Canada’s wage crisis: Jobs are available but workers want better pay

Forget the labor shortage — there is a wage shortage, according to a prominent Canadian economic analysis of new Statistics Canada data.

According to the analysis, two thirds of the job vacancies offer wages that are too low to attract applicants.

David MacDonald, chief economist at the Canadian Center for Policy Alternatives, analyzed data from a new temporary workforce survey question that asked workers what the lowest wage they would accept. He then compared this data to available published jobs, and found that 63 percent of job vacancies do not meet workers’ minimum wage expectations — in some industries, that much.

This disparity is influenced by some factors, MacDonald said. One is inflation, which has pushed up the cost of living at a rapid pace, causing workers to seek higher wages in order to make ends meet.

But workers also have more power in the labor market than they did in the past. MacDonald said that instead of unemployed workers competing for jobs, employers compete for workers.

“The tables have turned,” he said.

Often, when there is a perceived shortage of workers, MacDonald said, there are calls to “resolve” the shortage, usually by bringing in temporary foreign workers who want to work for lower pay. But this data shows that there is no shortage of workers, just a shortage of decent jobs, he said.

“They’re looking for jobs, but they don’t want to work for peanuts and they don’t want to work in a shoddy job,” MacDonald said.

Over the past decade or more, MacDonald said, the number of unemployed Canadians looking for jobs has been much higher than the number of jobs advertised — for most of the past decade, there have been an average of six job seekers for every vacancy, which has shrunk to 3.5 for every job vacancy. Posted in early 2017.

This was the case during parts of the pandemic, but in the summer of 2021 the ratio essentially dropped to 1:1, which is true a year later. In July 2022 there were just over a million job seekers, and in June (the last month for which data is available) there were just over a million postings.

This was not due to the influx of unemployed workers, MacDonald said, but because of a wave of new jobs. Before COVID-19, there were typically 300,000 to 400,000 job vacancies per month, and by April 2022 there were over 1 million jobs. By comparison, about 1 million Canadians are out of work, about the same number as before the pandemic.

This actually sounds perfect in theory: a million jobs and a million willing workers. So why aren’t these workers filling the vacant positions?

In many cases, MacDonald said, this is because jobs pay far less than they are willing or able to work for. With fewer workers applying for each job, he said, they can be more selective because they are in high demand.

The Labor Force Survey for February and March by Statistics Canada asked unemployed Canadians about their desired sector and the minimum wage they might accept, while the Jobs and Wage Survey asked employers what they offer in job vacancies.

He said about 14 percent of jobs open in the accommodation and food service industry, where the median advertised wage is $15.85 an hour. But workers in those industries are looking for a minimum of $18.84 an hour — a $3 difference.

Another 10 percent of hires are in retail, where employers offer a median pay of $17.85 — but workers are looking for $23, a difference of more than five dollars.

“The gap is huge” between workers’ expectations and what employers offer in these major industries, MacDonald said.

“These industries are not understaffed, they are plagued by employers who are unwilling to raise wages enough to make it worth the worker’s time,” he wrote in the report released Monday.

MacDonald said the other third of industries, where the wages on offer are high enough to meet workers’ expectations, may have a different problem. For example, 15 percent of hires are for healthcare jobs.

“Closed emergency rooms and backlogs of surgeries are evidence of the fact that attracting workers, especially highly skilled nurses, is very difficult at the moment,” MacDonald wrote. For these workers, working conditions are a major part of the equation, not just decent pay, and many of them have left the industry altogether.

“In such a case, which represents about a third of all vacancies,” he said, “there may be more justification to say that there is a shortage of workers with the right qualifications.”

With a potential recession looming, MacDonald said, the scales may once again tilt in favor of employers, with more workers available and fewer jobs. But at the moment, it is the workers who have the power.

MacDonald said that in industries where these workers are most needed, especially in industries where corporate profits are high, workers may get what they ask for. But in industries with lower margins, such as food services, jobs may still be vacant.

“Some business models will be more amenable to raising prices than others in order to afford higher wages,” MacDonald said.

But MacDonald worries that with interest rates rising rapidly in an attempt to cool the economy and inflation, that level of labor power won’t last long.

“There have been a lot of extraordinary events in the past two years and this is another extraordinary event where we see parity, in essence, between unemployed workers and job placement,” he said. “We’ll see how long it lasts.”

If the economy worsens, some employers may eliminate these jobs, instead finding other ways to get the job done. MacDonald explained that this would lead to a lower vacancy rate again.

Perhaps that will change if companies become less optimistic. They may be less likely to post jobs, even though those jobs haven’t really been filled in the last year.”

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