This column by Armine Yalnizyan was originally published by the Toronto Star on Saturday September 11, 2021. Armine is a Contributing Columnist to Toronto Star Business featured bi-weekly.
The world is changing, and so is the business news.
Why are businesses running short of labour? If trickle-down economics doesn’t work, what will replace it? How will the care economy evolve in future?
In my new column for the Star, I hope to help you make sense of the new economic trends we are witnessing that won’t fade away anytime soon.
Take for example the now-ubiquitous story of labour shortages. People blame it on the pandemic and hiring surges as the economy reopens, income supports that helped contain the contagion, disrupted supply chains and lower immigration. But in 2019, before COVID-19 hit, the annual unemployment rate was 5.7 per cent, a level not seen for 50 years. The reason? Population aging.
The pandemic poured accelerant on what was the underlying trend: more exits from than entries to the labour market. Get ready for 25-30 years of complaints about how hard it is find good help. That’s the real “future of work” story.
From decades of trying to attract capital, we’ll move into decades of trying to attract labour. Demographic realities means many nations throughout the entire Global North will shift from labour surpluses to labour shortages around the same time. As competition for immigrants escalates, only cities and firms that are people magnets will be able to duck bottlenecks that cripple business. This dynamic will entirely reshape social, economic and political dynamics, and introduce a new “generation gap” in culture, as well as new regional divides.
It’s an astounding inversion of the basic economics of supply and demand of the past 50 years and it’s going to mean workers have more inherent value than they have had for generations.
Population aging is producing another inversion: the fall of trickle-down economics, and the rise of bottom-up growth. For the past forty years, governments everywhere prioritized “more market, less government” as the policy frame for creating wealth. But soon one in four Canadian will be over the age of 65, and older people both pay less into public systems and draw more out of them. Expect more friction about price inflation and tax increases, as well as demands to improve accessibility and affordability of basic services. It will be impossible to reach the people least served and least able to access the basics without more government involvement.
Add global events like the pandemic (not the first, and won’t be the last), and more disruptions from extreme climate events and there’s no doubt: there will be no avoiding the need for more government action. And it will increasingly have to be there for Main Street, not just Bay Street.
If governments are really there “for the people” — all the people, not just investors and cranky seniors — more public spending will take a page from the public health playbook: improve the worst outcomes in society in order to improve the outcomes for everyone. Simply put, wealth creation and growth is maximized by boosting the economy from the bottom up, particularly in the era of population aging. That’s another inversion in what a generation of the business press took for granted: that government’s best role is to move out of the way, and let business get on with business.
And in case you missed it: no business, no family, no community can get on with its business without the Care Economy (shorthand for the combined industry sectors of health and social assistance plus education). Prior to the pandemic, many analysts viewed this sector of the economy as a derivative, a nice-to-have that could grow as we grew the economy. But the Care Economy accounted for 12.6 per cent of GDP, and 21.3 per cent of all paid jobs in June 2021, up from 12.3 per cent of GDP and 20.4 per cent of all paid jobs in February 2020, before the pandemic hit.
The Care Economy is essential, and essentially the foundation of the economy. If every job in it was a good job, it could be the backbone of the middle class of the early 21st century, much as manufacturing was in the 1950s to 1970s. Consider, too, if caring generates one in every eight dollars of economic activity, how much of that is profit? And how much profit should be made through the provision of care? The debate around caring for profit is about to heat up, and fast.
Most business news doesn’t talk about the context that shapes business moves, the macro trends that shape the micro decisions. I’ll bring you the big picture, and put more emphasis than you’ll usually see in the business press on the people who generate wealth for business: the workers.
Photo credit: Anna Lisa Sang