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Finance spins a skills-mismatch fairy tale

Ottawa wanted to tell a story about the serious and worrisome mismatches between available jobs and workers' skills in Canada's labour market. Unfortunately, in an effort to make it compelling, the government produced a work of fiction.

Last month's federal budget included a 56-page "Jobs Report" outlining at some length the "misalignment between the skills of the unemployed and those required by employers." It trotted out statistics to support its case – most notably, that the country has a job vacancy rate (unfilled jobs as a proportion of total jobs) of 4.2 per cent, even though unemployment is still at a relatively high 7 per cent.

A little problem with that narrative, though. That 4.2 per cent figure came not from Statistics Canada, the government's official agency for economic data, but from Finance's own research, using online job postings as its source. Statscan's own estimate, based on its monthly survey of employers, is a much smaller 1.3 per cent – suggesting that all the rhetoric about a national skills shortage has been exaggerated.

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Indeed, Finance's numbers have been discredited both by private statistical analysis (including from Globe and Mail contributor Sam Boshra) as well as by the Parliamentary Budget Office, which concluded that online postings (most notably on Kijiji) dramatically inflate the actual number of vacancies.

Even without that level of scrutiny, Finance's dramatic numbers don't pass a basic sniff test. Specifically, if Canada really was suffering from acute skills shortages across a broad swath of the economy, it would manifest in significant upward pressure on wages. Those wage pressures, in general, simply aren't there.

Year-over-year increases in Canadians' average weekly wages have trended downward over much of the past two years, even as the country added more than 400,000 jobs. Average year-over-year wage growth last year was just 2 per cent, well below the 10-year average of 2.9 per cent and the five-year average of 2.5 per cent.

That said, there is certainly evidence of pockets where wage pressures are significant, indicative of possible skills shortages.

In Alberta, average weekly wages were up 4.6 per cent year over year in December. Two other oil-industry-heavy provinces, Newfoundland and Saskatchewan, posted increases of 3.8 per cent and 3.6 per cent, respectively. Skills- and education-heavy segments of the economy – such as business management; professional, scientific and technical services; mining and oil and gas extraction; and construction – have, indeed, shown some of the biggest year-over year wage gains.

Statscan's latest monthly job-vacancy report shows that the highest vacancy rates in the country are in Alberta and Saskatchewan, and that vacancy rates in professional, scientific and technical services and in mining and oil and gas extraction are well above the national average. In these areas, there appear to be genuine skills mismatches.

But this more nuanced statistical tale isn't as easy to follow as a great big number in a federal government report, is it? It doesn't nearly so clearly promote Ottawa's labour agenda – to get the provinces onside on the overhaul of the country's skills-training programs that was proposed in last year's federal budget.

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Finance is absolutely right in wanting to harmonize apprenticeship and certification systems across the provinces, to improve skilled-labour mobility. It has a point that employers need to have more stake and involvement in the training process.

It didn't need to cook up flawed and misleading data to dramatically make its argument. By doing so, the government's credibility and integrity have become the story. Bad arithmetic, and bad politics, have obscured an important policy debate.

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About the Author
Economics Reporter

David Parkinson has been covering business and financial markets since 1990, and has been with The Globe and Mail since 2000. A Calgary native, he received a Southam Fellowship from the University of Toronto in 1999-2000, studying international political economics. More


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