A new report finds Canadian businesses in the construction sector missed out on over $9.6 billion revenue opportunities last year because of the ongoing labour shortage.
In total, small businesses across all sectors missed out on over $38 billion.
The report, Small Businesses in Canada Hit Hard, The Big Financial Toll of Labour Shortages, was released recently by the Canadian Federation of Independent Business (CFIB).
“We know that the labour shortage has been an ongoing challenge for small- and medium-sized businesses for several years adding to the many other difficulties they face,” explained Laure-Anna Bomal, CFIB’s economist and author of the report. “About 53 per cent of Canadian small business owners are reporting that labour shortages are hindering the growth of their business. In this report we try to understand what are the impacts and then to evaluate and measure the key impacts of labour shortages on businesses.”
While it examined all sectors, it found construction businesses are more affected and usually tend to turn down sales and contracts much more than those in other sectors.
According to the report, SMEs in the construction, manufacturing, enterprise and administration management and transportation sectors have been forced to turn down more contracts than those in other sectors.
Quebec had almost one in three small businesses having turned down contracts, followed by SMEs in Manitoba (28 per cent) and British Columbia (28 per cent). Business opportunities lost due to labour shortages were consistent across provinces, with Quebec and Alberta being the most impacted at 32 per cent and 27 per cent respectively.
“Fifty-two per cent of construction businesses turned down sales or contracts and 38 per cent postponed the timing of existing contracts,” said Bomal. “The Canadian average is 27 and 17 per cent respectively, so it’s almost double for both.”
According to the report, the high amount compared to other sectors can be explained by three factors: the sector size (number of SMEs), the higher proportion of affected small businesses and the higher share of lost opportunities compared to revenue.
In general, small business owners had to compensate for labour shortages by working more hours.
“One of the main findings of the report is that 53 per cent of business owners had to work more hours to make up for the shortage and 38 per cent mentioned their employees worked more hours to make up for the shortage,” Bomal said.
Although small business owners experience a notable effect on contracts and sales due to a lack of employees, it doesn’t always translate into an equivalent net loss for the Canadian economy, Bomal explained.
“The amounts that were not invested in these contracts or sales could have been redirected towards alternative projects or allocated to other expenses by SMEs,” states the report, adding the lost customers may have spent their money elsewhere in Canada, stimulating economic activity in different ways.
“It’s $9.6 billion, so it’s a lot of money and it could have been a major boon for small businesses helping them address staffing issues of course and to invest in automation,” Bomal noted. “Automation is a core solution, a core recommendation we have. It’s something that can help them.”
The CFIB also reviewed what other jurisdictions around the globe are doing to address labour shortages and completed a whitepaper on how to address various barriers to work with policy proposals covering three age groups: youth, core age and older workers (65-plus). It includes targeted solutions on how to better integrate workers of all ages into the labour force.
“The idea of the whitepaper was really to give recommendations to government so we have the impacts and then we have some solutions we can provide,” Bomal said.
“For example, to increase workforce participation among youth, governments could increase the prevalence of work-integrated learning in high schools,” states a CFIB release.
“Among the core-age group, employment insurance program design shouldn’t create disincentives to work, and governments need to facilitate labour mobility across provinces. As for experienced workers, governments should revisit existing tax policy and/or create a tax credit for career extension.”
The report also provides recommendations to help small business owners by providing them with more resources, including: introducing a payroll tax holiday for all new hires (e.g., EI, CPP/QPP, WCB premiums, etc.); introducing a training tax credit that recognizes on-the-job training for SMEs; and making permanent the Accelerated Capital Cost Allowance and Immediate Expensing to support investments in automation.
Follow the author on Twitter @DCN_Angela