Little evidence of labour shortages, skills mismatch

Canada is not experiencing significant job or skills shortages, says a new report from the country’s budget watchdog that also takes a shot at a recent government analysis pointing to a growing problem.

OTTAWA — Canada is not experiencing significant job or skills shortages, says a new report from the country’s budget watchdog that also takes a shot at a recent government analysis pointing to a growing problem.

The findings by parliamentary budget officer Jean-Denis Frechette appear to once again put the office on a collision course with the Harper government, which had a series of public spats with predecessor Kevin Page.

A spokesperson for Employment Minister Jason Kenney insisted there was no disagreement between the government and the PBO on labour shortages, however.

“This report is consistent with what we have been saying, that while there is no national labour shortage, there are regional- and sector-specific skills shortages, which employers have been saying for some time,” said Alexandra Fortier, Kenney’s press secretary.

Still, some industry groups said they were contacted by Kenney’s office to counteract the overriding message of the PBO report.

Sean Reid of the Progressive Contractors Association of Canada, one group that was contacted, said his members in the resource sector face real and acute shortages in a number of job skills, including welders, electricians, plumbers, carpenters and heavy equipment operators.

Michael Atkinson of the Canadian Construction Association added that by 2023, there will be a need for an additional 300,000 workers in his industry mostly because many current workers will have retired.

The PBO under Frechette, who took charge of the office in September, has been more circumspect in his disagreements with government economic positions, but Tuesday’s report makes clear he does not agree with how the government has characterized the skills issue.

While trumpeting their job-creation record, federal ministers have repeatedly narrowed in on industry complaints about labour shortages as a serious economic challenge both for today and the future.

In 2013, Ottawa introduced the controversial Canada Jobs Grant against provincial objections to address the problem. Provinces eventually agreed to enact the program only after it was watered down, and Quebec has backed out altogether.

But the PBO report suggests the problem has been exaggerated.

“There is little evidence to suggest a national labour shortage exists in Canada, although there appears to be regional and sectoral pockets of labour market tightness,” the PBO said in a 33-page report that examines the various trackings of job vacancies, including those from business groups.

“Further, there does not appear to be a more acute national skills mismatch in Canada than prior to the 2008-09 recession, although there may be exceptions in some regions and sectors.”

The report is particularly critical of the Finance Department’s “Jobs Report” issued in February that stated the vacancy rate, which tracks unfilled job openings, is rising and will get worse as baby boomers retire.

The PBO openly questioned the government’s methodology, particularly comparing present day vacancy rates to 2009, when the economy was deep in recession. Rather, the government should have compared job vacancies to a similar point in the business cycle, the PBO analysis said.

Another problem, said Frechette, is that the Finance Department made use of data that has since been revised downward. He said the PBO only learned of the revisions late Monday.

“We expect they would probably review their report, but it’s up to them,” he said. Finance did not immediately respond to a request for comment.

The PBO said while there appeared to be no national problem, there were pockets of labour “tightness” in some sectors and regions, particularly Saskatchewan, where the unemployment rate dipped to 3.9 per cent in February. Surprisingly, the PBO did not include Alberta as a region of labour tightness.

That’s also been the view of most economists, and conforms to the Bank of Canada’s quarterly business surveys that have tended to present the problem as isolated.

“No question that we should be encouraging training, and individuals to upgrade their skills,” said Bank of Montreal chief economist Doug Porter, a long-time skeptic on the issue.

“But the so-called ’workers without jobs; jobs without workers’ issue seems to skew much more heavily to the ’workers without jobs’ part of the equation.”

Following question period in Parliament, NDP Leader Thomas Mulcair and Liberal critic Scott Brison said the government had erred in trying to take away responsibility for job training from the provinces, noting the regional disparities in the job market.

The PBO’s overall assessment is of a labour market that has made some strides in recovery from the 2008-09 recession, but still has a way to go before it should be considered healthy or representing full employment.

Almost five years removed from the recession, unemployment is higher than pre-slump, weekly hours worked are lower, participate rates are lower, and wage growth across almost all industries and regions is slower than before the slump.

If there were serious labour shortages, you would expect to see a spike in wages in some sectors and regions, said Mostafa Askari, the PBO director general, and that has yet to happen.

Further, the report notes any wage growth has been mostly among top earners, adding to income inequality.

The report adds that particularly among young workers, there is indeed a skills mismatch: young workers are often overqualified for the jobs they have managed to land.

The report also suggests that the government’s controversial foreign workers program has succeeded in bringing down the vacancy rate.

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