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Opinion: Job vacancy crunch is partly due to aging


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There’s more going on in Canada’s labour market than meets the eye

A woman checks out a jobs advertisement sign during the COVID-19 pandemic in Toronto. A woman checks out a jobs advertisement sign during the COVID-19 pandemic in Toronto. Photo by THE CANADIAN PRESS/Nathan Denette files

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With unemployment at its lowest rate in decades, recent headlines have talked about Canada’s “booming labour market” and the records the labour market is setting in the pandemic’s wake. But while lower unemployment is a positive indicator of the labour market’s recovery, there’s more going on than meets the eye.

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In fact, based on other indicators, Canada’s labour market has yet to fully recover. For example, the employment rate — the share of the population aged 15 or older that is working — remains 0.2 percentage points below pre-pandemic levels at 61.7 per cent (based on average monthly data from January to May, the latest available comparable data). While that may not seem like a lot, it translates into hundreds of thousands of jobs at a time when job vacancies are at record highs.

The big story post-pandemic is that there were approximately 958,000 job vacancies in the first quarter of 2022, nearly double the number in the fourth quarter of 2019, the last before the pandemic hit. Employers are struggling to fill positions across a wide range of sectors and that’s disrupting businesses and supply chains across the country.

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Why is this happening?

As we show in a study published this week by the Fraser Institute, population aging is partly to blame. Between 2019 and 2022, Canada’s senior population (those of us aged 65 and older) grew by 12 per cent or about 729,100 people. (Again we’re averaging monthly data from January to May.) Among this group, however, just 62,680 seniors became employed.

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A few things are happening. Seniors, who have lower employment rates than people of working age, are a larger share of the population today than they were in 2019. Second, the growth in the employment of seniors has not kept pace with their population growth. As a result, despite a robust recovery in employment for working-age Canadians, whose employment rate has more than recovered and in fact is now at its highest on record, the overall employment rate remains below pre-pandemic levels.

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Unfortunately, there are more challenges ahead. According to Statistics Canada, seniors’ share of the population will increase from 19.0 per cent this year to 22.5 per cent by 2030.

While some elements of this demographic challenge are beyond government’s control, certain policies aren’t helping. For instance, the claw back of retirement income supports, including Old Age Security (OAS), the Guaranteed Income Supplement (GIS) and the Registered Retirement Savings Program (RRSP), reduce the payments seniors receive as they earn additional income, effectively acting as a tax on — and disincentive to — work.

There’s more going on in Canada’s labour market than meets the eye. While the unemployment rate is indeed at historic lows, Canada’s aging population has helped reduce the employment rate, which has coincided with record job va­cancies. Absent policy reform, as the population continues to age Canada’s labour market challenges will only get worse.

Alex Whalen and Tegan Hill and policy analysts with the Fraser Institute.

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