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If skilled tradespeople are scarce, why aren’t they paid more?

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Politicians insist that Canada has a skills shortage. The Conservative government's latest budget highlights the issue, and Immigration Minister Jason Kenney has been out selling its solutions to what he calls the "bizarre paradox of Canadians without jobs and jobs without workers." The government has evidently grown frustrated with years of investments in apprenticeship schemes that haven't paid off, as Mr. Kenney told the Calgary Herald editorial board recently that "Canadian employers have not been investing enough in apprenticeships." Perhaps it's the government's attempts to diagnose the problem that have fallen short.

The Tories have tinkered with apprenticeships since 2006, offering handouts to apprentices who finish their first or second level, as well as to those who further complete their studies. They also give tax breaks to candidates for professional examination fees, and to employers who hire apprentices. And yet in the latest budget, there are fresh measures – a $4-million fund to "reduce barriers to accreditation in the skilled trades…(and) ensure more apprentices complete their training" and even a proposal to change procurement practices to encourage the use of apprentices on federal contracts.

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The problem for the government is the skills shortage just isn't neatly borne out by statistics. Despite persistent warnings from certain quarters of shortages, only one quarter of firms reported they had labour shortages in the Bank of Canada's most recent Business Outlook Survey – well below the 15-year average of 35 per cent. The latest reading is particularly low considering Canada has a 7 per cent unemployment rate, says BMO Capital Markets chief economist Douglas Porter; the last two times unemployment was at this level, shortages exceeded 40 per cent.

Meanwhile, wages are increasing at just 2 per cent per year, a "strangely subdued pace" for a country with an alleged skills shortage, Mr. Porter says. In Alberta, the country's growth engine of the past few years, wages have only increased by an average 3.2 per cent annually over the past five years, compared to the Canadian average of 2.7 per cent. That gap "is close to a rounding error and not nearly as extreme as I would have expected," Mr. Porter said. "If the market was operating effectively and efficiently, wages would be rising in these industries and professions that are in greatest needs."

Is the Temporary Foreign Worker program to blame? No doubt it's partially responsible. But in a 2012 paper on labour shortages in skilled trades by the Certified General Accountants Association of Canada, researchers pointed out that hard data on labour shortages across Canada is wanting and that, where data exists, it shows shortages are sporadic and short-term in nature. Furthermore, apprentices seem motivated to enter programs by a lack of job opportunities in their region rather than knowledge of what opportunities the apprenticeship will bring them – which might explain why apprenticeship completions have not kept pace as registrations have doubled in the past decade.

The CGA paper argues for mechanisms that would make the labour market more transparent and, well, market-like: adopting measures that would identify where shortages "are indeed quantifiably present" and allow employers to "recognize shortages and adjust wages." Also, apprenticeship completion rates "are known to positively react to higher expected earnings associated with the completion of the program" and certification, so employers could help by "better signaling…earnings benefits expected at completion."

In other words, the government should help match employees with opportunities in a transparent manner, then let market forces do the rest. Genuine labour shortages will drive up wages in those professions, increasing their attractiveness to potential employees. Too bad there's no apprenticeship for politicians to upgrade their skills on creating jobs.

Sean Silcoff is a contributor to ROB Insight, the business commentary service available to Globe Unlimited subscribers. Click here for more of his Insights, and follow Sean on Twitter at @seansilcoff.

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About the Author

Sean Silcoff joined The Globe and Mail in January, 2012, following an 18-year-career in journalism and communications. He previously worked as a columnist and Montreal correspondent for the National Post and as a staff writer at Canadian Business Magazine, where he was project co-ordinator of the magazine's inaugural Rich 100 list. More

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