More than four in 10 small firms say skilled labour shortages are limiting their ability to increase sales or production, according to new research from the Canadian Federation of Independent Business.
The analysis reveals that 69 per cent of small and medium enterprises identify a shortage of qualified candidates within their sectors as the primary obstacle to recruiting skilled employees. Over half of small businesses have trouble attracting qualified candidates at all, while 47 per cent struggle with mismatched skills between applicants and job requirements.
Provincial licensing and certification barriers compound the problem by preventing employers from hiring qualified workers from other provinces, particularly affecting rural areas and sectors with scarce candidates.
Pay expectations create additional hurdles
Beyond skills gaps, small businesses face challenges meeting candidate expectations. Fifty-seven per cent report a disconnect between what applicants expect for pay and benefits and what businesses can offer. Half of small businesses say they cannot provide compensation packages that match larger companies.
“Over four in ten small firms say a shortage of skilled labour is limiting their ability to increase sales or production. Many are struggling not just to find workers, but to find candidates with the right skills, expectations, and qualifications,” said Marvin Cruz, CFIB’s director of research.
Productivity concerns mount
Even when positions are filled, businesses often deal with poor productivity, lack of motivation, and weak problem-solving skills among employees, forcing owners to spend more time on training and rehiring instead of running their operations.
“There’s a growing disconnect in Canada’s labour market between small business needs and the available workforce. Even when roles are filled, businesses often deal with employees’ poor productivity, lack of motivation, and weak problem-solving skills. Business operations and output are then lacking, while owners are often forced to spend more time training or rehiring workers instead of focusing on running the business,” said Alchad Alegbeh, CFIB’s research analyst.
Policy recommendations target training and mobility
To address workforce quality issues, CFIB recommends governments introduce tax credits and grants for small businesses that invest in employee training and upskilling. The organization also calls for wage subsidies or employment insurance premium holidays for businesses hiring and training new or inexperienced workers.
The federation suggests encouraging partnerships between small businesses and educational institutions to create apprenticeship and internship programs that bridge skills gaps.
For labour mobility, CFIB wants governments to mutually recognize regulatory requirements and allow licensed professionals to work within their existing training scope while completing registration processes in new provinces. The organization also recommends streamlining registration processes with clear timelines and compensation for businesses when approval deadlines are missed.
“Since 2021, wage costs have gone up, but productivity has stagnated. By improving our workforce quality and removing labour mobility barriers, we could boost our productivity and strengthen Canada’s economic competitiveness,” Cruz concluded.
The Canadian Federation of Independent Business represents 100,000 small and medium-sized businesses across all industries and regions in Canada.
