Canada’s Labour Market Crisis: Shortage of Skills or Labour?

In a challenging global climate, Canada’s labour market has shown strength and resilience, even outperforming all the other G7 economies in job creation through the private sector with highly-skilled, high-wage, full-time positions. Canada even has a higher labour force participation rate than that of the US.

With the unemployment rate at an all-time low of only 5.9% nationally, those who are looking for work appear to be finding it and the demand for top talent in the marketplace is evident with corporations declaring a labour crisis. There isn’t enough talent supply to meet the hiring demand.

At the Future of Manufacturing conference in Toronto this past October, David Aplin Group Principal, Chris Roach, live polled an audience of HR professionals, asking what work-related issues kept them up at night. The vast majority, 81%, responded citing talent and labour force issues as their growing concern.

But is there a labour crisis in Canada? The research indicates a skills shortage or a mismatch of skills rather than a labour shortage and many associations have echoed the same sentiment. According to the Government of Canada’s Jobs Report: The State of the Canadian Labour Market, employers are expressing significant recruitment difficulties finding talent with the required skills.

• The Canadian Chamber of Commerce lists skills shortages as the number one barrier to Canada’s competitiveness.
• A third of senior Canadian executives surveyed by Workopolis reported that a shortage of skilled workers is the greatest challenge facing Canadian businesses, on par with concerns about the general state of the economy.
• The Canadian Federation of Independent Business reports that about a third of businesses surveyed reported having experienced skills shortages limiting their expansion, a rate that is double what was seen in early 2010.
• The Canadian Manufacturing Coalition states that nearly one-half of companies surveyed face “immediate labour and/or skills shortages.”

Currently, Canada is seeing a structural shortage take place. When it comes to labour, any shortage is either structural or cyclical, and in an active economy, shortages are expected. Structural shortages often happen when we see major developments in technology, rapid growth in industries, and shifts in demographics. In all economies, the available workforce is determined by immigration and demographics. When the imbalance between supply and demand exists in multiple sectors and regions, it is usually an indicator of a labour market mismatch.

Essentially, most that are unemployed in today’s market either don’t have the required skills or they are living in regions with a lack of job vacancies.

There are groups in the labour market that are still out of work and often under-utilized when a skills shortage emerges. A higher rate of unemployment exists for unrepresented groups, the most common being new immigrants. Due to unrecognized credentials and work experience from overseas, many corporations are hesitant to hire newcomers. As a result, highly skilled immigrants struggle to find work.

So where did this mismatch of skills come from? The fourth industrial revolution has caused significant disruption as it relates to the types of jobs it has created. As Forbes describes it, industrialization 4.0, “will take what was started in the third revolution with computers and automation and enhance it with smart and autonomous systems fuelled by data and machine learning.” This means a brand-new set of skills, mainly technological, becomes the most sought after. But technology is advancing faster than the labour market is, leaving massive skills gaps in the talent landscape.

For every industrial disruption, we see hardships for workers, but we also see more productivity and advancement economically. Most corporations will often exploit technologies to create new types of jobs and in some cases, even entirely new industries. Throughout history, technological advances have always led to a rise in productivity and living standards. Technology creates more jobs than it destroys.

The future labour market will require a skilled, mobile, and flexible labour force. According to the Royal Bank of Canada, automation will impact at least 50% of jobs in Canada within the next decade. Being “human” will ensure resilience in an era of disruption and artificial intelligence. Digital literacy will become a necessity for all skill sets, with a propensity to manage automated tools, platforms, and processes.

To remain competitive, job seekers will have to be comfortable with moving from one job to another. Skills such as social intelligence, complex dexterity, and creativity will continue to be in demand, as well as more “human skills”, such as problem-solving, critical thinking, active listening, and coordination.

Overall, changing demographics, technology, and the global economic context are exerting pressure on Canadians to become more skilled, more mobile, and more flexible. Strong demand for highly skilled workers is expected to continue along with ongoing technological change and globalization, which are transforming the workplace and increasing the demand for new skills.

Population aging will be a key challenge as the share of the population aged 65 and older increases and the share of the working-age population falls. Unless labour force participation improves, this could contribute to larger skills and labour shortages and increase the economic impact of mismatches.

The rising competitive intensity of emerging markets will continue to raise the skill requirements of jobs. Canada is increasingly tied to the international marketplace, which has opened new markets and increased competition for skilled workers.

Canada needs a mobile, flexible, and highly skilled labour force to keep up with rapidly advancing technology and increased worldwide competition. Technology and innovation are raising skill requirements and driving strong job growth in high-skilled occupations.