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Show me the money: It’s not a worker shortage, it’s a wage shortage

Two-thirds of job postings are offering wages that are too low to entice applicants. Employers are going to have to be more competitive to fill those jobs.

September 5, 2022

3-minute read

The fact that many job postings are going unfilled in Canada is often blamed on a worker shortage. What is often missed in this approach is the proviso that jobs aren’t being filled “at the wages offered.”

Data from a new temporary labour force survey question allows us to determine what workers will accept as their lowest acceptable wage. This can be compared to what is being advertised in job postings.

The result is that 63% of job postings are in industries with a wage shortage, not a worker shortage. The wages offered in job postings are below what job seekers would be willing to accept to fill those jobs.

For the first time, employers are competing to attract workers

Historically in Canada, the number of job seekers has been much higher than the number of advertised jobs. For most of the 2010s, there were, on average, six job seekers for every job posting. This narrowed to 3.5 job seekers for every job posting in early 2017, prior to the pandemic.

Even just after the pandemic, when the survey started up again, there were still 3.5 unemployed people chasing each job vacancy. However, this changed substantially by the summer of 2021, when the ratio fell to 1:1, with one unemployed worker seeking every job posting.

In July 2022 there were 1.09 million unemployed Canadians and in June 2022 there were 1.04 million job vacancies (the most recent data available). From a company’s perspective, employers have gone from receiving an average of six applicants per job vacancy in 2017 to receiving only one applicant per posting today.

The dramatic decrease in the job seeker to job vacancy ratio in 2021 was caused almost entirely by employers posting substantially more jobs. Pre-pandemic job postings were running between 300,000 to 400,000 a month. By April 2022, they hit a million and have stayed above that ever since. On the other hand, the count of unemployed Canadians has remained stable, sitting at about 1.2 million pre-pandemic compared to 1 million today.

Employers might be finding it harder to fill positions but there are still a million unemployed Canadians, which makes it hard to see how there aren’t enough unemployed workers to fill these positions. So why aren’t a million unemployed Canadians filling a million unfilled positions?

The standard explanation is also the employer’s explanation: Canada has a worker shortage—there aren’t enough workers with the right skills to fill the jobs. But there’s another explanation.

One of the key worker reasons for not taking jobs is that the jobs are lousy. One of the key ways that a job is lousy is that the pay is too low. Given the disruption in work experienced earlier in the pandemic, followed by sky-high inflation, expecting 10 people to apply for a $15 an hour job isn’t realistic.

Most industries are facing a wage shortage, not a worker shortage

A completely new dataset from Statistics Canada allows us to measure which industries have a wage shortage and which industries have a worker shortage (due to skills mismatch, for example). The February and March 2022 Labour Force Survey asked unemployed Canadians in which sector they were seeking work and what is the minimum pay that they would accept to take a job. On the other hand, the Job Vacancy and Wage Survey asked employers how much they are offering on job postings. The averages by industry in the first quarter of 2022 are presented below.

Lo and behold, 63% of job postings are in industries in which the wage being offered by employers is below the wage being sought by unemployed workers.

In other words, two-thirds of vacant jobs in Canada are unfilled because the wages being advertised are too low, not because there aren’t interested workers.

If we look at the accommodation and food services industry, which represents 14% of vacant jobs, the average posting offers $15.85 an hour, but workers aren’t willing to work for less than $18.84 an hour.

In the retail trade industry, representing 10% of all vacant job postings, employers are advertising jobs that pay $17.85 an hour, but workers aren’t going to work for less than $23 an hour.

These industries aren’t suffering from worker shortages, they are suffering from employers who are unwilling to increase wages enough to make it worth a worker’s while.

On the other hand, a third of industries are offering wages that are higher than what workers are seeking. The largest such industry is health care, representing 15% of all vacant positions. Closed emergency rooms and backlogged surgeries are testament to the fact that attracting workers, particularly highly skilled nurses, is incredibly difficult right now.

The issues go far beyond wages in this sector, with many nurses and other health care workers suffering from burnout after two long years of a pandemic and facing unreasonable restrictions, like cancellation of all vacations or being expected to regularly work double shifts. Working conditions matter.

Why we shouldn’t “solve” high job vacancies

Inevitably there are calls to “solve” the situation of many jobs going unfilled. Employers used to be able to flood job boards with lousy jobs and expect multiple applications for each. However, not getting multiple applicants for a low paying job is hardly something to be “solved.”

For most job postings, higher pay is the problem, not unwilling or missing workers. Job seekers are waiting for employers to show them the money—and to offer good working conditions too.

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