By Julie Gordon

OTTAWA (Reuters). – A massive exodus by young Canadian families from Canada’s major cities has drained a core group of workers. This, experts claim, could accelerate wage inflation in some industries.

The children below 10 years old and millennials or young families were the main drivers of Canada’s migration from its big cities. Reuters analysis of data showed that many people who sought more space in rural and smaller cities moved there to seek out better housing and jobs.

The drive-until-you-qualify trend has shifted mid-career workers – a key segment of the labor force – out of big cities, making it difficult to find established talent in sectors where in-person work is essential or preferred.

Mike Moffatt is an economist and the senior director at Smart Prosperity Institute. “There’s a whole type of workforce missing,” he said. You have the entry-level people but they are leaving for middle age people (those in their 40s and 30s).

According to federal data, 64,000 individuals left Greater Toronto in order to find smaller places within their respective provinces. Greater Montreal experienced a steep acceleration of an established trend. Vancouver lost 12,000 people.

Young families were the ones who sparked this rush. The data show that Toronto saw the loss of approximately 15,00 children below 10 years old between 2020 and 2021. This was in addition to 21,000 people aged 25-44. The population grew in small cities outside of Toronto.

(Graphic: Millennials, young children flee Canada’s big cities – https://graphics.reuters.com/CANADA-ECONOMY/INFLATION-EXODUS/lgvdwxgoapo/chart.png)

Home type and home price were the main drivers of this shift. Condos account for half of Toronto’s sales. The average home price in Toronto is C$1.2million ($946,074). A detached house is a common option in small cities, such as Toronto. It costs below C$800,000.

The race to space is causing faster prices outside Toronto and its suburbs.

(Graphic: Pandemic home price gains, Toronto and exurbs – https://graphics.reuters.com/CANADA-ECONOMY/INFLATION-EXODUS2/zdpxoagxmvx/chart.png)

Employers have had to raise wages to attract employees in big cities. As companies vie for skilled workers, this is leading to rapid wage growth. Robert Half (NYSE 🙂 reported that 46% percent of employers are increasing their starting salary to recruit talent.

Because they are being offered big packages, people are moving on from their current jobs. This is how the war for talent looks right now,” explained Koula Vasilopoulos – district director at Robert Half Canada.

(Graphic: Most Canadian firms see upward pressure on wages – https://graphics.reuters.com/CANADA-ECONOMY/INFLATION-EXODUS3/klvykmllbvg/chart.png)

Bank of Canada fears that inflation could be driven by fast-rising wages. Its December record of 4.8% was the highest level in 30 years. However, it claims this is not yet happening.

Stephen Tapp from the Canadian Chamber of Commerce, chief economist said that “there could be this selffulfilling cycle in which we have inflation at a 30-year-high now, so… employees start asking for higher wages as compensation for that inflation.”

That increases labor costs. It also increases the output cost, and further accelerates inflation.

To tap the large city talent pool, many big-city employers offer hybrid or fully remote roles. Statistics Canada data shows that only 25% of Canadians are now able to work from home.

According to Dan Kelly, President of Canadian Federation of Independent Business, “Canadian employers are afraid of asking people to go back to their office jobs because they fear that they will lose them all.”

Remote work is not possible in those industries that have the greatest shortages: warehousing and retail as well as manufacturing, education, and healthcare. These jobs are difficult to fill, especially as more people swap tiny, downtown condominiums for distant detached homes.

Andy Yan, Director of Simon Fraser University’s City Program, said, “It’s a whole spectrum labor, from baristas right up to hospital workers.”

“It will be hard, particularly for small and medium-sized businesses but also big businesses. He said, “How do you attract talent when housing costs are so high relative to incomes?”