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Is Canada’s ‘skills gap’ really a non-issue?

Making the case for a looming labour shortage


 
The worker factory

Camosun College AV Services

A number of business groups, labour consultants and politicians are warning of a looming labour market crisis in Canada. The threat is two-pronged: a wave of baby boomers about to hit retirement age and a growing “mismatch” between the skills job candidates possess and those employers require. The Canadian Chamber of Commerce says there could be more than one million people unqualified for available positions by 2021.

But this week economists at TD Bank said the concerns are overblown. The report, written by deputy chief economist Derek Burleton and three others, suggests Canada’s job market has been relatively robust in recent years. “There is some evidence of tightness across certain occupations and regions, but the analysis failed to provide a real smoking gun,” the authors wrote.

Crisis averted? Not necessarily. Rick Miner, a consultant who has written several reports on Canada’s labour market, including one in 2010 called “Jobs without people, people without jobs,” says the TD report is mostly focused on the current labour market, which he concedes doesn’t look nearly as bad as it did just a few years ago. His most recent research shows that worker shortages have indeed become less acute in some occupations. That’s because Canadians over the age of 55 are lingering in the workforce and a weak economy has caused some employers to dial back hiring. More people are also getting a post-secondary education.

The problem is there’s no guarantee those mitigating trends will continue indefinitely, whereas Canada’s shifting demographic profile isn’t going anywhere. It’s also unlikely that Canada’s research-focused (as opposed to skills-focused) post-secondary education system will suddenly start producing thousands of highly-skilled workers. Miner writes in an email:

They [TD’s economists] are reluctant to project into the future, but then go into explanations of what could happen to minimize any labour force shortages. That is really the point of my current and earlier research. We can either proactively attempt to make changes to increase the size of the work force/skill levels or we can assume, as TD does, that economic principles will take care of the problem and the market will adjust itself. I am less willing to assume that economic principles/theory will rectify the situation the way we would like to see it occur.

The problem could be rectified by off-shoring more jobs in cases where an appropriate labour force was not available. It could also be solved by moving business to jurisdiction with better labour supplies. One could also decide to use capital to substitute for labour, which might have some good points but could negatively impact on employment unless the new technology was made in Canada. There are others (Canadian Chamber of Commerce, Economic and Social Development Canada, Labour ministries in B.C., Alberta and Saskatchewan, numerous industry associations, IBM, Engineers Canada, etc.) that say there is a labour shortage and it is constraining their growth. I guess the biggest question is whether classical economic approaches are the ones we should use to understand the future.

Miner says his data continue to show a projected labour shortage though 2031, with labour market mismatches being driven by supply-demand issues, underemployment and geographic disparities.

Getting a handle on the issue is difficult due to a dearth of labour-market data (it doesn’t help that the federal government decided three years ago to scrap the long-form census)—something TD readily admits in its report. For example, TD noted there’s scant evidence of rising wages in Canada, which one would expect to see if employers were having a tough time finding workers to fill positions. That’s even the case in Western Canada, where labour shortages are well-documented. “A number of factors could be holding back wages, including competitiveness pressures and the preference of employers to use non-wage channels to address hard-to-fill vacancies,” the TD economists wrote. “We do not rule out the possibility that the data are under-estimating wage pressures, as the figures we reviewed do not include bonuses and other incentives, but instead account for just hourly wages, tips and commissions.” Also a possibility: employers have been leaning on Canada’s Temporary Foreign Worker program to fill positions without resorting to wage hikes. That’s likely what’s occurring in the restaurant sector, a big user of temporary foreign workers, where consumers can be sensitive to even small increases in the price of a cheeseburger.

Many in corporate Canada remain convinced that the labour pool needs to be retooled. In this week’s issue of Maclean’s, Bombardier CEO Pierre Beaudoin talks about the importance of convincing more young people to enter the skilled trades, which can lead to high-paying jobs in cutting-edge industries such as aerospace. “We try to learn from our other plants in the world,” he says. “One of the advantages that we see in Europe is these very well-developed apprentice programs—especially in Germany and the U.K. We need to put an emphasis on developing these trade schools again.”

Canada’s labour market may not be in crisis at this very moment, but that doesn’t mean there aren’t significant challenges ahead. And there’s little harm in taking steps to improve Canada’s competitiveness in the global economy (we rank among the bottom half of OECD countries when it comes to productivity). Even TD’s economists say as much. “Canada can do much better to improve the efficiency of its labour market,” the authors wrote. “Greater labour market information and other targeted strategies and policies would help in this regard. Furthermore, a more skilled workforce and efficient labour market is a vital component to achieving and sustaining improved productivity and economic growth over the long haul.”


 

Is Canada’s ‘skills gap’ really a non-issue?

  1. I really believe that with the massive amount of Canadians that are out of work, and continue to through mud at the Tories for it, this is in fact a non-issue. Jobs will open up and people will find work. Sounds like good news to me!

  2. ‘It’s no secret that we’ve had this very strange economy for 10-plus
    years now where the economy keeps growing, but wages are stagnant and
    the share of labour as part of gross domestic product is declining. I
    firmly believe that’s the beginning of the post-industrial age. It’s the
    age that’s been talked about since the late-70s, but has finally
    arrived, where machines are better than humans at a lot of things. So
    the demand for human labour is actually decreasing’

    Yes, the answer is right here on the same site.

    http://www2.macleans.ca/2013/10/24/qa-venture-capitalist-albert-wenger-on-how-the-internet-is-transforming-society-and-why-the-death-of-privacy-is-a-good-thing/

  3. Every single employer, business group or individual I have ever been associated with who parroted the “we can’t get workers” was simply a d i c k to work for. Why is it we never hear the top ranked Canadian companies spewing this rubbish? This so called “labour shortage” is a concerted effort to drive down wages, absolve employers from training employees and kill the middle class. What is truly disturbing is the amount of middle class Canadians who just don’t get it and often repeat the lies.

    • It’s the same all over the world Les….not a plot by Canadian business

      • Read the headline and associate it with my response, things might become a bit clearer for you.

        • I repeat…it’s the same all over the world. Not a Canadian plot.

  4. I think not only the Canadians are having this kind of problem. I think Canadian company are looking for some high class workers that the middle class workers don’t get it.

    • Yes, technicians not assembly line workers….or plumbers.

  5. It does seem a bit silly to plan and project skills shortages for 30 years or more. Who exactly can confirm the skills shortages experienced now (real or imagined) will be even required 30 years from now?

    There were certainly no skills shortages when ‘globalization’ became necessary to capitalists and then most of the current skills demands at that time became redundant when all of the jobs moved to third world economies.

    To me the most obvious and important skills shortage in the past 30 years are real reporters. We have far too many that simply regurgitate what shows up on ‘release’ web sites like (AP). This is an excellent way to control news isn’t it? Useless stories are now headlines, investigative reporters are so few, media owners control reporting so it falls in line with private agendas…

  6. As someone who went through an apprenticeship in the 1980’s it does not surprise me that there is this continuing discussion about a shortage of trades people. The 80s and 90s were for the most part, lousy decades for the construction trades. Tradespeople have not encouraged their children to enter the trades. You hear the same issues in Information Technology. People invest a lot of time and energy to enter the business and are then downsized. One company I worked at had the employees train their replacements from India and then were shown the door.

  7. Hit the nail on the head but don’t realize it, wages haven’t risen because there is no reason to pay more, this skills shortage is nonsense except for maybe a few niche areas, its an excuse to not pay market wages, bring in foreigners for less then market wage, hire people on contract for peanuts and claim poverty to get government handouts
    Its “good” business, and nice logic the conservative government can use to increase corporate profits

    but we should not worry, the discredited trickle down economics will keep us off the streets if we wait longer, just pretend your not actually on the streets when you end up there

  8. There IS NO labour shortage, skilled trade or otherwise. This line from the article hits the nail right on the head: “…there’s scant evidence of rising wages in Canada, which one would expect to see if employers were having a tough time finding workers to fill positions”. I live in ON and work in the IT field. I’ve been looking at job boards for desktop support roles in AB (where worker shortages are arguably more pronounced). Despite this, wages there for similar roles are not substantially higher (if at all) than they are here, not even taking into account the higher cost of living. If there was any truth to these claims of worker shortages compensation would be markedly higher; they’re not. Wages have for the most part been stagnant since the early 80s; consumers’ purchasing power has dropped significantly since that time. Now it seems there’s a race to the bottom by corporate Canada to pay their workers as little as possible which is decimating the middle class. The irony is that if this keeps up eventually few will be able to afford the very products and services these companies are selling. Who can afford to buy a $25,000 car when they’re making $12 an hour? I also think the TFW program should be scrapped altogether. It has served only to absolve employers of the need to hire and train locally. There are plenty of qualified, unemployed Canadians that would love to have these jobs but companies here are short-sighted. All they care about is the bottom line; they just want cheap labour. They have no loyalty or allegiance to Canada or Canadian workers. Shame on them. Sooner or later it will come back to haunt them.

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