This is exacerbated by the current supply-chain dislocations preventing goods and services being brought in from the Asian countries we had largely outsourced our supply chains to. As result of these supply-chain disruptions, smart employers are rushing to attempt to fill that demand no longer being supplied from abroad.
But we lack the employees, skilled and unskilled, to perform that work.
In the United States, there were 10.4 million unfilled jobs in October, but only 7.4 million unemployed. In Canada the difference is not as stark, although similar conditions exist, with more than 800,000 jobs unfilled as of June.
Why aren’t these jobs filled? Partially from an often vast skill mismatch between the unemployed and available jobs.
But much of it now is from employees seeking “different” jobs that offer remote work and higher pay, as well as the residual impact of the Canada Recovery Benefit and Employment Insurance, which caused employees to prefer not to work. If you doubt that, ask any restaurateur in any Canadian city.
The impact of this disequilibrium has been a strong pressure on wages. Starbucks Corp., according to USA Today, has increased wages and benefits over the past two years by close to US$1 billion in order to attract and retain employees. The company also raised salaries in Canada amid a critical shortage.
This pressure is being seen in increases to minimum wages in several provinces, including recently, in Ontario.
But the law of unintended consequences, as we see in so many of my columns, always prevails. As technology improves and its costs reduce, the sales of robotic products meant to replace employees has been skyrocketing. Jeff Burnstein, President of the U.S.-based Association for Advancing Automation, told the Wall Street Journal in a Nov. 11 article, that, “With labour shortages throughout manufacturing, logistics and virtually every industry, companies of all sizes are increasingly turning to robotics and automation to stay productive and competitive.”
I am seeing this everywhere.
The equivalent of Moore’s Law — that the computing power of microchips doubles every two years while its costs decrease dramatically — applies to all aspects of technology.
The cost of labour and robotics are moving in different directions. Increasingly, employers will be looking to replace increasingly costly labour with increasingly cheaper robotics. And as robots are not paid wages, benefits, payroll taxes and are indifferent to union and human resources issues, they are becoming increasingly ubiquitous in Canadian and American workplaces.
We have companies now such as Berkshire Grey, an intelligent warehouse automation company that has contracts with Walmart, Target, and FedEx to automate their picking and packing operations. Even winemakers in North America and Europe are turning to robots for their autumn grape harvest.
But it is not just routine, lower-level jobs that are being automated. Particularly worrisome for employees, high-tech jobs are increasingly under threat of automation.
For example, Arrival, the British electric vehicle maker, is using robotics, automation and artificial intelligence in small and cheap micro-factories, instead of utilizing large factories with massive machinery.
Once employers pay to automate, the work is unlikely to return to human labour.
We have had historic struggles between unions and employers and fights at provincial labour relations boards over whether employees were discharged as part of a fight over unionization.
Unions will have much greater difficulty arguing before labour relations boards that a company’s decision to automate was motivated by illegal “anti-union animus.”
Even existing union shops seldom protect employees from layoffs caused by automation. At best, such collective agreements provide a little more severance for affected employees.
When I had a summer job at Stelco Holdings Inc. in its open hearth furnace many years ago, they had 25,000 employees doing dangerous and dirty work. Now they have only 500 employees in its largely automated Hamilton factory.
The reality is that higher wage pressures caused by the current demand for employees and higher minimum wage rates (which also force higher wages at the wage levels above) will have two long-term impacts on the Canadian workforce.
First, employers will invest in robotics, which are becoming more user-friendly and less expensive.
Second, now that employers have become comfortable using remote workers during the pandemic, they will look to placement agencies to find those workers from lower-wage countries where minimum wage laws do not apply.
And that will not be just for minimum wage workers but for most levels of the organization. If a company needs a qualified engineer for a project, why pay $120,000 for a Canadian if they can hire an equally skilled one at $25,000 from the developing world. That is the subject for a future column.
BY HOWARD LEVITT
Howard Levitt is senior partner of Levitt Sheikh, employment and labour lawyers with offices in Toronto and Hamilton. He practises employment law in eight provinces. He is the author of six books, including the Law of Dismissal in Canada.
THIS ARTICLE ORIGINALLY APPEARED HERE: https://financialpost.com/fp-work/howard-levitt-wage-inflations-unintended-consequence-rise-of-the-robots?video_autoplay=true