Are There Labour and Skill Shortages in Canada?

Further to my earlier post on this topic, whether or not we are or will soon be experiencing labour and skills shortages is a question of critical importance to the development of sound public policy. Next week, we will get some new Statistics Canada data on job vacancies which will help support a more informed discussion.

Given projections of very weak economic growth and a real  unemployment rate which is much higher than before the recession and still stands at over 10%, it is hard to support the case that we face generalized labour shortages anytime soon.

Demand for workers can be readily filled from the ranks of the unemployed, discouraged job seekers, and the involuntarily part-time and self-employed. Unemployment and under employment are especially high among the echo baby boomers entering the work force, recent immigrants trapped in jobs well below the level of their qualifications and experience, and aboriginal Canadians.

Despite a slack overall job market, many employers claim that there are significant shortages of at least some kinds of workers across the skills spectrum. Accordingly, they have pressed successfully for a major expansion of the temporary foreign worker program which now accounts for the majority of entrants to Canada, and also for changes to the regular immigration program which would much more closely align immigrant intake with the perceived needs of employers and the job market.

Do employers have a point?

It is not hard to be skeptical. Many employers want to increase labour supply via the immigration route, especially the temporary worker route, rather than raise wages, improve working conditions, and increase woefully low levels of Canadian investment in training  of the current work force.

On the other hand, there is fairly compelling evidence of some specific skills shortages by occupation and region, such as skilled trades workers for major construction projects in Alberta, and some health care professions in many parts of the country. And we know from the detailed work of sector councils that some occupations will be hit much harder and earlier than others by the aging of the current workforce.

It is crucially important to get a handle on these kinds of current and emerging shortages so that we can respond through education, training and active labour market programs as well as through our immigration program. (To be clear, filling labour market needs is not the only purpose of our immigration programs, but it is certainly an important component.) Young people deserve to know what education and training programs are likely to lead to employment in good jobs, and unemployed and under employed workers need to be retrained in the skills which are demanded by employers. A good labour market information system would also allow workers to change jobs in an informed way.

As Lars Osberg has emphasised, knowledge of any labour and skills shortages is also essential to sound macro-economic policy.  Monetary and fiscal policy should push unemployment down to eliminate cyclical unemployment, while active labour market policies are needed to address any structural  mismatch between vacant jobs and the skills of the unemployed.

But we lack a good labour market information system, and do not even have the basic building block of a national job vacancy survey.  Surveys of employers to determine the level of vacancies are common in other countries, but the last Canadian survey was eliminated in 1978.

As I have argued before, building on an important ten year labour market outlook report by HRSDC which largely rejects the generalized labour shortages argument,  we need details of skills shortages by detailed occupation, and by locality.  Such shortages can, in principle, be identified if unemployment by occupation and by region is very low, and if wages are rising much faster than average. Reports from employers are also important.

We have to distinguish between undesirable labour and skills shortages which result in foreclosed economic opportunities and stretched public services, and the desirable state of tight labour markets which deliver low unemployment, growing opportunities for workers to rise up the skill ladder, and real wages rising at least in line with productivity… . in short, the kind of labour market which we have not seen in Canada since the early 1970s.

Fortunately, we will be getting some basic Statscan data next week based on an add-on question to the monthly business payroll survey which has now been asked for several months

This is an important start. However, this release will only give us a count of vacant positions by industry, by province and by size of firm. There will be no detail on occupation, nor on what employers tried to do to recruit workers.

While new information is welcome, I fear we can anticipate a lot of unhelpful employer and business media commentary on supposed labour shortages even at a time of high unemployment.

Fortunately, Statscan will be in a position to provide much more detailed data from the new Workplace Survey  further down the road (the release date has not yet been set.)

Credit should go to HRSDC for funding Statistics Canada work on job vacancies, which was one of the key recommendations of the Drummond Task Force on Labour Market Information.