Employment Practices and Skill Demands in Canada: A National Survey

Small and medium-sized enterprises (SMEs) represent the bulk of private sector employment in Canada. Despite their critical role in the economy, SMEs face persistent labour and skill shortages, limiting their capacity for business growth. While there is widespread recognition among SME owners and executives of the importance of investing in workforce training and employee retention, many do not possess the resources to adequately address these gaps. Labour and skill shortages may adversely impact businesses in several ways, including their cash flow, time allocation, and future planning.

In this study, we draw on first-hand experiences from 1700 SME business executives and owners by telephone interviews to better understand specific labour-related challenges facing SMEs. We focus on the ways in which contemporary pressures— including the adoption of artificial intelligence and the imposition of U.S. tariffs on Canadian exports—are shaping skill demands, employment practices, and organizational performance and capacity.

• About 28% of SME respondents have experienced difficulties filling job vacancies in the last six months.
• Among employers who experienced difficulties filling vacancies, 34% attributed these difficulties to a lack of skills as the primary reason.
• The most in-demand roles were technicians/tradespeople and production workers. This suggests that Canadian businesses may be increasingly dependent on immigrant workers in the future to address labour and skill shortages.
• About 30% of respondents reported that their firm was using artificial intelligence (AI) in some capacity.
• 20% of respondents indicated that their business had intentions of expanding AI adoption in the future.
• Among respondents whose firms engage in exporting, 66% indicated that United States President Donald Trump’s tariffs on Canada would adversely impact their business.
   

Only a subset of SMEs experienced difficulties filling job vacancies in the last six months. Firms primarily operating in Atlantic and Western Canada report a higher incidence of hiring challenges, consistent with relatively higher job vacancy rates observed in these regions.Notably, only a relatively small proportion of respondents report using AI in their business, especially when compared to counterparts in other high-income countries. Canada’s slow-paced adoption of AI poses a significant challenge, particularly as the rapid expansion of the digital economy presents a profound opportunity for productivity gains. In order to encourage AI adoption, there is a need to bring awareness of AI tools and their benefits to business professionals. In the next few years, it is essential to measure the prevalence of AI adoption, understand barriers to implementation, and derive best policy practices to address