Canada's economy lost almost $13 billion over the past year due to a nationwide labour and skill shortage in the manufacturing sector, a new report has found.
Canadian Manufacturers and Exporters' (CME) annual labour survey of 563 manufacturers in 17 industries across the country found that almost two thirds have lost or turned down contracts and experienced production delays due to a lack of workers.
The penalties and loss of sales resulting from these issues totalled $7.2 billion, according to the organization.
As well, 43 per cent of companies have postponed or cancelled capital projects because of the shortages, resulting in another $5.4 billion in lost investment, said the CME.
The pandemic has had lingering effects on the labour market in the industrial sector, the report said -- for two years in a row, more than 80 per cent of manufacturers said they are facing labour and skills shortages, up from 60 per cent in 2020 and 39 per cent in 2016.
The sector was dealing with labour issues before the pandemic, said CME president and CEO Dennis Darby, but the difficulties were heightened during the pandemic and haven't let up.
"As the pandemic eased from a societal point of view, the concerns about labour shortages were just as strong as ever," he said.
CME chief economist Alan Arcand said in the report that two factors are combining to create the shortage: an aging cohort of baby boomers retiring in waves, and a lack of interest in manufacturing jobs from young Canadians.
During the pandemic, more workers retired than usual, said Todd LeRoy, vice-president of window company Loewen, while immigration was held back.
"As well, the last few months has seen a very strong job market and just not enough people to fill open positions," said LeRoy in an emailed statement.
"The birth rate simply cannot keep up with the demand we have."
One of the biggest barriers companies reported was a difficulty finding workers with the right technical skills -- the shortages are hitting the hardest in skilled production jobs, such as welders, machinists and industrial mechanics. Companies are also having trouble filling positions in general labour or production, and supervisory or management roles.
Darby is concerned the shortages, especially of skilled labour, are becoming chronic, and that the issue can't be fixed overnight as it takes time to learn a trade.
"The pipeline of new entrants has been really, really slow through the pandemic," said Darby.
He said the sector needs to hire more underrepresented groups, such as women, people of colour, Indigenous people and newcomers.
To attract and retain workers, more than 70 per cent of those surveyed said they are increasing wages and benefits. However, they're also looking to the government to help, by supporting automation, promoting the trades, and increasing immigration.
CME are also asking the government to increase the Canada Job Grant and make it permanent, provide tax credits to offset employee training costs and equipment purchases, and speed up the temporary foreign worker program.
The ongoing shortages have shone a light on the need for more automation, said Darby.
However, he said that while general labour and production work, especially repetitive tasks, is ripe for more automation, it's a lot less likely to help with the gap in skilled trades.
CME represents more than 2,500 companies across Canada, most of which are small- and medium-sized businesses.