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The Progressive Economics Forum

Alberta’s Bogus Labour Shortage

The following is a guest post by the Alberta Federation of Labour’s Tony Clark:

A labour shortage occurs when the demand for labour exceeds the supply of labour, right? Well, apparently not in Alberta.

The Alberta Federation of Labour took a long hard look at the Government of Alberta’s projections showing an astronomical labour shortage of 114,000 workers by 2021 and found them to be based on misleading methods.

Instead of a straightforward calculation of demand for labour minus supply of labour, with a shortage occurring when total demand exceeds total supply, Alberta used a strange formula that subtracts the annual change in demand from the annual change in supply.

The result: even though the Alberta government’s projections show the supply of labour exceeding demand (a labour surplus, one would think) for every year through 2021, their strange method shows a labour shortage.

What’s more, the government accumulated these phony yearly labour shortages up to 2021 to show a “cumulative shortage” of 114,000 workers even though this supposed shortfall would be captured in the following year’s demand. Put another way: one vacant job over ten years is still one vacant job, not 10 as the Alberta government would have us believe.

The same day the AFL released its report, the Certified General Accountants Association of Canada released its own report with similar findings. Their findings include “Labour shortages are difficult to observe and measure directly” and “Where sufficient data exists, an assessment shows that labour shortages occurred rather sporadically and did not persist for more than one year at a time over the past ten years.”

These bad numbers lead to bad public-policy decisions.

On July 16, Citizenship, Immigration and Multiculturalism Minister Jason Kenney used Alberta’s “acute labour shortages” to justify an expansion of a Temporary Foreign Worker pilot program whereby employers won’t have to consider hiring Canadians in certain occupations first before turning to offshore labour.

Originally, the pilot program allowed some Alberta employers to bring in Temporary Foreign Workers for steamfitter/pipefitter jobs without going through the Labour Market Opinion (LMO) process. The LMO process forces employers to show efforts to “recruit and/or train willing and available Canadian citizens/permanent residents.” The expanded pilot process to include six more occupations, including welders, heavy duty equipment mechanics, ironworkers, millwrights and industrial mechanics, carpenters, and estimators.

Of course, the AFL acknowledges that there is a “tight labour market situations in select trades and skills” in the province, but those specific shortages in certain occupations are related to the provincial government’s ineptitude for planning and pacing development in the oil sands.

Nevertheless, that fact hasn’t stopped anti-union interests in the province from using the government’s faulty labour shortage figures to call for radical changes to labour markets with the end goal of depressing wages in the oil sands.

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Comments

Comment from Rod Smelser
Time: August 4, 2012, 11:05 am

To be honest, this is a subject I have tried to forget about after retiring last summer following 39 years as a regional labour market economist for HRSDC, under its many changes of name from Manpower onwards. And I have seen spreadsheets like the Alberta Govt’s one referenced here many times.

I wouldn’t necessarily agree that the Alberta Govt’s new subraction of year to year changes is wrong, although it is a bit harder to figure at first blush. I think the key things are these two. Whichever method is used, yearly ratios or year to year changes, the entire calculation is based on the idea that these medium and long term projections are highly reliable, but we know from other forecasting exercises that this assumption is shaky.

Arguably, over the medium to long term one is averaging out the business cycle and dealing mostly with demographics on the supply side and long term growth rates on the demand side. But mobility changes according to economic opportunities and eight and ten year growth rates are not as predictable as some would like to think.

My second point is that whichever method is used, either the ratios or the changes, if one accepts the basic projections as valid enough or the best we can do, they show a tightening labour market, with the gap between estimated demand and supply falling from over 100,000 jobs down to under 30,000. So that “message” would be there with ratios as well as with changes.

Really, governments and the public need to decide what the criteria is. Do we use temporary foreign workers to fill a small number of key professional and skill gaps so that business can move ahead, employing many Canadians in the process, or do we use the TFW program to bring in thousands of low skilled people to keep wage costs down for businesses in farming, food service, cleaning, etc., etc.

It has never ceased to amaze me to hear people I know saying, when there are news reports of foreign workers been paid or treated poorly, that at least that’s better than the pay and work standards in those workers’ home countries. Maybe it is, but what is the impact of this approach on pay and work standards here in Canada? A lot of otherwise sensible people don’t seem to realize that this is the issue.

Comment from Sam Bodilly
Time: August 4, 2012, 2:03 pm

lol Whenever I hear that we have a “labor shortage”, I quickly remind myself to translate that into reality: We are really saying, “we cant find any Canadians willing to work for the rate I want or can afford to pay”. It is that simple. When demand outstrips supply, one charges more (i.e. Apple profits anyone?).
Stop asking for “Corporate Welfare” – i.e. bringing in cheap non Canadians and start respecting the marketplace!

If you want people to be Diesel mechanics or fruit pickers, pay a competitive rate in your labor market and you will have a line up.

Comment from Purple Library Guy
Time: August 5, 2012, 1:26 am

I’ve noticed a distinction in how free-marketeers approach situations of high and low unemployment.
If unemployment is high and employers take advantage of the slack labour market to cut wages and make work more precarious, that’s just the natural workings of the free market and workers have to learn to be “flexible”. And poor.
On the other hand, if unemployment is low and wages threaten to rise in a tight labour market, that’s a catastrophe which requires government intervention! Free markets? What are those?
This is one of the ways you can tell that most so-called free marketers are in reality nothing of the sort, merely class warriors for the rich. Which is one reason I make no apologies about being a class warrior for the non-rich.

Comment from Taliesyn
Time: August 7, 2012, 11:33 am

The problem is not that the AB labour market isn’t paying competitive wages – wages in Alberta for most trades are higher than just about anywhere in the world, particularly when considering that income taxes in Alberta are lower than most other high wage jurisdictions (e.g. Australia).

The problem is that the economic growth is outpacing the labour market. There are many Canadians who could do the work – if they would move to Alberta! But government programs create an incentive to be unemployed (or underemployed) in other parts of the country.

The government should not be trying to manage the rate of development to match the labour force. Central planning like that has NEVER worked anywhere. Government should be getting out of the way of the market, and let the market drive the choices of individuals to move to where the work is.

Comment from Francis Fuller
Time: August 9, 2012, 8:42 pm

Purple:

Excellent point!

Comment from Jill
Time: August 18, 2012, 8:55 am

I think this should be titled Alberta’s Legitimate SKILLED Labour shortage due to skyrocketing wage expectations.

I’m not an expert by any means, just an observer, but if Companies can’t afford to pay these higher wages and are forced to stop doing business, doesn’t that hurt the economy as a whole?

Comment from Greg
Time: August 22, 2012, 5:34 pm

For Jill,

Isn’t that what the ‘free market’ does… kill inefficient companies. Why do they need government intervention?

Comment from Gerry Beitel
Time: November 9, 2012, 3:04 pm

The Alberta Goverment is using the Standard measure for labour shortage and is correct in the ussage. 4%-4.5% is basically fully employment as there is a certain number of unemployable, mismatched skills, and those tranistioning in an out of the labour force. Under 4% is panic mode for business where you start seeing signs go up at Macdonald’s where they can no longer offer late night service. There is an existing shortage of labour and it is only going to get worse. With retiretments at 2.2%/ year and Conservative Alberta GDP at 2.0%, that leaves 4.2% leaving and less than 2% entering. Do the math, we are short now and it only going to get worse!

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