The invisible hand and Yukon tourism

‘Talk around town suggests tourism labour shortages this year were more severe.’

The Yukon’s tourism businesses struggled finding staff this summer, according to TIA Yukon, the industry association.

It’s not a new problem. The 2017 Yukon Business Survey found that almost half of Yukon job vacancies were in the sales and service sector, which includes many tourism-related roles. And a Tourism HR Canada study in 2016 said that 48 per cent of Yukon tourism businesses reported staffing challenges.

While it may not be new, talk around town suggests tourism labour shortages this year were more severe. This is backed up by the territorial unemployment statistics. In July, unemployment was just 2.3 per cent. This is extremely low by historical standards and in comparison with other parts of Canada. In fact, the jurisdiction with the second-lowest unemployment rate in Canada was BC, and its rate was more than double the Yukon’s.

BC has also been reporting tourism labour shortages. A 2016 study by Grant Thornton in British Columbia documented how labour shortages were causing businesses to miss out on revenue opportunities. River rafting outfits offered fewer trips. Restaurants and bars shortened hours, or closed for certain meals or days of the week. Some hotels even had to close a wing due to staff shortages.

Besides the lost revenue and profits for the businesses, the losses cascaded into other sectors of the economy and government tax revenues.

The Yukon government spends a lot of money trying to lure tourists to the territory. So it’s a shame for local business when a tourist is ready to splash out big bucks on a rafting trip and fancy dinner, but gets steered by labour shortages to go for a hike and grab a sandwich instead.

Where could more workers come from? Some propose allowing more immigration or temporary foreign worker permits. Others point out that there are untapped pools of labour in Canada. Unemployment in some provinces is in recession territory, such as Newfoundland at over 15 percent or PEI at 9.5 percent.

There are also the 27.5 per cent of Yukoners who don’t have formal jobs and aren’t looking (and therefore aren’t counted in unemployment statistics). Statistics Canada also looks at Canada’s 2.4 million students aged 15 to 24 intending to return to school in September. In July, it found that only 55 per cent of these were working full or part time. That leaves 1.1 million not in the formal labour market.

Keep in mind that these potential workers may or may not be sitting idle. They may be working in the home, caring for elderly family members, doing summer school or working under the table.

So how could Yukon tourism businesses solve the labour shortage?

There are two competing fixes for this kind of problem.

The first is a collaborative approach by government, industry associations and their partners. You might boost the number of foreign workers or expand tourism training programs at Yukon College. You could create summer co-op jobs with Yukon high school programs such as Tourism 12 or Foods, Education and Service Training. You could also target students in the high school and college business education programs. You might recruit at the tourism and hospitality programs of southern universities or advertise fun Yukon summer jobs in social media feeds across the Maritimes.

On the other hand, cold-hearted economists steeped in the tradition of Adam Smith would point out a second approach: raise wages.

They would ask why all those students without jobs and unemployed Maritimers aren’t accepting offers to work in Yukon tourism. Or why workers aren’t leaving government or the mining sector to work in hospitality. Indeed, Yukon governments actually hired an additional 300 people over the last year.

The Yukon government’s 2018 economic outlook estimated that tourism represented 14 per cent of jobs in the Yukon, but just four per cent of gross domestic product. This suggests the industry pays less and is less profitable per worker than other industries. Statistics Canada says the average weekly earnings in Yukon accommodation and food services were $496 in 2017, while the comparable figures were $1,372 for public administration and $1,203 for construction.

The problem is exacerbated by surging Yukon housing prices. In order for us to lure those Maritimers and students from post-secondary tourism management programs, they need to be able to find an affordable place to live. This summer, the headlines were full of stories that even the government is having trouble finding housing for new staff at the Whistle Bend continuing care facility.

This is a painful line of thinking for tourism business owners. Many have invested their heart, soul and capital in their businesses, and have spent the summer working even harder than usual to cover staff shortages. Things like higher energy costs, rent and property taxes are already eating into profits.

But unless the collaborative approach mentioned above solves the problem, and quickly, entrepreneurs will have to deal with Adam Smith’s “invisible hand.” This was Smith’s metaphor for how things like prices, demand and supply force businesses and workers to change.

Some businesses will need to more aggressively raise prices and cut costs to survive. Others may have more fundamental challenges requiring rethinking the products and services they offer, or even whether they stay in business or not.

The good news is that 52 per cent of Yukon tourism business owners did not tell that 2016 study they were having staffing challenges. Some businesses report having had a busy and profitable summer. But if you have a business that relies on large numbers of low-wage workers, you may need to do some deep thinking this winter.

Keith Halliday is a Yukon economist and author of the MacBride Museum’s Aurore of the Yukon series of historical children’s adventure novels. He is a Ma Murray award-winner for best columnist.

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