A significant labour shortage and the cost of doing business in the province costs Nova Scotia small businesses hundreds of millions of dollars in lost opportunities, a legislative standing committee was told Tuesday.
“We estimate that in 2022, Nova Scotia small businesses lost $1 billion in business opportunities because of lost sales or contracts they had to turn down due to labour shortages,” said Duncan Robertson, a senior policy analyst with the Nova Scotia branch of the Canadian Federation for Independent Business (CFIB).
“To try to mitigate these impacts of labour shortages, business owners themselves have worked long hours with the average Nova Scotia small business owner facing labour shortages working 59 hours a week.”
Existing employees are also feeling the pressure to work additional hours, Robertson said.
“There is no doubt based on our data and the lived experiences of our members that over the last two years, inflation and labour challenges have been at the forefront of most business owners’ realities,” Robertson said.
Robertson explained that the CFIB is Canada’s largest non-profit organization devoted solely to the needs of small businesses, representing 97,000 members in all sectors and all regions across the country, including 4,000 in Nova Scotia.
Once pandemic health restrictions eased in a meaningful way, Robertson said multiple factors combined to create the current lingering economic conditions that have been challenging for many businesses.
“Beginning in February 2021, businesses started to rehire to meet pent-up demand from their customers and began to feel the pinch of the labour shortage,” he said.
That was followed by an upward pressure on wages and input, insurance and occupancy cost increases.
“While wage pressures started easing in mid-2022, input costs remained at historical highs … into the early part of 2023,” Robertson said.
“Adding to this, the Bank of Canada increased the interest rate, which increased the borrowing costs for many small and medium-sized businesses.”
He said 44 per cent of CFIB’s members currently report that borrowing costs negatively affect their business. The CFIB shows two-thirds of small-business membership secured variable-rate loans over the past three years, leaving them susceptible to rising interest rates.
By September of this year, interest rates impacted close to half of Nova Scotia CBIF members and an additional one-third said they expect to feel those impacts in the future.
The most reported impacts of rising interest rates on small businesses, aside from increased borrowing costs, are delaying or cancelling expansion or investment plans, staffing plans and potential wage increases for workers.
Rising costs also bring rising prices, he said, and rising prices means decreased consumer demand.
Brandon Ellis, senior policy manager with the Atlantic Chamber of Commerce, painted an equally bleak picture.
“The greatest challenge that faces our membership is the cost of doing business,” Ellis said.
He said the Atlantic Chamber, a not-for-profit, is the largest accredited business association in Atlantic Canada, comprised of local chambers and corporate partners and representing more than 16,000 businesses of all sizes and in all sectors throughout the region.
“One of the largest contributors to the cost of doing business has been inflation,” Ellis said, adding that in a summer survey, businesses noted that costs were up, debt was up, sales were down, and that they felt difficulty planning for the future.
“The inflation problem that our economy faces is a result of monetary policy and the Bank of Canada’s decision to print billions of dollars,” Ellis said. “The government of Nova Scotia should examine reducing the cost of doing business from a provincial level as inflation is largely out of the province’s control.”
Ellis said it is incumbent on the provincial government to examine labour shortages, which are directly affected by the housing crisis.
“In another recent survey, 87 per cent of respondents indicated that they were concerned with rental rates in their area, and 89 per cent stated that affordable and available housing should be a priority for government,” Ellis said. “And 44 per cent said that they had difficulty finding a place to live in the last year.”
Ellis said with a growing population, the province must come up with a concrete plan to expand the supply of housing.
“While Nova Scotia is a leader in the area of reducing regulatory burden, a public review of provincial taxation would likely be a worthwhile initiative,” Ellis said. “Nova Scotia has some of the highest personal income tax rates in all of North America. Nova Scotia also has taxes on taxes. All of this adds to the day-to-day burden of the overall economy.”
Ava Czapalay, deputy minister of the provincial Labour, Skills and Immigration Department, said there is no doubt that there are many businesses looking for workers.
“Yet, we still have workers looking for work,” Czapalay said. “My department can help match jobs to people and people to jobs though our Employment Nova Scotia division which oversees the Nova Scotia Works offices.”
Czapalay said the 50-plus offices located in communities throughout the province provide in-person and online support, including resume writing workshops and job interview preparations, to help people connect to work,
“We need more skilled trade workers and more employers participating in apprenticeship training to meet the needs of our growing province,” Czapalay said. “The plan to modernize apprenticeship includes actions that will help recruit, train and retain more people to fill existing gaps in the skilled trades. The actions we’re taking will add 5,000 additional new apprentices to the system over the next three years. It will increase the number of certified skilled trades professionals by 1,000 a year.”
Scott Farmer, deputy minister of the Economic Development Department, said a lot of discussion has centred around two main concerns – access to labour and the CEBA (Canada Emergency Business Account) repayments to the federal government.
“When it comes to addressing the labour shortage, we know there is no one solution,” Farmer said.
“The business community is calling on the federal government to extend the loan forgiveness deadline for CEBA beyond the current January 2024 date,” Farmer said. “CEBA was a lifeline for so many businesses across Canada, including here in Nova Scotia, during the pandemic, but they need more time to repay their loans without losing the loan forgiveness.”
Gary Burrill, the New Democrat MLA for Halifax Chebucto, said paying a living wage would increase consumer demand and bolster the labour market.
Robertson responded that the concern is that small cash-strapped businesses cannot afford increased wages.
Ellis said it would be better for the economy if the businesses who are able to pay higher wages did so.
Czapalay said her department is focused on connecting employers and workers and added the Minimum Wage Review Committee has been meeting this fall.
“Our minimum wage is at $15 and hour – similar to the other provinces in this region and many across Canada,” she said.
“The committee is comprised of both workers and employers and is focused on providing balanced recommendations to the minister, taking into account the needs of workers and employers.”
Burrill asked Czapalay if a significantly increased minimum wage would in this hyper-inflationary time would go a long way to attracting and retaining workers in the province.
Czapalay said the existing advice is that the minimum wage be tied to the Consumer Price Index plus one per cent as of April 2024.