A new report shows Canada losing $13B a year due to labour shortage

Industries in Canada

Canada’s economy hit nearly $13 billion last year due to a widespread labour and skill shortage in the manufacturing industry, as found in a new report by the Canadian Manufacturers and Exporters (CME).

The CME’s annual labour survey of 563 manufacturers across 17 industries in Canada revealed that nearly two-thirds of respondents have lost or turned down contracts and experienced production delays, all because they couldn’t find the needed workers. These businesses reported $7.2 billion in penalties and lost sales.

The CME reports that the total cost of these issues, including penalties and lost sales, has amounted to $7.2 billion. Additionally, 43% of companies have had to postpone or cancel important capital projects due to these shortages, costing them an additional $5.4 billion in lost investment.

The pandemic has had a lasting impact on the labour market in the industrial sector. For the past two years, more than 80% of manufacturers have reported facing labour and skills shortages – a significant increase from 60% in 2020 and 39% in 2016.

Before the pandemic, the sector was already struggling with labour issues, said Dennis Darby, president and CEO of CME. However, the pandemic has worsened these difficulties, and they show no signs of stopping anytime soon.

“As the pandemic eased from a societal point of view, the concerns about labour shortages were just as strong as ever,” he said.

 Also, In the report, CME chief economist Alan Arcand said two main factors are causing the shortage: an increasing number of baby boomers retiring and a lack of interest in manufacturing jobs from young Canadians. He said that during the pandemic, more workers retired than usual while immigration rates decreased, leaving manufacturers scrambling to fill the gaps. Vice-president of window company Loewen, Todd LeRoy, confirmed this by saying that he’s seen firsthand how the pandemic has exacerbated the already existing issue.

“As well, the last few months have seen a robust job market and just not enough people to fill open positions,” said LeRoy in an emailed statement.

“The birth rate simply cannot keep up with our demand.”

According to a recent study, companies need help finding employees with the appropriate technical skills for certain positions. The areas where this is becoming most problematic are skilled production jobs that require experience with welding, machining, and industrial mechanics. Furthermore, businesses also need help filling general labour or production positions and supervisory or management roles.

Darby is concerned that the shortages, especially of skilled labour, are becoming chronic and that the issue can’t be fixed overnight. It takes time to learn a trade, so this problem will likely not be resolved shortly.

“The pipeline of new entrants has been slow through the pandemic,” said Darby.

In addition, he adds that the sector needs to hire more underrepresented groups, such as women, people of colour, Indigenous people and newcomers.

CME is asking the government to help with the worker shortage by increasing the Canada Job Grant and making it permanent, providing tax credits for employee training and equipment purchases, and speeding up the temporary foreign worker program.

Darby said the shortages had shown the need for more automation.

He said that general labour and production work is ripe for more automation, but it’s much less likely to help with the skilled trades gap. CME represents over 2,500 companies across Canada, most small and medium-sized businesses.

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