countries is fairly evenly spread across the country's towns and cities.

The problem seems to be more that Atlantic Canada is not considered an appealing place to live by Canadians and immigrants alike. The reasons for this may be more complicated than just total availability of jobs.

Also, I'm suspicious of projections about the number of 'vacant' jobs. If it gets this bad, surely many companies will simply relocate to another province?

David said...

What exactly is the "problem" here? I read the study and nowhere does it actually say what the negative economic effects of this "labour shortage" are expected to be! In fact, it only mentions benefits (rising wages, falling cost of living, affordable housing).

It then goes on to mention the advantages of Atlantic Canada in general, most of which are the byproducts of a well-educated, close-knit, homogenous population. It complains about the lack of productivity while citing as a positive the "relaxed pace of life."

So ... it was a bit of a surprise to read the recommendation on page 16 that the area initiate larger scale immigration of low-skilled (i.e. poorly-educated) foreign workers as a "solution" to the "problem," with no attention given to the effect that a large influx of low-skilled foreigners would have on the the quality of life factors the study had just listed.

I am actually very suspicious, like Colin, of the "vacant jobs" statistic as well as the whole "labour shortage" concept in general. If the population of Atlantic Canada is falling, the job market will begin to contract with it at some point. The situation will resolve itself naturally. If, for example, a small business owner cannot find someone to work for him, such that his business is no longer viable -- he can 1) relocate his business, or 2) take the highest-paid job offered by another labor-starved owner, thus neatly "rolling up" the labor market. The projections in the study therefore seem unlikely to me as well.

Randy said...


The tendency of immigrants in Canada to concentrate in urban areas--first the three metropoli I mentioned, then in Ottawa and the Calgary-Edmonton corridor and perhaps southern Ontario generally, and at a distance regional centres like Québec City, Winnipeg, and, yes, Halifax--is something that's been well-established, for whatever reason. At this stage I don't quite know how this can be changed, efforts like Prince Edward Island's notwithstanding.

The main problem is that with a shrinking workforce and unimpressive productivity growth, without anywhere near enough human capital the Atlantic Canadian economy will drift further behind Canadian and North American averages. Of the four provinces, the only one that has made an economic leap forward is Newfoundland and Labrador, and that was precipitated by and oil-drivene conomic boom (and perhaps the emigration of large numbers of people from unproductive fishing areas et al.). In Canada, so far, this relative lag has resulted in extensive transfers of wealth from richer provinces to keep services up to spec, but I'm skeptical as to how long this can continue.

Net emigration, as Colin notes, also plays a major role. There just aren't enough high-paying jobs in the area already, and employment strategies haven't focused on increasing productivity so much as they have on subsidising existing jobs or creating make-work, employing people on roadwork, say, or keeping people involved in fishing and so perpetuating the strategies that led to the collapse of cod stocks. Perhaps half of the region's population lives in rural areas, outside of communities with higher levels of productivity and disproportionately invested in First Wave industries. Again, wastage.

As for the quality of life issues, Atlantic Canadian lifestyles often have a lot of good points to them, true, but my overall impression is that a goodly share of the migrants who do come do so with the intent of being economically inactive, as retirees or vacationers. Human capital issues also come into play here.

The foreign labour would come in handy in creating new wage pressure, since the makework tendencies I mentioned above tend to manifest themselves in high prices for products which are often of low quality: New England and Icelandic fish products tend to be of substantially higher quality than Atlantic Canadian ones despite federal subsidies which let Atlantic Canadian firms have better machinery.

So. With labour used very inefficiently, net emigration continuing to whittle away at the workforce, many of the incoming migrants not being interested in participating in the economy, and barring the sort of resource-driven economic boom that has mixed effects in the long term, the regional economy can be expected to regress still further relative to the rest of the continent and could create a cycle of economic decline leading to emigration leading to economic decline . . .

Toronto real estate agent said...

Well, as Colin Reid said immigrants don't necessarily have to concentrate on big Canadian cities. Also, if our population indeed is getting old, we will find out in few years that we need the immigrants very much.