The gap between companies’ hiring needs and workers’ skills is costing Ontario more than $24-billion in lost economic activity and is robbing the province of $3.7-billion annually in potential tax revenue, according to a new study by the Conference Board of Canada.
The review concludes that there has been a long, slow decline in employment for less-educated workers while employers are reporting growing difficulties filling certain key jobs, and argues that the gap is costing the province billions in forgone economic growth.
“Ontario cannot afford to live with a skills gap of this magnitude,” said Michael Bloom, the Conference Board’s vice-president of organizational effectiveness and learning. “The need for action is urgent, since changes in education will take years to bear fruit in the labour market.”
The Conference Board said it undertook the review because there has been much discussion about the skills gap facing employers, but little work done to quantify its financial impact. To come up with a dollar figure, the board looked at the economic gains that would result if more currently unemployed workers were to enter the labour force.
The study focuses on workers who do not have university or college degrees or diplomas – including workers with some postsecondary training who never completed a program or degree – and concludes they are 10 percentage points less likely to be employed today than they would have been 20 years ago. Employment rates for the group have fallen from 58.4 per cent in 1990 to 47.9 per cent currently.
If that group attained the skills necessary to bring their employment levels to the 1990 level, the study says, they would contribute $24.3-billion to GDP, and yield an additional $3.7-billion annually in provincial taxes and $4.4-billion in federal taxes.
The report also concludes that workers who are underemployed, in jobs that do not fully utilize their training, are costing the province $4.1-billion in forgone GDP, resulting in a further $627-million in forgone annual provincial tax revenue and $747-million in federal taxes.
The Conference Board surveyed 1,500 employers in Ontario, who reported their greatest needs are for workers in science, engineering, technology, business and finance.
Many companies said they are not simply seeking workers with advanced university degrees. The survey showed 57 per cent said they needed workers with two- or three-year college diplomas, 44 per cent needed people with four-year university degrees and 41 per cent were seeking workers with specific trades training.
The report acknowledges that better jobs “cannot be created out of thin air” and the potential economic gains may never be fully realizable, but says the findings demonstrate the value in better aligning student training with market demands.
The Conference Board calls for co-operation among employers, educators and governments to bolster training where it is most needed. It urges employers to increase their investment in training and to provide more opportunities for students to learn on the job, such as paid internships or co-op placements. It also asks educators to better align programs to market demand and communicate better with students about employment prospects.
It also says students have a responsibility to ensure they develop skills “that find a home in the labour market of tomorrow” and become “active consumers of education.” But it warns against too-narrow education tracks that leave workers without resiliency if the labour market shifts.