Employment growth needed to solve shortages: the paradox

Got an email from someone asking why I argue we need to grow the economy to address our growing labour shortages.  They speculate that growing the economy would actually exacerbate labour shortages in the province.

This is a good question. There are a couple of answers.

First, many of the sectors of the economy facing shortages are at the lower end of the wage scale.  These are jobs for which it is difficult to recruit people into the province to take on.  Normally, many of these jobs are filled by second income earners in households and by student workers.  If we were growing our mining or IT or life sciences sectors, for example, that would attract families to the province and workers for those service-based sectors (immigrants and migrants).  We see this impact in Saskatchewan right now.  Adjusted for population size, that province is attracting more than its share of immigrants both for work its growth sectors and all the service industries that are growing as well.

Second, the economics of a shrinking employment base in New Brunswick combined with an aging population are not tenable in the long term.   In Newfoundland you may be able to get away with it for a longer period of time because of billions of dollars worth of oil royalties.  New Brunswick generates the money to pay for its public services from old fashioned taxes on income, profit and land (very little royalties).

We are about to have thousands of people leaving the workforce via retirement (and the resulting 40-50 percent drop in average taxes paid) combined with increasing health care expenses.  If we do not replace those retirees in the workforce and even grow the employment base, the base of economic activity will not be strong enough to fund public services.

It’s that whole dependency ratio concept.  You should have 3-4 people working for everyone not working in a society (again one with limited royalties).  If you get to the point where there are more people not working than working you have hit a massive wall.