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Why Canada’s labour mismatch is getting worse

A quarter of a million Canadians have been jobless for more than six months and the country appears to have too many people in some professions, according to a CIBC report.

J.P. MOCZULSKI/The Globe and Mail

It's Canada's labour market conundrum: Evidence suggests skills shortages in the country's jobs market are growing, while at the same time pools of labour surplus are also increasing.

On one hand, Prime Minister Stephen Harper said this month that skills shortages are "the biggest challenge our country faces." He's concerned about looming shortfalls of engineers and scientists and wants new immigrants to help fill the gaps.

But on the other, a quarter of a million Canadians have been jobless for more than six months and this country appears to have too many people in some professions, such as tour guides and factory labourers, according to a report Thursday that seeks to untangle the duelling trends.

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"This labour market mismatch is big enough not only to reduce the effectiveness of monetary policy, but also to limit the growth potential of the labour market and the economy as a whole," CIBC World Markets Inc. deputy chief economist Benjamin Tal said in his analysis.

First, he examines labour shortages. At least three in 10 businesses say they face a skilled labour shortage, CIBC says, based on Bank of Canada and Statistics Canada calculations. That number is double the rate of early 2010.

The increase in skills shortage concerns comes as Canada's employment rate stagnated, "loosely" suggesting these shortages are having a negative impact on job growth.

Meantime, the number of job vacancies reported by companies has jumped 16 per cent in the past year, led by openings in Alberta.

Cries of skilled labour shortages should be taken with a few grains of salt because they are subjective measures, Mr. Tal notes.

"Yes, a CEO might indicate that her company is facing a skilled labour shortage, but is it severe enough to force her to raise wages and/or increase on-the-job training activity? Actions speak louder than words."

Delving deeper, he looked at 25 occupations with both rapid increases in wages and low or falling unemployment rates – areas that are showing clear signs of a tight labour market. He found the largest skill shortages were in health occupations, the mining industry, advanced manufacturing and business services. Together, these occupations comprise a fifth of total employment in Canada.

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Therefore, "one-fifth of the Canadian labour market is currently showing signs of skilled labour shortage," he said.

Government efforts to bring in more skilled immigrants and boost apprenticeship programs are welcome; however, they won't be enough to fill these gaps, he said.

Next, Mr. Tal examined labour surpluses. He looked at 20 occupations with rising unemployment and slowing wage growth – a pool that includes food counter attendants and recreational guides. These jobs account for a fifth of unemployment in Canada.

This might help explain why the duration of joblessness is still high. The average length of unemployment is 16 weeks – five weeks longer than pre-recession levels, and two weeks above the average rate seen since the early 2000s.

A quarter of a million Canadians have been unemployed for more than six months, accounting for 18 per cent of total unemployment in the country. While the long-term jobless rate has come down in the past two years, it is still higher than its long-term average, especially among people over the age of 45.

The mismatch means measures of long-term unemployment are likely to even climb higher, he said.

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Retraining efforts should be part of the solution, he added – something the federal and some provincial governments are tackling, to various degrees.

For now, though, the people-without-jobs and jobs-without-people conundrum remains.

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About the Author

Tavia Grant has worked at The Globe and Mail since early 2005, covering topics from employment and currency markets to trade, microfinance and Latin American economies. She previously worked for Bloomberg News in Toronto and Zurich, writing on mining, stocks, currencies and secret Swiss bank accounts. More

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