The exodus of families from Canada’s big cities could fuel wage inflation

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Young families are fleeing Canada’s biggest cities, in a pandemic-driven exodus that has depleted a core age group of workers in the already tight labor market, which experts say risks accelerating inflation wages in certain industries.

Children under 10 and millennials, or young families, have led the rush to Canada’s big cities, according to Reuters analysis of official data, many of whom have moved to smaller towns or rural areas looking for more space to live and work.

The trend of driving until you’re qualified has moved mid-career workers – a key segment of the workforce – out of big cities, making it difficult to find established talent in industries where in-person work is essential or preferred.

“It’s a whole kind of cohort of missing workers,” said Mike Moffatt, economist and senior director of the Smart Prosperity Institute. “You have the kind of newbie people, but this middle, people in their 30s and 40s, they move on,” he added.

Federal government interprovincial migration data released last month shows 64,000 people left Greater Toronto for smaller locations in their own province from 2020 to 2021, while Greater Montreal lost 40,000, a strong acceleration of an existing trend. Vancouver lost 12,000 people.

The rush was sparked by young families. Toronto has lost some 15,000 children under the age of 10 from 2020 to 2021, as well as 21,000 adults between the ages of 25 and 44, the data shows. At the same time, populations surged in smaller towns beyond Toronto’s outer suburbs.

The driver of change was the price and the type of house. Half of Toronto home sales are condos and the average price is C$1.2 million ($946,074). In smaller towns outside the GTA, a typical house is single-detached and costs less than C$800,000.

Indeed, the race for space has led to faster price increases outside Toronto and its suburbs than inside.

In large cities, the very tight labor market has forced employers to offer higher wages to attract workers. This triggers a rapid increase in wages as companies compete for the skills they need. Recruitment firm Robert Half said 46% of companies raise starting salaries to attract talent.

“People are leaving (jobs) today, because they’re being offered big packages to go somewhere else. That’s how this talent war is going on right now,” said Koula Vasilopoulos, district manager. from Robert Half Canada.

The Bank of Canada is concerned that rapidly rising wages are starting to fuel inflation, which hit a 30-year high of 4.8% in December, something it says has yet to happen.

“There could be this self-fulfilling cycle where inflation hits its highest level in 30 years now, so … employees start asking for higher wages to offset that inflation,” said Stephen Tapp, chief economist at the Canadian Chamber of Commerce.

“It increases labor costs, it increases the cost of production and it further fuels the spiral of inflation,” he explained.

Many big-city employers are offering fully remote or hybrid positions to tap into talent who fled the big cities during the pandemic. Recent data from Statistics Canada revealed that a quarter of Canadians now work exclusively from home.

“Canadian employers have a deathly fear of forcing people back into office jobs for fear of losing people all together,” said Dan Kelly, president of the Canadian Federation of Independent Business.

But telecommuting isn’t working in the sectors where the shortages are most critical – warehousing, retail, manufacturing, education and healthcare. Filling those jobs, especially as more and more people swap tiny downtown condos for remote detached homes, remains a costly challenge.

“It’s a whole spectrum of workers, from baristas to hospital workers,” said Andy Yan, director of Simon Fraser University’s City Program.

“It will be a struggle, especially for small businesses, but even for big businesses. How do you get talent if housing is so disproportionate to income,” he said.

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