Canada’s labour pain: 1.3 million jobless, but not enough skills

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Some companies may be having a tough time finding suitable new hires – but Canada's problem, at least right now, is not a labour shortage.

For all the hue and cry about shortages, it's tough to find hard data to support the claims.

The number of job vacancies, at last count, are at the same level as a year ago and so is the ratio of unemployed people to job openings. The Bank of Canada's business outlook survey shows shortages are far less acute than before the recession. And while the jobless rate has fallen in recent months, 1.33 million Canadians are out of work, a higher number than before the downturn (it was 1.11 million in October, 2008).

Yet the Canadian Chamber of Commerce says the country is developing a "desperate" labour shortage and it is the number one threat to competitiveness. Federal government officials and others maintain Canada has a "skills and labour shortage."

Maybe it's time to untangle one concept from the other. Anecdotal evidence suggests skills shortages certainly exist in some job areas (accounting) or provinces (Saskatchewan). The near-term challenge for the country is to make more efficient use of its existing labour pool. In the March budget, the government introduced the Canada Job Grant, which is meant to provide up to $15,000 per person to train Canadians for jobs in "high-demand fields" – assuming the provinces and the private sector are willing to kick in two-thirds of that amount.

"Canada has an army of unemployed people, and long-term unemployed people," says Benjamin Tal, deputy chief economist at CIBC World Markets, who has studied the topic. A labour shortage isn't the problem.

"The skills mismatch is costing the economy ... and that affects everyone."

By his calculations, filling every open job in Canada with a suitable worker would generate an extra $5-billion a year for the federal government in higher tax revenue and reduced jobless benefits.

But to do that, the onus has to shift to parents, students and guidance counsellors to give better advice about career prospects – and de-stigmatize jobs in, say, skilled trades – Mr. Tal said. And employers must also step up.

Companies need to "identify people and invest in them, and I don't think we're seeing enough of that," he said, echoing observations by both the World Economic Forum and the Conference Board that Canada lags in on-the-job training. A 2011 Conference Board study said that investment in worker training has fallen about 40 per cent since 1993.

Some firms are taking matters into their own hands, given an aging workforce and longstanding challenges of luring young people into some areas, such as the trades. Gray Tools Canada Inc., which makes industrial-quality wrenches, pliers and screwdrivers, has trouble finding young people with the exact skills it's looking for.

"If they have the mechanical aptitude, we'll train them. But it takes time and investment," says Gary Nuttall, president and owner of the Brampton, Ont., firm, which employs 60 people, nearly half of whom are skilled trades people.

It spends about half a year training new hires in tasks such as how to set up and operate machines. And this month it donated $20,000 worth of hand tools to five local vocational schools to support young people interested in working with their hands.

Canada certainly has no shortage of young people looking for work, especially this time of year.

The federal government's efforts to beef up skills training for students and workers is generally welcome. But it could also bolster information on job availability and trends in smaller labour markets, as recommended in a 2009 report by Don Drummond and others.

Skills mismatches aren't just a hot topic in Canada. Many advanced nations have emerged from the recession with an abundance of labour, but too few people in areas like engineering, carpentry and auditing.

The debate around skills and training has raised a number of solutions, among them, having companies work more closely with schools (both postsecondary and high schools), beefing up apprenticeships and easing inter-provincial migration.

Generally, labour shortages tend to trigger higher wages as companies vie to attract talent – as was the case before the recession, when wages in Alberta in particular swelled amid a scarcity of workers.

In this case, wage gains have been tepid. Wage earnings likely rose just 1 per cent in the first quarter of the year – slower than the two prior quarters, according to National Bank Financial. (CIBC calls income growth in Canada "dismal.")

Job openings are at the same level as a year ago. Canadian businesses had 221,000 job vacancies in December, "unchanged" from the same month a year earlier, according to Statistics Canada. There are 5.7 unemployed people for every job vacancy, little changed from 5.8 a year ago.

More insights into the jobs market will come Friday, when Statscan releases its labour force survey for March. Economists are all over the map on what to expect – Toronto-Dominion Bank, for example, believes the economy lost 20,000 jobs, while other forecasters see slight job creation of about 5,000 or 10,000 positions.