Decoding Canada’s ongoing ‘skills crisis’
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Laid-off welders in Ontario sit idle, while oilsands employers in Alberta are chronically short-handed. High-skill jobs go unfilled, yet university graduates can’t find work. Canada has 1.33 million unemployed workers, yet business hired 338,000 temporary foreign workers last year, citing shortages in such low-skilled jobs as fast-food servers.
Why? One reason cited has been called the skills mismatch or skills shortage, phrases that refer to the growing gap between the skills Canadian employers say they need and the ones job seekers can provide.
Employers say it’s one of the toughest challenges they face; the federal government made it the centrepiece of its 2013 budget, with a training incentive grant for employers called the Canada Job Program.
Labour groups, meanwhile, say the skills crisis has been overblown by employers looking for a way to keep a lid on wages and training costs.
On all sides, there’s precious little agreement about what the skills shortage is, how to address it, and whether it even exists.
There is, however, agreement on the need to address the growing problem of what one observer has called “People without Jobs: Jobs without People.”
How pressing is the ‘skills gap’?
Like other advanced economies, Canada has an aging population and a rapidly changing economy.
As the first wave of baby boomers hits retirement age and younger people stay in school longer, the percentage of Canadians in their prime earnings years begins to shrink, taking with it Canada’s capacity to fund everything from pensions to education.
John Manley, president and chief executive officer of the Canadian Council of Chief Executives, has called it a “demographic time bomb.”
Critics say the impact of this demographic shift is being overstated, saying the warnings ignore the fact many baby boomers are already staying in the workforce longer, either because lifespans are lengthening or they need to recover retirement savings lost in the recent economic downturn.
The federal government’s own data shows the overall labour market will remain “in balance” over the next decade, much like it is today.
The Canadian Occupational Projection System predicts Canada will create 6.5 million new jobs and 6.3 million new job seekers — including recent graduates and immigrants — between 2011 and 2020.
Retiring baby boomers will play a huge role in the creation of job openings, the study acknowledges, creating nearly two-thirds of the vacancies, while economic growth will account for the rest.
At the same time, globalization has intensified the competition from lower-cost countries, creating a growing pool of jobless Canadians at the low-skilled end of the workforce, while technology changes the nature of work.
“The new jobs require more education, more specific skills than the professions of the past,” said Benjamin Tal, deputy chief economist at CIBC World Markets. “And we are competing with China and Mexico. And we lose low-skilled employment to those countries.
“The nature of those jobs is changing. So the nature of training and education is changing. The labour market is changing faster than our ability to adapt to it.”
Business groups like the Canadian Chamber of Commerce say if nothing is done to address these challenges, we could have a shortfall of 1 million skilled workers by the end of the decade. That could mean lower productivity and longer waits for service. “A crisis that had been hidden by the recession has become fully apparent,” the chamber said in a policy paper outlining its top 10 public policy priorities.
Labour groups, however, say the skills crisis has been overblown. “In very rare industries and very rare regions, labour markets are tight,” said Jim Stanford, economist with the Canadian Auto Workers. “But we should not for a minute accept at face value the claim that there’s a generalized labour shortage or a generalized skills shortage in Canada.”
By his reckoning, the skills mismatch might account for, at most, 100,000 unfilled positions across the country. Meanwhile, up to 2.3 million Canadians are either unemployed, underemployed or have given up looking for work, he said.
Before the recession of 2008-2009, Canada’s national unemployment rate was a relatively low 6 per cent. By August 2008, it had hit a high of 8.7 per cent.
Since then, it has fallen back to around 7.2 per cent, or about 1.33 million people, according to Statistics Canada. But that’s still high by historic standards.
The number of job openings, meanwhile, has declined. In January, it was 200,000, down 22,000 from a year earlier. As a result, there were 6.5 job seekers for every available job, up from 6.1 per cent a year earlier.
Labour economist Erin Weir of the United Steelworkers Union said that’s proof Canada’s biggest challenge isn’t a lack of skilled workers. It’s the lack of job creation by employers.
Bank of Canada Governor Mark Carney has also chastised Canadian employers for sitting on piles of cash instead of pursuing growth opportunities.
If there are gaps, where are they?
That doesn’t mean labour markets aren’t tight in some regions, and some occupations.
For instance, Alberta’s unemployment rate is just 4.4 per cent, as global demand for oil fuels a resource boom there. There’s plenty of anecdotal evidence that even fast-food restaurants are having trouble hiring in that province.
Some 30 per cent of employers across Canada say they face a skilled labour shortage, double the rate seen just three years ago, CIBC’s Tal said in a report last December.
But employer surveys are highly subjective, he wrote in The Haves and Have Nots of Canada’s Labour Market.
The Canadian Chamber of Commerce said there’s a limit to how much employers can raise wages to attract and retain workers.
“I talked to a guy last year in Newfoundland who couldn’t find people to staff his pizza chain. Why couldn’t he pay more and keep them on the job? Because he couldn’t charge $40 for a pizza,” said chamber senior vice-president Warren Everson.
Is the shortage severe enough to cause employers to raise wages or spend more on training, he asks? Only in some fields, Tal found.
Right now, CIBC’s Tal found the largest skills shortages in health care, the mining industry, advanced manufacturing and business services, sectors enjoying the highest wage increases and lowest unemployment rates.
At the other end of the spectrum, the pool of unemployed people is growing in clerical services, food services, recreational guides, personal services, and sales and service, Tal wrote.
Looking ahead, federal government data predicts there will continue to be shortages and surpluses in specific industries, though they’re not the ones you’d expect from listening to many employers talk about the “skills crisis,” said Alex Usher, president of Higher Education Strategy Consultants in Toronto.
Most shortages will be in management, health care and business services, the report by the Canadian Occupational Projection System shows.
Yet, no one in government is talking about a looming shortage of nurses, Usher said.
Why can’t we agree on where the gaps are?
Canada needs to do a better job of collecting and disseminating reliable labour market information, the kind employers, students and policy-makers can rely on to make good decisions, observers say.
“Our data is horrible,” said Rick Miner, a former Seneca College president who took part in a federal labour market advisory panel in 2009. The U.S. and most European countries do a much better job of tracking the job market, he said.
When the federal government, under Prime Minister Stephen Harper, cut Statistics Canada’s funding and also the long-form census, it left an information vacuum, said Miner, now a partner in the Toronto-based management consulting firm Miner & Miner.
In its place is a hodgepodge of conflicting claims by employers and labour groups and a lot of anecdotal evidence.
“The problem is everybody’s got a vested interested here,” Miner said. “You’ve got to be very careful what you believe and who you believe.”
The Canadian Occupational Projection System is based on outdated “national occupation codes,” the official descriptors of hundreds of job categories, he said. “There’s no apps developer, no windmill technician.”
It doesn’t take into account the fact that jobs evolve over time and require new skills, Miner added. For example, even hotel housemaids now require some training in technology as hand-held devices are used to track which rooms need cleaning. Nor is it able to predict future kinds of work, he said.
“Think of iPad, or Kijiji, or cloud computing,” he said.
Miner believes the country is facing a widespread crisis of skilled workers, a term broadly defined to include anyone with more than high school education.
While 62 per cent of Canadians now achieve some form of post-secondary education — including apprenticeships, college and university — he said that figure will need to be closer to 70 per cent by the end of the decade.
“There’s an increased need for people who are in more skilled categories,” Miner said. “That doesn’t mean simply trades. Technicians, technologists, engineers, research scientists.”
Yet, more and more young people are enrolled in the humanities and social sciences, he said, “programs that don’t have an obvious link to the economy. How many philosophers can we employ in the world? Or historians?” Miner asks.
“We’ve got some real serious problems in front of us that are going to require some innovative solutions.”