Face the new economic reality

In Brief: In this Labour Day Commentary, requested by the New Brunswick Telegraph-Journal, AIMS President Brian Lee Crowley reflects on the new reality of today’s labour market. He points out that with Atlantic Canada’s ageing population, it is in for a very bumpy road.

Plans were announced recently to build a pipeline to Alberta. Nothing unusual there, except when you realise that this is not to take oil or gas out, but to pipe a very sweet light crude called diluent in. The purpose? To dissolve the oil sands bitumen so it can be piped to places where workers are available. At 3.5 percent unemployment (and falling), it is a real question whether Alberta can develop and process the oil sands alone even as it sucks in new workers at a dizzying rate.

The Canadian Federation of Independent Business in Atlantic Canada recently reported that 2/3 of their members report their biggest problem is finding workers and dealing with employee related issues, and this is a big jump over previous surveys.

As retirements pick up speed, unemployment in New Brunswick and other Atlantic provinces will, in 7 years’ time, have fallen to around 3 percent. That’s lower than Alberta’s rate today.

Canada is entering uncharted economic and demographic territory. Over the last few decades Canada has seen roughly 225,000 new workers enter the labour force on average every year. Our labour force grew by 200 per cent over the last 50 years. We therefore spent those decades pre-occupied with unemployment.

But by around 2011 or so, that tap will be turned off tight, and the drain opened. Eighty percent of new entrants into the workforce will be taken up merely replacing retiring Boomers. The precursors of the coming change are already visible. Unemployment is declining and significant shortages being reported, most notably in Alberta, despite recent annual population growth of 3 percent.

But this is not limited to Alberta. The deputy ministers of finance of two Atlantic provinces were complaining in Ottawa last year about the growing labour shortages in their provinces and how they are obstructing growth.

A huge increase in interprovincial mobility is doing what decades of regional economic development policy and equalisation could not: causing a convergence of unemployment across the country. Atlantic Canada, about 7 percent of the national population, contributes about 17 percent of those moving between provinces right now. And that only captures those moving. As anyone on the “Fort McMurray Express” knows, there is now a large number of people who commute from various parts of this region to work in Alberta, several weeks there, then a week or two at home and so on.

A lot of this explains the relatively recent but massive move out of seasonal work in the region, a move that is especially marked for young people, whose unemployment rates have declined dramatically, no doubt in part because they are the ones who are the most mobile.

But Atlantic Canadians aren’t just moving out of the region; they are moving within it too. We have been the least urbanised part of the country for a long time – in large part because Ottawa and the provinces competed with each other to pay people to stay put in declining rural communities kept afloat by the dole and regional development subsidies to dying natural resource industries. That era is on its last legs and people are fleeing to the region’s cities where the economic, educational, social and cultural opportunities are greater.

What do we need to do? Immigration is important, but nationally we would need to increase levels of immigration seven times above their current level of 200,000 for many years to come to cancel the effects of population ageing. Don’t hold your breath.

Because for decades our bedrock assumption was our problem was unemployment we encouraged people to retire early, employed too many people in the public sector, paid thousands not to work through EI and social welfare, subsidised companies to invest in regions with little economic rationale and paid workers not to move to areas of higher opportunity. These policies lowered our productivity and kept many more people in declining industries than were needed.

Then we could still find the workers we needed for the emerging industries. No longer.

The problem will be more acute in Atlantic Canada than elsewhere because our population is older. Wages will soon rise here in response to our severe labour shortages and we will soon find that we are attracting migrants from other parts of the country at the same time as we will be urging workers not to retire so early, but to keep working as long as they possibly can.

This is not your grandmother’s New Brunswick or Atlantic Canada. Throw out every assumption you have about who we are and the challenges we face. We will struggle hard every day to find the workers to build LNG terminals, gas pipelines, oil refineries, highways and nuclear power plants, to mention just a few projects on the horizon. Hang on to your hat; the ride is about to get bumpy.