Widespread labour shortages a myth, TD economists say

A new report from the TD Bank attempts to debunk what its authors call the myth of widespread skills mismatches in Canada and of a looming labour shortage as the workforce ages.

What skills shortage?

10 years ago
Duration 3:10
Scott Peterson reviews the TD report on Canadian labour trends.

A new report from the TD Bank attempts to debunk what its authors call the myth of widespread skills mismatches in Canada and of a looming labour shortage as the workforce ages.

The findings run counter to the general discourse on the subject over the past few years, which has tended to highlight shortages in trades and in Western Canada, along with warnings of overall labour shortages as the baby boom generation moves into retirement.

The federal government has introduced several measures to combat the problem, including more stringent rules for obtaining unemployment insurance benefits and a new proposal, called the Jobs Grant, that would directly involve employers in decisions and funding of training programs.

It's not a complete myth, but it's not as extreme as people believe- Derek Burleton, TD Bank deputy chief economist

The government has said it will go ahead with the program despite what appears to be near universal opposition from the provinces.

But the bank's report, authored by TD's deputy chief economist Derek Burleton and three other bank economists, says whatever skills shortages exist are isolated and likely no greater than a decade ago.

"Evidence of economy-wide shortages is hard to find," said Burleton. "Yes, across regions and occupations, skills mismatches (exist) because you are never going to get a perfect match.

"So it's not a complete myth, but it's not as extreme as people believe."

The report, which runs 52 pages, looks at a variety of factors for its conclusions, including job vacancy rates and overqualification and underqualification rates in comparison with other countries.

They also looked at wage gains on the theory that if labour is scarce, employers will pay more to obtain it.

Far from a crisis

But even in Alberta and Saskatchewan, which for years have led the country in low unemployment rates and have real shortages in certain trades, the report suggests the problem is far from crisis proportions.

"The story on the wage data remains curious, as wage gains out West have not increased to the extent that one might have thought given the signs of tightness," the economists wrote.

Nor do they buy into dire predictions of massive labour shortages down the road as the aging workforce moves into retirement, noting that older Canadians are working longer and that other market adjustments are likely to occur.

The latest Bank of Canada business outlook survey released last week did show an uptick in firms reporting difficulty finding specific skills, but the bank added that in general "firms do not consider the intensity of labour shortages to be very different from 12 months ago."

The TD economists do say that skills mismatches could increase in the future and urges governments, business and educators to increase their focus on skills and training "to provide Canada with a world-leading workforce in the 21st century."

In an overview of Canada's labour market over the last decade, the economists judge that Canada has fared far better than the United States and other members of the Group of Seven big industrial economies, with the possible exception of Germany.

Despite the dip during the 2008-09 recession, job growth in Canada has averaged 1.3 per cent a year between 2003 and 2013, compared with 0.4 per cent for the U.S. and 0.3 per cent for the G7 as a whole.

Canada's pace of job creation has been slightly better than the growth in the labour market during the period, the economists say.

The authors noted other trends, including a growth in temporary or contract jobs, which may show a deterioration of job quality but could also be attractive to older workers.

They say older workers are "punching well beyond their weight," in terms of their takeup of new jobs, while youth unemployment remains elevated.

Still, they say concerns about a "lost generation" is overstated, saying the job outcome of recent university graduates, including those with liberal arts degrees, "are likely better than many Canadians perceive."