Redefining the landscape: Why is Canada facing a labour shortage?

By Emily Newton   

Industry People and Skills Manufacturing

Turning the tides on labour shortages in Canadian manufacturing

Even though the labour shortage in Canada is at an all-time high, no comprehensive solution exists. As the skilled labour shortage Canada’s manufacturing industry is experiencing worsens, the need for a plan becomes increasingly crucial. 

The labour shortage in Canada Is worsening

Although Canadian manufacturing has experienced skill scarcity for years, its recent growth is unparalleled. The percentage of manufacturers reporting understaffing increased to over 80 per cent in 2022, up from 39 per cent in 2016. The labour shortage more than doubled in less than a decade. 

This issue isn’t limited to select positions — most manufacturers have reported urgent shortages in skilled and general assembly roles. The demand for both is similar. While administrative and supervisory jobs are less affected, they remain understaffed.


Experts expect the labour shortage in Canada to continue worsening. According to some estimates, it will increase from 200,000 job openings in 2023 to 600,000 by 2030. While the trend seems to be at its peak currently, all indicators suggest it will remain an ongoing issue. 

Why is manufacturing declining in Canada?

While many industry stakeholders have expressed concern over the rising skilled labour shortage Canada is experiencing, no comprehensive solution has yet been identified. Those who take action find their efforts insufficient because they aren’t approaching the issue correctly. 

While supplementing the workforce with immigrants can be a viable strategy, nearby countries likely won’t be of any assistance. For example, the United States will have 2.1 million job openings in manufacturing by 2030. Hiring locally may be equally challenging. 

While most manufacturers increased salaries, they still aren’t competitive. In 2021, Canada’s federal minimum wage was $15 hourly. In the same year, manufacturers paid $28.84 per hour on average. Skilled workers know they can get more elsewhere, so they aren’t incentivized. 

Although manufacturers clearly need labour, most aren’t automating. While many believe it isn’t a viable strategy, some simply can’t afford to. According to one survey, six in 10 manufacturers weren’t utilizing automation technology in 2023. Only 12% reported widespread adoption.

Why is Canada facing a labour shortage?

The labour shortage in Canada is a multifaceted issue stemming from geopolitical trends, shifting expectations, public perception and an aging workforce. There are a few key factors driving skill scarcity in the manufacturing industry. 

Poor hiring is one of the biggest reasons Canadian manufacturers face a labour shortage. As workers continue to retire, young people aren’t replacing them — many choose alternative career paths because they don’t view manufacturing as lucrative or worthwhile. 

Many Canadians view manufacturing jobs as risky because they consider the industry low-paying, unsafe and unfulfilling. Historically, their opinion of hands-on, blue-collar work hasn’t been favourable. However, the attitude of current workers also affects public perception.

As workloads worsen and workers increasingly become discontent in their roles, the belief that manufacturing is thankless and unpleasant further cements itself in the public’s mind. This impacts hiring since the demand for convenient, satisfying work is trending. 

The impact of the skill and labour shortage in Canada

Manufacturers have experienced substantial financial, talent, opportunity and reputation-related losses because of the skilled labour shortage Canada faces. Understaffing has forced many to delay or cancel deliveries, increasing operational costs and reducing sales. The consequential client dissatisfaction left a lasting impact on their customer retention rates.

These lost business opportunities and declining customer satisfaction rates have been financially damaging. According to one study, manufacturers individually reported losses of $2.8 million in 2022. The Canadian manufacturing industry lost $7.2 billion because of late delivery penalties and declined contracts. 

The same study revealed labour and skill shortages are forcing manufacturers to put off investment and expansion plans. In 2022, those cancellations caused $2.1 million in losses per company — costing the industry an additional $5.4 billion. 

Even though manufacturers have been forced to postpone or cancel most contracts and internal projects, the labour shortage in Canada ensured workers remained overworked. Consequently, many are growing dissatisfied with their work. As burnout increases and motivation deteriorates, employee retention rates decline.

The inability to invest in new projects, take on new contracts and retain talented workers will permanently affect many manufacturers. When they are unable to innovate, their forward momentum will stagnate. Their competitiveness and future earning potential will be significantly impacted.

Ways to overcome skill scarcity in manufacturing

While no out-of-the-box solution exists, Canadian manufacturers can leverage numerous strategies to permanently strengthen their workforce.

1. Facility Transformation 

Leveraging state-of-the-art equipment and prioritizing cleanliness can combat the general public’s perception that manufacturing positions are unhygienic or high-risk, potentially increasing interest. This move can also improve employee retention. 

2. Collaboration and Outreach

The aging workforce and lack of fresh talent are significant drivers of the skilled labour shortage Canada faces. Companies can collaborate with higher education institutions or develop outreach programs aimed at youth to dissuade young people from alternative career paths. 

3. Automation Investment

Manufacturers that digitize their machinery, software and equipment can ease the burden on their current workforce and fortify themselves against further shortages. Staggered adoption and strategic implementation may make investment more affordable. 

4. Upskilling and Reskilling 

Manufacturers should collect performance data to objectively and swiftly address skill gaps. Considering that 68 per cent of workers are willing to learn new professional skills, this strategy can be impactful. Upskilling and reskilling eliminate the need to source talented individuals since they all but guarantee candidates can learn critical, specialized skills on the job.

Strategies for sourcing and hiring skilled workers

Administrators can combat the labour shortage in Canada by restructuring their hiring processes. 

1. Harness Digital Engagement

Social media and online spaces are ideal platforms for broadening the talent pool and targeting youth. Young people can revitalize the manufacturing industry, so hiring professionals would be wise to develop targeted outreach campaigns. 

Digital onboarding is another way to ensure candidates meet skill requirements. Promark Electronics, a Canadian electronics manufacturer, leveraged online tools to reduce instruction length from six weeks to two while maintaining performance goals.

2. Update Wages and Benefits

Manufacturing wages continuously increase by 5 per cent year-over-year, but the skilled labour shortage Canada faces has only worsened. Similar industries like construction, warehousing and utilities pay much better, so they’re often preferred. 

Administrators should restructure pay and benefits to address the expectation misalignment between candidates and employers. Retirement packages, maternity leave, mental health days and disability programs are attractive incentives — and can even increase employee retention.

3. Leverage Awareness Campaigns

Underrepresented groups often have no idea their unique expertise is desirable since the industry doesn’t favour them. For instance, women filled only 28% of manufacturing roles in 2019. Hiring professionals should tap into this untouched resource by leveraging awareness campaigns and publicizing their diversity and inclusion efforts. 

BASF Canada Inc., a chemical manufacturer, made substantial progress in this regard. It developed a three-year strategy to improve its diversity and inclusion efforts, even going as far as to establish a governance and oversight team.  

The Skilled Labour Shortages Canada Faces Can Resolve

Although the skilled labour shortages Canada faces in the manufacturing industry seem insurmountable, professionals can overcome them if they leverage proven strategies and carefully consider a context-specific approach to their situation. 


Stories continue below