Despite record low levels of unemployment across Canada, many sectors are suffering from labour shortages in the second quarter of 2022, with restaurants and hotels continuing to be amongst the worst hit.

According to a new survey by Statistics Canada, nearly two-thirds (64 per cent) of businesses in accommodation and food services said they would face labour shortages in the next three months – the largest proportion across all other sectors.

This sector was also most likely to see a spike in the number of vacant positions in the next three months. In March 2022, the job vacancies for this sector rose to 12.8 per cent – the highest rate across all sectors in the 11th consecutive month.

Statistics Canada conducted the survey from the beginning of April to early May 2022. During that period, businesses with more employers were also at greater risk of losing their employees in the next three months.

Based on these results, employees may be required to put in more working hours to address the labour obstacles.

The report comes at a time when Canada’s current inflation has touched 7.7 per cent– the highest in nearly four decades. In a recent report, the Organization for Economic Cooperation and Development (OECD) highlighted the labour shortage and the wage pressures in Canada and said that higher immigration could help address these issues.

The businesses expecting labour shortages largely belonged to those with a high number of employees. Larger businesses with more than 19 employees foresee labour shortage as a bigger obstacle in the next three months than smaller businesses with fewer than 19 employees.

Larger businesses with over 20 employees were also more likely to expect their number of vacant positions to increase over the next quarter, than smaller businesses with fewer than 19 employees.

Recruitment, retention of skilled staff, and more work hours

Among businesses expecting labour shortages, nearly three-fifths (58.7%) reported recruiting and retaining staff was more challenging now than 12 months ago, according to the report.

Almost two-fifths (36.9 per cent) of businesses expected skilled labour recruitment to be a challenge and over one-quarter (27.6 per cent) of businesses anticipated retention of skilled staff to be an obstacle.

According to the report, construction (49.5 per cent) and manufacturing (47.4 per cent) businesses were most likely to face recruitment challenges of skilled labour over the next three months. Retention of skilled employees was recorded as highest for accommodation and food services (42.4 per cent), followed by health care and social assistance.

With growing labour challenges, professional, scientific, and technical services were most likely to expect management (68.2%) and existing staff (63.5%) to work more hours in order to meet the labor challenges.

The survey also found differing expectations in recruitment, retention, and working hours tied to the number of employees each business had.

Retention of skilled employees was an obstacle for nearly three-fifths (56.5 per cent) and almost half (48.4 per cent) with 100 or more employees and 20 to 99 employees, respectively. This was slightly lower 36.6 per cent) for businesses with five to 19 employees and under one-fifth (17.2 per cent) for very small businesses with less than four employees.

Statistics Canada analysis showed that recruiting skilled employees was an obstacle for nearly two-thirds of businesses with 20 to 99 employees (65 per cent), followed by those with more than 100 employees (62.8 per cent).

Even smaller firms expected recruitment of skilled staff to be a challenge in the next three months– with over half (52 per cent) of businesses with 5 to 19 employees raising hiring concerns.

When it came to the size of the company, larger companies – 100 or more employees (61.4%) and 20 to 99 employees (59.3%) – felt the need to add in more work hours in comparison to smaller firms – 5 to 19 employees (47.1%) and 1 to 4 employees (40.5%).

Inflation and wage negotiations

In order to attract skilled staff and retain old ones during inflation, businesses are struggling to adjust their current wage plans.

The issue is bigger for businesses employing more than five people, with seven in 10 businesses expecting inflation to be an issue during salary negotiation.

This means an increase in the average hourly wage. In the first quarter of 2022, 45 per cent of businesses said they planned on raising their wages in the coming year.

However, with inflation on the rise, more than half (55.2 per cent) of businesses expect the high cost of living to be a bigger issue when discussing pay hikes with their employees.

This is especially true for accommodation and food services (76.1 per cent), followed closely by manufacturing (70.9 per cent).