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A closer look at the single biggest long-term threat to Canadian economic growth

The Jobs Report: What to do about a massive shortage of qualified workers


 
Why Canada doesn’t work

Fernando Morales/The Globe and Mail/CP

On a recent February evening, Karl Eve received an emergency call from a restaurant owner in Canmore, Alta. The busy eatery had suddenly found itself with no hot water, even though the basement hot water tanks appeared to be working fine. A plumber with 10 years’ experience, Eve eventually traced the problem to a malfunctioning dishwasher and got the hot water flowing again—much to the owner’s relief.

It’s the sort of detective work Eve says he loves about his job. He also likes that his plumbing business, which he runs with his wife in nearby Exshaw, provides his family with a comfortable middle-class lifestyle. But it was a career he very nearly missed. Never a fan of textbooks, Eve ended up toiling in a southern Ontario gypsum mine after high school. It was only after moving to Alberta years later that he considered a career in the trades. A chance meeting at a church potluck led to a ride-along with a local plumber and, ultimately, an apprenticeship. “I discovered there was a lot to learn, especially when it came to math,” Eve says of his four years of training, which included eight weeks a year in a classroom. “The amount of education was very surprising to me, but in a positive way. I grasped it with both hands, so to speak.”

Eve’s story is more rare than it should be in Canada. Many consider the trades to be low-paying, go-nowhere jobs, if they consider them at all. But it’s a perception not grounded in reality, as Eve’s healthy hourly rate of $90 to $135 suggests. Nor is it one Canada can afford to maintain. Numerous studies warn Canada is facing a massive shortage of skilled workers over the next few decades as millions of baby boomers hit retirement age and exit the workforce.

At the same time, the nature of work itself is changing as the country transitions to a so-called knowledge economy that relies on a well-trained and highly educated workforce to produce value-added products and services. Those without the necessary skills could soon find themselves unemployable. The Canadian Chamber of Commerce estimates there will be 550,000 unskilled workers who won’t be able to find work by 2016. By 2021, it says, the number could be well over a million. At the same time, it’s estimated there will be 1.5 million skilled job vacancies in 2016, and 2.6 million by 2021.

Economists call it a skills “mismatch.” The country is in dire need of engineers, health workers and skilled tradespeople. Yet tens of thousands of students continue to pursue degrees in the arts and humanities. The result is an unemployment rate that refuses to fall below seven per cent (about 13.5 per cent among youth), while employers increasingly complain about vacant jobs that promise good wages—particularly in Western Canada, where the oil, gas and mining industries are booming. “The new phenomenon here is that we’re going to be seeing pockets of persistent high unemployment existing right alongside serious worker shortages in particular industries,” says Perrin Beatty, a former member of Parliament and the chamber’s CEO.

Hence, Canada not only needs to encourage more people to enter the workforce, but to ensure everyone will be productive once they get there. That’s a tall order in a country where, incredibly, nearly half of all adults don’t have the necessary literacy and numeracy skills to participate in a modern economy. As a result, experts say a dramatic rethink of how our post-secondary system works is in order. Though Canada’s universities are among the best in the world, critics argue for a much greater focus on colleges and polytechnic universities, since the latter are better plugged into the business community. Others say the country needs to do a better job of informing young people about the breadth of high-paying career opportunities in a modern economy.

The trend toward “people without jobs, jobs without people” poses the single biggest long-term threat to Canadian economic growth, exacerbating Canada’s already lagging productivity and innovation, according to one recent report. But attempts to head off calamity are so far being met with the usual obstacles. Companies complain about the additional cost of training employees; unions are wary about foreign workers taking local jobs; and parents continue to try and steer their children into a few prestigious professions. Something has to give. “We have a skills problem well on its way to becoming a crisis,” Beatty says. “And you need only look at the demographic wedge that we’re confronting to see that the problem is only going to get worse.”

A recent report by the Canadian Imperial Bank of Commerce suggested as much as one-fifth of Canada’s labour market already suffers from too few qualified workers, particularly in the health care, mining, business services and advanced manufacturing sectors. The average unemployment rate for those jobs is just one per cent, while workers in those positions are seeing wage gains of nearly four per cent annually, more than double that of the broader economy—a telltale sign of a labour shortage.

At the same time, the CIBC report noted a surplus of employees in occupations such as food services, clerical work, sales and recreational guiding—a group that collectively accounts for about 16 per cent of the workforce. Another study, released last week by the C.D. Howe Institute, noted that the mismatch is especially problematic in the Western provinces of Alberta, Saskatchewan, Manitoba and British Columbia.

Evidence of the shortage is already popping up in day-to-day life. In Alberta, the booming oil sands have sucked workers away from dozens of other occupations, some of which—like policing—were already experiencing shortages. As a result, Calgarians who get pulled over by the police are just as likely to be questioned in a British or Scottish accent following a U.K recruitment drive several years ago. Other provinces, meanwhile, are preying on foreign countries that are still recovering from the 2009 global crisis. Saskatchewan is targeting Ireland, which required a bailout from the European Union and International Monetary Fund, for a fresh supply of heavy duty mechanics, welders, engineers and machinists.

But such cross-border shopping for talent threatens to become a problem in its own right. A survey of 38,000 companies in 41 countries last year by Milwaukee’s ManpowerGroup found that one-third were unable to find enough workers with the right skills, suggesting a global shortage is emerging. One country’s gain can quickly become another’s loss. “Highly skilled people are extremely mobile,” explains Beatty, adding that it creates disincentives for employers and government to pour money into training programs, lest all those newly skilled workers get poached.

The flip side of Canada’s skills mismatch—all those bartenders and baristas with expensive university degrees—is also troubling. Not only are underemployed Canadians contributing below their full potential, they’re creating a domino effect by taking jobs away from those without skills who can’t find work. The economic impact is potentially huge. At a time when the Bank of Canada is trying to juice business activity with continued record-low interest rates, CIBC chief economist Avery Shenfeld argues that Canada’s “labour market mismatch is big enough not only to reduce the effectiveness of monetary policy, but also to limit the growth potential of the labour market and the economy as a whole.”

In a recent speech, Diane Finley, the minister of human resources and skills development, compared the situation to a man listening for an oncoming train by putting his ear to the tracks. “Well, folks, it’s time to stop listening for the train, because it’s bearing down on us,” she said, citing a PricewaterhouseCoopers survey that found two-thirds of CEOs ranked the lack of key skills as the biggest threat to their growth prospects. “Canada’s economy is changing, the workplace is changing and we all have to change with it.”

Nor is the problem simply constrained economic growth. Although there’s some debate about when the full force of the baby-boomer retirement wave will hit—many Canadians are working past the age of 65 and the lingering effects of the 2009 recession have caused many businesses to hold off on hiring—some experts are forecasting a profound shift in the way the entire economy works. As Canadians get older, on average, they’re expected to spend less money while putting a greater strain on health care, pensions and old-age security. Those services, in turn, will be supported by a declining number of working-age Canadians. “We’re going to be in a hell of a problem unless we find ways to increase the size of the workforce and encourage higher participation rates,” says Rick Miner, the president of Toronto consulting firm Miner & Miner, which published a report on Canada’s labour challenges last year. “We’re not going to have the resources to provide ourselves with the services we’ve come to think of as normal, whether it’s health care or anything else.”

Ottawa is taking the threat seriously, and one of the biggest weapons in its arsenal is the country’s immigration system. The federal government has already announced changes, to take effect this spring, that would place a greater emphasis on younger workers and speed up the process employers must go through to hire new Canadians in occupations where there are immediate labour shortages.

But immigration alone won’t be a panacea. Many new immigrants tend to settle in big cities like Toronto and Vancouver, where there are big ethnic communities and established social networks. By contrast, many of the most acute labour shortages are in the country’s hinterlands, where oil and mining companies’ operations are based. There are also problems with the recognition of foreign credentials and language skills, which has traditionally led to a much lower workforce participation rate for first-generation immigrants. Whereas roughly 82 per cent of Canadians between the age of 25 to 54 have historically participated in the labour force, the corresponding number for recent immigrants is just 63 per cent, according to Statistics Canada. It remains to be seen whether policy changes that target workers with high-demand skills will be able to dramatically narrow this gap.

Individual industries face their own problems with foreign workers. Beatty, for example, notes that the trucking industry is suffering a critical shortage of drivers, which could have an outsized impact on the economy, given the importance of truck transport to North American supply chains. “Increasingly, we’re having to look at new immigrants to fill those jobs,” he says. “But that poses a problem because security requirements at the border limit the countries drivers can come from if they want admission to the United States.” There’s also the risk of a backlash if foreign workers are perceived to be favoured for jobs that might otherwise go to Canadians. In B.C., a mining company recently found itself the target of a union lawsuit after it hired about 200 foreign temporary workers from China. They’ve since been sent home.

Finding more workers is only one side of the equation. “We also need to look at the educational side,” says Miner. “That’s where the real payoff is.” Despite Canada’s solid public schools and high-quality post-secondary institutions, 48 per cent of adults lack sufficient literacy skills “to function well at work and in daily living,” according to Human Resources and Skills Development Canada. While Canada actually scores relatively high—about fifth out of 20 developed countries— on basic reading, or “prose” literacy, it falls to the middle of the pack on “document” or “quantitive” literacy skills, which involve things like reading charts and graphs or balancing a chequebook. All of which suggests that many Canadians are increasingly ineligible for the occupations of today, let alone the jobs of tomorrow.

High-tech skills are becoming a prerequisite for many jobs. “Everything we do is heavily laden with technology—even down to drywall installation,” says James Knight, the president of the Association of Canadian Community Colleges. “I don’t know if you’ve watched this recently, but it’s all done with lasers bouncing around the room.” He estimates nearly 75 per cent of jobs now being created in Ontario require a post-secondary education, but that only about 58 per cent of the population has one. “The people we need require a much more sophisticated level of education,” he says. “And we’re simply not there yet.”

Click on the chart to enlarge (Created by Amanda Shendruk)

Also key is making sure Canadians receive the right training. Miner, for one, argues that government efforts to encourage innovation by pumping billions into university research over the past 30 years may have actually exacerbated the country’s labour woes. While all that money has resulted in exciting discoveries and publications in elite journals, it hasn’t necessarily done a great job in preparing graduates for the workforce. “You have parents that desperately want to make the right decision for their kids. And you can’t fault them if they want their kids to go to university,” Miner says. “But what parents don’t realize is that you can get a great career through college, and better earning potential. But the status just isn’t there.” Universities, on the other hand, cite stats that show graduates have filled 1.3 million of the 1.5 million new professional and management positions created over the past two decades.

Knight says it’s ultimately a question of finding the right balance. He argues that colleges are particularly well-suited to bridging the divide between academics and training because they already work closely with industry to develop their programs. He cites a four-year degree at B.C.’s Selkirk College that focuses on geographic information systems, including GPS applications used heavily by the forestry and mining industries. “Where in a university calendar would you find anything about GPS?” he says. “At a time when the principal constraint on economic growth in this country is a shortage of human capital, we really have to think about what we’re emphasizing and where we put our resources.” He adds that the post-secondary system would benefit immensely if students could move more seamlessly between colleges and universities, noting that as many as 20 per cent of college applicants already have a university degree. “Obviously, it’s not efficient to spend six years in post-secondary education when considerably less might have done the job,” he says.

Another limitation of the current system, according to a recent study by the Organisation for Economic Co-operation and Development, is that Canadian university research, though top-notch, has a poor track record of finding its way into the commercial sphere. In contrast, colleges are developing a niche for themselves by having faculty and students work closely with smaller companies to develop new products and services—applied research that can be immediately implemented in the marketplace. Nobina Robinson, the CEO of Polytechnics Canada, which represents 11 colleges and institutes of technology, says the trend not only promises to boost Canada’s innovation across a variety of sectors, but will equip future employees with skills that employers need to be successful. “The knowledge economy is always saying we need more M.B.A.s and Ph.D.s,” Robinson says. “But to come up with big discoveries and innovative breakthroughs, you actually need people who can make, design and build things, too.”

Among the recommendations Polytechnics Canada has put forward to Ottawa: more government support for applied research and commercialization programs; more focus on apprenticeship and pre-apprenticeship programs; and a requirement that bidders on government contracts create apprenticeship positions as a condition of their bids. Fewer than half of Canadians who register as apprentices every year actually go on to become certified. The reasons are many and vary across provinces and industries, but Robinson cites a general unwillingness among many employers to take on apprentices—possibly because they fear rivals will steal their newly trained workers. A study last year by the Conference Board of Canada showed that investment in employee training among Canadian companies has fallen nearly 40 per cent since 1993. “We need to reward employers through the tax code who invest in training,” Robinson says. She adds that governments could also do a much better job of making the apprenticeship process more attractive. “The philosophical issue is that when you pay an apprentice through [Employment Insurance] to do their in-class portion of their study, they’re being treated as an employee, not a learner,” she says. “If we want more skilled tradespeople, we’ve got to change.”

Back in Exshaw, Karl Eve’s wife, Michelle, a former teacher who, incidentally, has two university degrees, says Canadians who believe that university education is the only path to prosperity are selling themselves short. She recalls her own initial feelings when her husband announced he wanted to become a plumber. “I just had that sense, which we’re all a bit guilty of, I think, that the more capable people go to university and the less capable people end up in technical schools,” she says. “But when I saw what Karl was doing, the level of mathematics really impressed me. It’s stuff that most people just don’t know.” And unless more people make a similar discovery, Canada is going to have a lot more to worry about than leaky pipes.

Where are all the jobs?

Despite persistent high unemployment in Canada, many occupations are expected to face serious shortages of qualified workers over the next decade. The following shows the percentage of job openings that are forecast to go unfilled in each occupation, with more vacancies than actual job seekers.

Technical sales specialists, wholesale trade 23%

Logging and forestry workers 27%

Finance and insurance administrative occupations 28%

Stationary engineers and power station and system operators 28%

Cleaners 30%

Service station attendants, grocery clerks and shelf stockers 31%

Administrative and regulatory occupations (e.g., court officers) 34%

Transportation officers (e.g., pilots, air and marine traffic controllers) 34%

College and other vocational instructors 34%

Insurance and real estate sales workers and buyers 35%

Mine service workers and operators in oil and gas drilling 36%

Managers in protective services (e.g., police, fire, armed forces) 38%

Positions in agriculture, horticulture and aquaculture 38%

Administrative support clerks 40%

Logging machinery operators 40%

Technical jobs in libraries, archives, museums and galleries 45%

Supervisors in mining, oil and gas 58%

Secretaries, recorders and transcriptionists 71%

Supervisors in logging and forestry 100%

Beware: jobs expected to have too many workers in the next 10 years:

Managers in art, culture, recreation and sport

Security guards

Athletes and coaches

Fishing vessel skippers

Cashiers

Computer and information system professionals

Chefs and cooks

Pulp and paper machine operators

Physicists and astronomers

Geologists


 

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