Closing the labour market gap: Approaches to addressing Canada’s job vacancies
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In a previous blog post, we discussed Canada’s tight labour market and the challenges it poses for policy-makers and the economy.
We highlighted the demographic dynamics contributing to the tight labour market, including an aging labour force and low fertility rates. We also noted some supply-side solutions—such as increasing population size and improving education and training opportunities.
In this follow-up article, we zero in on the growth in population size and employment rates needed to fill Canada’s job vacancies.
According to Statistics Canada, there were 815,300 job vacancies in Canada as of March 2023.
To fill these, our working-age population (those aged 15 to 64 years) needs to increase by 4.6%, assuming a constant employment rate. Looking at it another way, to fill these jobs with the current working-age population, the employment rate would need to increase by 3.3 percentage points (from 75% to 78.3%).
New immigrants
New immigrants are often discussed as a group that could help fill Canada’s labour market gaps. Canada has a track record of attracting educated and highly skilled immigrants. In 2023, Canada expects to receive 500,000 immigrants.
However, assuming a constant employment rate, the core-aged immigrant population (those aged 25 to 54 years) would need to increase by 22.4% (from 4.4 million to 5.4 million people) to fill the vacancy gap.
This means that relying on immigration to fill all of Canada’s job vacancies would require more than doubling the current immigration target. (Alternatively, an 18.6 percentage point increase in the immigrant employment rate—to 101.6%, keeping population constant—would be required to fill the vacancies. Clearly, this is unrealistic.)
Admitting more immigrants is not a simple solution. Many trained immigrants struggle to find work in their fields, and children represent a significant portion of the immigrant population. Solutions that support newcomers to integrate into the labour market, like better recognition of foreign qualifications, targeted immigration programs, and language training, can help. However, there are significant systemic barriers to growing Canada’s immigrant population, like maintaining affordable housing and adequate public services. In addition, higher numbers of newcomers could exacerbate the demand for goods and services that are already in short supply. As a result, Canada shouldn’t rely only on immigration to fill the gaps in the labour market.
Youth and mature workers
Canada's labour market gaps could also be addressed by increasing the employment rates of two groups already in the Canadian labour market or standing on the sidelines: youth (aged 15 to 24 years) and mature workers (aged 55 to 64 years).
Both groups have relatively low employment rates compared to the general population. In January 2023, the youth employment rate was 55.6%, while the mature worker employment rate was 63.7%. Keeping the population constant, the youth employment rate would have to increase by 18 percentage points (to 73.6%) to fill all the vacancies. However, such an increase could lead to lower school attendance rates, which could negatively affect long-term labour market outcomes.
Mature workers would need to increase their employment rate by 15.9 percentage points (to 79.6%) to close the gap. Although it isn’t always feasible or desirable for a worker to stay in the labour market longer than planned, there can be benefits. From a macroeconomic perspective, the ongoing employment of older workers supports the tax base and means more contributions to government pension plans. From an individual perspective, working longer can maximize retirement income. Flexible, remote and part-time working arrangements could encourage mature workers to work longer.
Women
Women are another group that could help fill vacancies in the labour market.
While women's employment rates have historically been lower than men's, there has been significant improvement in recent decades. In January 2023, the employment rates for core-aged women and men were 82.1% and 87.1%, respectively. To fill the labour market vacancies, the employment rate for core-aged women would have to reach 92.8% (an increase of 10.7 percentage points). Such an increase is unlikely, but improving childcare subsidies and reducing discrimination against women in the workplace could help. Making it easier to combine parenthood with work could also lead to higher fertility rates and population growth, which could reduce labour market gaps in the longer term.
In addition, women are under-represented in some sectors, including science, technology, engineering and mathematics. Employer education and training programs that address systemic barriers, such as bias and harassment, could encourage more women to pursue careers in these fields.
Under-represented groups
Under-represented groups—such as people with disabilities or visible minorities—could also contribute to closing labour market gaps. However, some members of these groups face significant barriers to employment, such as discrimination, limited access to education and training, and insufficient social support. Increasing their employment rates could involve implementing more inclusive recruitment practices, reducing workplace discrimination, and diversifying employment or working practices.
The way forward
In conclusion, filling vacancies in Canada's tight labour market will require a concerted effort from all levels of government and all employers. There is no single solution. Targeted policies and programs aimed at increasing immigration, reducing age and gender employment gaps, and increasing the employment rates of under-represented groups can all play a role in filling the vacancies and benefitting the Canadian economy.
Anne-Lore Fraikin
Research Lead
Dr. Anne-Lore Fraikin contributes to the analysis and development of labour market information in Canada. She brings expertise in public policy analysis, microeconomics and microeconometrics, and in labour market, population and public economics
Michael Willcox
Economist
Michael Willcox is an Economist with LMIC. He contributes to the analysis and development of labour market information in Canada.