Boomer retirements are creating a labour shortage across the country

For many, many years predictions of a “grey tsunami” of boomer retirements were linked to expected increases in the costs of healthcare and government retirement benefits.

But those retirements are also causing a labour shortage, the Canadian Press (via Global News) reports, that is now upon us.

The story, written by CP’s Amanda Stephenson, reports that the current wave of boomer retirement parties is making some employers quite nervous.

Dan Gallagher of Fort McMurray, Alta.-based Miskew Group tells CP “I take a walk around our shop, and around our field service workforce, and I can clearly see that demographic. It’s aging.”

Miskew, the article notes, already has been having labour shortage problems and has had to recruit from as far away as Australia.

“The ratio of apprentice to older worker here has been so low for so long that there just isn’t the bench strength to offset the people who are leaving,” Gallagher tells CP.

The article notes that “a looming wave of retirements” by baby boomers, those born between 1946 and 1964, has long been predicted by experts, and is now creating a mass exit from the workforce.

The size of the workforce has been trending downward since 2000, the article reports, but the “grey wave…. is now crashing ashore.”

As of the second quarter of 2022, there were over a million job vacancies in Canada, the article notes. And while the participation rate amongst employed Canadians has nearly returned to pre-pandemic levels, the stats suggest that the exit of older workers is driving the labour shortage.

Citing recent research from Scotiabank, the article reports that “the decline in overall workforce participation that does exist is entirely due to Canadians aged 60 and above exiting the workforce. That means the real root of the current problem is Canada’s aging population, and it has broad implications for the country’s economy.”

Patrick Gill of the Canadian Chamber of Commerce tells CP that 36 per cent of Canadian businesses are reporting labour shortages, a figure that jumps to 45 per cent in the manufacturing sector and 58 per cent in food and accommodation.

“It translates to everyone working more hours, and that ultimately affects quality of life. It means slower growth, and it’s also a factor in supply chain delays,” Gill states in the article.

The article concludes by saying that a younger workforce is now “a new reality,” and employers are going to have to go that extra mile to attract and retain new talent.

“Labour is going to be very difficult to find and employers are going to have to work hard to attract employees,” the University of Toronto’s Rafael Gomez tells CP.t

This is a very interesting report.

For younger people, this labour shortage represents a time of employment opportunity not seen for many decades, where there are suddenly a lot of good jobs out there to be filled. Let’s hope employers take a page out of the past — we are thinking the post-war boom, but even into the ‘60s and ‘70s — and begin to offer more and better retirement programs to attract new talent.

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If you haven’t been following the financial media closely through the lazy, hazy days of summer, you may be unclear what income tax changes have been proposed and how they might impact you, particularly if you have an incorporated small business.*

As committed in the Federal Budget 2017, on July 18, 2017 the Department of Finance issued a discussion paper providing details about tax planning strategies involving the use of private corporations and setting out “proposed policy responses to close loopholes and bring greater fairness to the tax system.” Interested parties have been invited to submit comments to fi******************@ca****.ca by October 1^st.

This paper focuses on three issues:

1. Sprinkling income using private corporations which essentially means income splitting by paying out dividends or capital gains to other family members who may not actually be working for the corporation to reduce total taxes. The Government is seeking input on proposed rules to distinguish income sprinkling from reasonable compensation for family members.
2. Holding a passive investment portfolio inside a private corporation, which means retaining and investing money in the corporation instead of paying it out annually because corporate income tax rates are much lower than personal rates.
3. Converting a private corporation’s regular income into capital gains which can reduce income taxes by taking advantage of the lower tax rates on capital gains. Income is normally paid out of a private corporation in the form of salary or dividends to the principals, who are taxed at the recipient’s personal income tax rate (subject to a tax credit for dividends reflecting the corporate tax presumed to have been paid). In contrast, only one-half of capital gains are included in income, resulting in a significantly lower tax rate on income that is converted from dividends to capital gains.

Also read:  Tax Planning Using Private Corporations – The New Liberal Proposals (Blunt Bean Counter)

This has resulted in a huge outcry from groups as diverse as the Canadian Federation of Independent Business, the Canadian Chamber of Commerce and the Canadian Medical Association.

In a BNN video interview, Scott Johnston, a partner at CBM lawyers in B.C. says the Liberal plan would punish small business owners, not “fat cats.” He counsels more than 800 small businesses in the Vancouver area.

“You are comparing employees with entrepreneurs who may make nothing for years and have no guarantee their business will succeed,” he says. “They are the ones who are taking risk and putting their homes on the line. They don’t have fat government pensions and they don’t receive medical, dental or parental benefits.”

Canadian farmers are also worried about federal tax changes, but the proposals are the last thing they have had time to think about during the busy harvest season. The Western Producer says “the impact of the tax changes could be humongous,” including:

• Rules to make it more difficult and risky for full-time farmers to share farm income with spouses and children.
• Regulations that could make it dangerous to use farm earnings to help pay for children’s post-secondary education.
• Rules that discourage farms from renting out their land or saving cash within a farm company.
• Changes that could make it risky to divide ownership of a family farm’s land base among a number of children, while allowing the land block to remain intact.
• Rules that encourage farmers to sell their land to neighbours or strangers rather than their own children.

In contrast, the Canadian Nurses Association representing primarily salaried nurses issued a statement on September 5^th supporting the proposed changes. In her statement, Canadian Nurses Association (CNA) president Barb Shellian said:

“CNA commends Minister Morneau’s aim to achieve federal tax policy that treats all sources of income similarly and equitably, based on the principles of social justice. Accordingly, CNA supports the proposed changes to the federal tax code that reasonably strengthen the rules on increasingly popular but potentially unfair tax advantages for incorporated high-income earners. CNA further recommends a more comprehensive review of the Canadian tax system with an eye to simplification and ensuring all hard-working Canadians are treated fairly and equitably.”

Also read: Dissenting doctors write open letter in support of federal tax reforms

While both Finance Minister Bill Morneau and Prime Minister Justin Trudeau have said they are fully committed to the proposed tax changes, as in all cases “the devil is in the details.” It remains to be seen if any significant modifications to the proposals will be made prior to passage and the planned January 1, 2018 implementation date. We will update you when more information becomes available.

Also read: The good, bad and the ugly of Ottawa’s proposed corporate tax changes

*In the spirit of full disclosure, the tax status of my company Sheryl Smolkin + Associates Ltd. will be impacted by the proposed changes

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Written by Sheryl Smolkin
	Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.