dividend from demographic change. This has now evaporated....21
That helps to clarify how we paid for our massive expansion of the state. We borrowed, of course, and ran up an impressive national debt22 in the process as we consumed public services for which we were unwilling to pay commensurate taxes. But just as important was the demographic dividend Foot describes.
Its evaporation coincided with our worsening fiscal position, with our need to improve productivity (which gave birth to free trade with the Americans) as well as with increasing resistance to abusive welfare policies that had allowed many people to escape working. So the first mini-wave of painful adjustment brought us trade opening, the battle to defeat the deficit at both the federal and provincial levels, and a wave of welfare reform at both the provincial23 and federal (Employment Insurance reform and reductions in transfers to the provinces to finance welfare) level. Yet that was during a period when the labour force was still growing faster than the population in general, although the gap had already closed considerably compared to the sixties and seventies. When the next wave of demographic change hits, that first mini-wave of change will look like glory years.
We are already suffering its first early ripples, even though the big wave is still several years away. Starting in 2011, population will grow faster in Canada than the labour force, and that trend will continue for forty years. Already today, after nearly fifty years of the labour force growing by an average of 1 per cent a year every year (and often much more), we are in a period when it is growing at half that rate. By 2016, a few short years away, the number of net new workers entering the workforce will be zero and will be slightly negative for a decade after that. We are teetering on the edge of a demographic cliff, and we have one foot out in the air.24
Help Wanted
Labour shortages on a massive scale are so foreign to the Canadian experience that it may be hard for people to grasp what it may mean. The problem is made even more difficult by the fact that we are in the midst of an economic downturn that is squeezing employment in many parts of the country.
Yet the current slowdown, as painful as it may be, is nothing more than one of the ups and downs that all economies experience from time to time. That’s why it is referred to as a cyclical downturn. Imbalances (in this case too much debt) build up and have to be fixed. But once fixed, we return to growth and almost invariably end up surpassing previous high-water marks of income, employment, and growth. There is little reason to think this downturn will be materially different.
The point here, however, is that a cyclical downturn such as we are experiencing today can temporarily mask much deeper and more profound changes. The coming labour shortages are a good example. The demographic changes that I have described are not cyclical; they are not the result of short-term ups and downs. They are deep changes in the very structure of our population, changes that will outlast downturns and upticks. In fact, population aging is likely responsible for the fact that unemployment in this downturn is actually quite mild compared to earlier recessions at the height of the Boomer wave. The unemployment rate in mid-March 2009 was 7.7 per cent. To put that in perspective, the unemployment rate for the quarter century from 1974 to 1999 was always higher (8.1 per cent in 1990 was the lowest during the period). Moreover, during a similar worldwide recession in the early 1980s, the Canadian unemployment rate was in double digits for four years (1982, 1983, 1984, and 1985), peaking in 1983 at 12.7 per cent. We haven’t seen double-digit unemployment since 1994 (10.4 per cent).25
Prime Minister Stephen Harper has been quite forthright about the fact that the current downturn is merely masking a much more profound social transformation. In a speech in London, Ontario, on March 13, 2009, he said, “As the world struggles with the effects of global recession, we as Canadians are looking ahead. Despite the rising unemployment we see today, the demographic reality is this: as soon as this global recession ends, our country will face a long-run challenge of labour shortage.”26 Many others have made the same point, including those responsible for the Atlantic fishery, traditionally the employer of last resort in the highest unemployment region of the country.27
If we really want to see what the future has in store for us, we have to look back to conditions just before the downturn. We do not have to wait until 2016 to see how Canada will be changed by our new population circumstances, because those circumstances have already begun to make themselves felt, even if the change is being masked for a brief moment by the downturn.
Perhaps the newspaper reports28 a couple of years ago of a proposal to build a new pipeline in Alberta did not catch your eye. After all, what is there new about another pipeline in Alberta? Nothing. Or at least so it appears until you realize that this pipeline is not to take oil or gas out, but to pipe a very light oil (“diluent”) in. The purpose? To dilute the heavy oil extracted from the oil sands to allow it to be piped out to places where the labour force is available to build and operate the plants needed to process it. Even in this lull in Alberta’s super-powered growth, oil sands giant Syncrude is having difficulties recruiting the workers that it needs and was on a major recruiting drive in Atlantic Canada in February 2009.29 And even though unemployment has undeniably risen in Alberta, that province, along with Saskatchewan and Manitoba, continues to have the lowest unemployment rate in the country.30
In Brandon, Manitoba, in order to get the workers needed to operate its meat-packing plant for several shifts a day, Maple Leaf Foods imported workers from Mexico and Colombia, to whom the winters must have seemed a rude shock. In PEI, there were dozens of Russian guest workers at a fish processing plant, and there were requests for more. There is now discussion about closing down fish plants for want of workers, a trend that is set to accelerate. On current demographic trends, unemployment in Nova Scotia will, in a few short years, have fallen to 3 per cent, regardless of the recession of 2009–10.31 In response to requests from businesses across the region, every provincial government in Atlantic Canada now has an immigration policy. Under federal-provincial nominee programs in virtually every part of the country, needed workers can be fast-tracked.
Until 2008 I was a partner in a restaurant in Halifax, and our biggest single challenge, bar none, was to find the workers we needed, an experience common to every other restaurant owner we knew. The Canadian Restaurant and Food Association projects huge labour shortages throughout the industry in the years ahead, again despite the gloom of 2009.32 It is an industry, like many other services, that cannot be outsourced or offshored to China or India, but must be done by people right here in Canada.
The average truck driver in Canada falls into the 50- to 55-year-old range (and is as old as 70 in some regions)33 and everyone is increasingly concerned that we will not be able to bring needed goods to consumers because we won’t have the people to drive the trucks to get them where they need to go. Try to imagine an economy in which it has become impossible to move goods from factories and ports to stores and homes.
As you can see, there is no need to wait until 2016 (when the growth in the number of new workers goes to zero) to feel the effects of a tightening supply of workers. Those effects are already here, and they have already affected growth, mobility, wages, and investment. According to a 2006 PricewaterhouseCoopers survey, nearly two-thirds of Canadian private companies said that the shortage of skilled workers was already slowing the growth of their companies.34 In Ontario, where the economy has been battered recently, nearly 57 per cent of business leaders polled that same year, a strong majority, reported that their growth was hampered by labour shortages.35 And according to the Canadian Federation of Independent Business (CFIB), nearly 60 per cent of their members were expressly mentioning labour shortages as an issue of importance to their business.36
And among specific industries, the CFIB’s numbers were even higher. The momentum behind labour shortages has been growing across many sectors, including manufacturing, for several years, and now includes shortages of unskilled as well as skilled workers. A year or two’s increase in cyclical unemployment will not change anything about this portrait
