Wage inflation can hit Canada as families exodus from cities

A pandemic-driven migration of young families from Canada’s main cities has reduced a key age group of workers from an already tight labour market, raising the possibility of wage inflation in several industries, according to experts.

Children under the age of ten and millennials, or young families, led the exodus from Canada’s large cities, with many moving to smaller cities or rural areas in search of more space to live and work.

The drive-until-you-qualify trend has pushed mid-career professionals out of metropolitan cities, making it difficult to recruit established talent in industries where in-person work is required or desired.

Mike Moffatt, an economist and senior director of the Smart Prosperity Institute, remarked, “That’s a whole cohort of employees missing.” “You have the entry-level folks, but the middle, the ones in their 30s and 40s, they’re leaving.”

According to federal government data released this month, 64,000 people left Greater Toronto for smaller towns within their own province from 2020 to 2021, while 40,000 left Greater Montreal, indicating a substantial acceleration of a previously observed trend. A total of 12,000 people left from Vancouver.

Young families sparked the stampede. According to the report, Toronto lost 15,00 children under the age of ten between 2020 and 2021, as well as 21,000 people aged 25 to 44. At the same time, population growth accelerated in smaller cities outside Toronto’s outskirts.

The price and type of housing drove the move. Condos account for half of all house sales in Toronto, with an average price of C$1.2 million ($946,074). A typical detached home in a smaller city outside of Greater Toronto costs less than C$800,000.

Indeed, the struggle for space has resulted in faster price increases outside than inside Toronto and its suburbs.

Employers in big cities have been obliged to pay greater rates to attract workers due to a tight labour market. As organisations compete for the skills they require, this is causing significant salary increases. According to the recruiting firm Robert Half, 46% of employers are raising starting pay to entice talent.

“People are quitting their jobs today because they’ve been offered hefty severance packages to go somewhere else. That is how the talent competition is currently playing out “Robert Half Canada’s district director, Koula Vasilopoulos, commented.

The Bank of Canada is concerned that rapidly growing wages may begin to drive inflation, which touched a 30-year high of 4.8 percent in December, something it claims has not yet occurred.

“There might be a self-fulfilling cycle,” said Stephen Tapp, chief economist of the Canadian Chamber of Commerce. “We’ve had inflation running at a 30-year high currently, so employees start to seek for greater pay to compensate for that inflation.”

“This raises labour expenses, which raises production costs, which drives the inflation cycle even higher.”

To tap into the talent that fled the large cities during the pandemic, several big city businesses are offering totally remote or hybrid employment. According to Statistics Canada, a quarter of Canadians now work from home exclusively.

“Canadian firms are deathly scared of requiring people to return to office occupations for fear of losing everyone,” Dan Kelly, president of the Canadian Federation of Independent Business, stated.

However, in the industries with the most significant shortages, such as warehousing, retail, manufacturing, education, and healthcare, remote does not function. It’s still expensive to fill those professions, especially as more people choose for far-flung detached houses instead of cramped city condos.

Andy Yan, director of Simon Fraser University’s City Program, said, “It’s an entire range of labour, from the barista up to the hospital personnel.”

“It will be a fight, especially for small enterprises, but also for large corporations. How can you attract talent when housing costs are so high in comparison to incomes? “he stated

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