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Ontario’s skills gap is costing the province billions

Former Electro Motive Diesel employee Garnet Cooke, looks over the job boards in London, Ont. A new Conference Board of Canada study says Ontario’s skills gap is costing the province up to $24-billion annually.

Deborah Baic/The Globe and Mail

Ontario's employers say they can't find the skilled workers they need. Recent graduates complain they can't find the jobs they want. The fact is, both are right – and both have reason to be concerned.

The gap between the skills employers need, and those that graduates have, costs the Ontario economy up to $24-billion annually, according to a recent study by the Conference Board of Canada.

The report (The Need to Make Skills Work: The Cost of Ontario's Skills Gap) shows that some Ontarians have weak employment prospects, in part because they simply do not have the kinds of skills and education sought by employers.

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Changing skills and education requirements in the workplace will create greater demand for graduates with education and training in science, engineering and technology, business and finance, and health-related fields. While all types of post-secondary credentials will be needed, the Conference Board's survey of over 1,500 Ontario employers – currently employing more than 750,000 people – shows there is particular interest in graduates with college diplomas (57 per cent), four-year degrees (44 per cent), and trades certification (41 per cent).

To be sure, while skills shortages loom, unemployment also remains a problem. Ontario labour market statistics show that there are eight people unemployed for every job vacancy. But aggregate numbers mask the reality that in specific industries, unemployment-to-job-vacancy ratios have already tightened considerably.

In industries such as finance and insurance, transportation, wholesale trade, and health and social assistance industries, there are fewer than three job-seekers per job vacancy. In the health care and social assistance sectors the ratio is almost even, with only 1.2 job seekers for each vacancy, reflecting the increasing health-related needs of our aging population.

Skills mismatches help explain why high unemployment persists in some areas alongside skills shortages. Although there are many well-educated graduates, their training and education does not always align with the skills needed in the economy. Ontario has a world-leading rate of post-secondary graduates in its population: 57 per cent of Ontarians have obtained post-secondary education credential, compared to 30 per cent across the Organisation for Economic Co-operation and Development countries. But Canada has the highest percentage of individuals with post-secondary credentials who actually earn less than the average median income.

Skills mismatches do not imply that people are overeducated, as some suggest. On average, there is still a significant earnings premium for post-secondary graduates across a range of fields. The employment prospects of those with post-secondary credentials are also much better than those without: An estimated 81 per cent of the jobs lost in Ontario during the recession were among individuals without post-secondary credentials. And jobs for this cohort do not appear to be returning.

The Conference Board's work looks at what employers, educators, governments and individuals should do to ensure that graduates have the skills that employers need to power future economic growth and prosperity.

Given the time it takes to prepare future students for the jobs of tomorrow, it is important that action be taken now – particularly as large numbers of baby boomers prepare to exit the workforce in the years ahead, taking their skills and experience with them.

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James Stuckey is research associate at the Conference Board of Canada. Daniel Munro is principal research associate at the Conference Board.

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