As the ramifications of inflation continue to ripple through the Canadian economy, rampant staffing shortages are causing labor wages to rise, an economist says.
Although higher wages seem like a victory for those employees who are filling the gaps left by fewer workers, experts warn that this trend will worsen inflation.
“We’re seeing a fundamental driver of wage inflation,” said Sal Guatieri, senior economist and head of BMO Capital Markets.
“If workers are in short supply, companies just have to pay more to not only attract new workers, but also retain current staff so people don’t go to other companies,” he told CTVNews.ca in a phone interview Thursday.
Guatieri explained that if employers are paying their staff more, the cost of their services will also increase. This leads to higher prices for goods and services.
This chain reaction of rising costs is especially difficult for small business owners.
James Stockton, owner and operator of the Sound Factory Music School, a music teaching studio in Waterloo, Ontario, told CTVNews.ca on Friday that the costs of his services have increased along with the salaries of his employees.
“Our salary is tied to our price,” he said. “We have increased our price accordingly because to cover our costs we have to make our percentage. Unfortunately, the customer has to pay for it.”
Stockton said a pay raise was the only option to retain and gain employees in a competitive market for music educators.
The same causality of rising costs applies to various small business sectors, in particular, the hotel industry.
A June survey, released by Statistics Canada, found that 64 per cent of accommodation and food service respondents said they would encounter labor shortages in the next three months.
To fill those gaps, some employers are turning to technology alternatives instead of hiring more staff.
Graham Campbell, chief operating officer of Givex, a technology company that provides kiosks and management software for restaurants and businesses, has seen how shortages in the hospitality industry have left employers with too much work and too little help.
“Thankfully things are opening up and people are coming back to these new businesses, but the time it takes to hire new staff, train them and retain them has left a void there. As long as that gap exists, customers rely on technology like ours,” he told CTVNews.ca in a phone interview on Friday.
Givex’s technology allows services to shift to online sales, which can ease the pressure to hire more employees during a time of inflation.
“Online sales and delivery modules allowed [short-staffed] companies not only stay afloat but also increase their sales,” he said.
Although digital solutions are not a replacement for fewer employees, Campbell believes they can effectively complement companies hoping to improve the customer experience.
“Reducing overhead and increasing operational efficiency should be the top priority for businesses,” he said.