The myths about Canada’s skills gap

Chris Sorensen explains how misperceptions get in the way of solutions.

<p>TORONTO, ONTARIO, CANADA &#8211; September 15, 2014:  Alan Sellathamby, 26, a clerk at BMV Books, poses for a portrait at the store. Photograph by Philip Cheung</p>

Photograph by Philip Cheung

Photograph by Philip Cheung
Photograph by Philip Cheung

Alan Sellathamby graduated from the University of Toronto four years ago. Armed with a degree in political science and philosophy, he scoured job boards in the hopes of landing an entry-level civil service job—maybe a junior policy analyst or even a position in a passport office. But in the aftermath of the Great Recession, his prospects were bleak. “Any of the positions I would look for wanted someone with experience in the field,” he says. “Even if it was an entry-level position, they would want two or three years experience.”

Fast forward to 2014 and little has changed. The economy is better, but Sellathamby still works in the same bookstore he did while attending university. And he’s one of the lucky ones. The youth unemployment rate remains stuck at 13.4 per cent, about double the overall unemployment rate.

Sellathamby wasn’t so naive as to think his bachelor’s degree would guarantee him a high-paying, career-oriented position straight out of school. But with all the panicky talk about a looming skills shortage as Baby Boomers retire, he didn’t think he would be ignored, either. More frustrating, the “skills” separating him from that all-important first position seem like the sort of thing that could be picked up with a few weeks of on-the-job training. “It’s not like you need to spend two years at college to learn about this stuff,” Sellathamby says. “To me, it looks like a lot of companies are just shunting the costs over to us.”

Related reading: Maclean’s on the future of jobs.

Indeed, there’s little evidence employers are willing to train new recruits—or anyone, for that matter. Despite complaints about a shortage of skilled workers, studies show corporate spending on training has been in steady decline for the past two decades. Canada is also near the bottom of the pack when it comes to adult participation in non-formal job-related training (resulting in no degree, diploma or certificate), well behind several European countries and the United States. Experts say the curious phenomenon contributes to Canada’s abysmally low productivity rates, since well-trained workers tend to do their jobs more efficiently.

As the currency of his undergraduate degree fades, Sellathamby feels he has no choice but to head back to school to burnish his resumé. But this presents yet another conundrum. What should he study? What skills are going to be in demand? The last thing he wants is another degree or diploma employers aren’t interested in, not to mention more student debt. Yet, amazingly, there’s almost no way for him to make an educated decision. Experts say that Canada, for all its hand-wringing about the economy, does a woeful job of tracking the all-important labour market. We know very little about who is hiring, what skills they are looking for and how graduates of specific programs fare in the real world. Don Drummond, a former chief economist at one of Canada’s big banks and now adjunct professor at Queen’s University, argues that the real crisis may be one of ignorance: “Do we have a huge shortage of workers? No. Are they in the right place at the right time? Probably not. But I think at least half of that problem would get solved if we had the right information.”


Depending on whom you talk to, Canada’s labour market is either going through an extended rough patch or is fundamentally broken. The overall unemployment rate remains elevated at seven per cent, even as companies in a range of industries, from information technology to natural resources, complain they can’t find enough qualified workers to fill advertised positions. The situation has been dubbed a “skills gap” or “skill mismatch” and has led to questions about whether Canada’s education system has become too university-focused, pumping out thousands of grads with liberal arts degrees when employers are actually looking for technicians and tradespeople. The Canadian Chamber of Commerce suggests that, by 2021, as many as one million Canadians could be out of work because they don’t have the qualifications to match the available jobs.

Not everyone believes a skills gap actually exists, however. Economists at TD Economics penned a report last fall that cast doubt on the idea, although they did concede that some industries and regions, like oil-rich Alberta, are experiencing shortages in certain occupations. Yet, there was still relatively little indication of significant wage increases in affected industries, which one would expect to see if companies were struggling to lure workers. “Wage gains in occupations that have faced the tightest conditions in the hottest regions of the country have been running at a faster clip than average, but the gap is not dramatic,” the researchers wrote.

So what’s going on? One theory is that employers, after suffering through the Great Recession, continue to be overly cautious amid a weak economic outlook. Reluctant to raise wages (which are difficult to claw back), companies are filling empty jobs by repurposing existing staff and complaining loudly about their predicament in the hopes someone, somewhere, will do something about it—a strategy that’s so far been at least partly successful. Ottawa’s controversial Temporary Foreign Worker Program made it possible for some unscrupulous employers to bypass available Canadian workers in favour of cheaper foreigners. A report earlier this year by the C.D. Howe Institute said the program, since overhauled, ballooned to 338,000 participants in 2012 from 101,000 10 years earlier, and actually helped to accelerate unemployment in the Western provinces.

In such a cost-focused environment, it’s hardly surprising that many firms are also hesitant to shell out extra cash to provide training—a budget line that’s often the first to get cut when times are tough. Studies by the Conference Board of Canada have found that employers in this country spent about $705 per employee on training costs last year. While that’s up $17 from 2010, it’s down nearly 40 per cent from a peak of $1,207 in 1993. Meanwhile, only about 31 per cent of Canadians participated in some type of non-formal job-related education or training in 2009. That’s slightly better than the OECD average of 28 per cent, but still below the 33 per cent in the U.S. Additional explanations for corporate Canada’s dismissive attitude toward training range from a relative lack of competition in many industries (which reduces the incentive to increase profits by boosting efficiency), a risk-averse corporate culture (the return on investment from training isn’t always obvious) and an economy that’s overly reliant on resource industries (where profits are driven mostly by global commodity prices, as opposed to how efficiently companies can extract them from the ground).

Related reading: Who Earns What 

The result is a sort of workplace prisoner’s dilemma: Why spend thousands improving an employee’s skills only to have him or her poached by a hungry competitor? Benoit Dostie, a professor at HEC Montréal, says the concern is pervasive, even if it flies in the face of research that suggests employees who receive training are also more loyal. Besides, he adds, “What’s worse? Training your workers and losing them, or not training them and keeping them?” There’s also the question of what kind of training is most effective. Drummond, for example, argues there’s little evidence that informal on-the-job training improves the bottom line, compared to intensive, months-long programs spent in a classroom. Dostie, on the other hand, says some short-term training programs can have big productivity impacts—such as teaching older employees how to type. “We need to create a culture of training where people are experimenting and trying things,” Dostie says.

Breaking out of the cycle requires employers to view training as a shared benefit—Dostie points to the tight-knit aerospace industry in Montreal—or waiting for another government program to break the deadlock. Quebec, for example, introduced a training levy in 1995 that required firms to set aside a portion of their payroll cost for training, or else pay into a provincial training fund. But while the program helped boost training levels, today, the province is no better off than the rest of Canada, raising questions about whether a similar approach would work elsewhere. More recently, Ottawa has sought to bridge the skills divide by repurposing the money it currently spends on readying people for the job market. It unveiled the Canada Job Grant in its 2013 budget, promising to help fund $15,000 worth of classroom-based training per worker. The program promises to give employers more say on how government training money is spent in colleges by matching employer and provincial contributions up to a maximum of $5,000. However, it’s only designed to help about 130,000 people annually once fully implemented and has proved controversial, since it will replace funding for other provincial programs that focus on job counselling and helping the underprivileged enter the workforce.

A more attractive option for corporate Canada, it seems, is to convince post-secondary institutions they should be in the business of providing job skills in addition to an education. “There’s a funny dynamic that may be occurring between employers and the higher education system,” says Dan Munro, a principal research associate at the Conference Board of Canada. “There are increasing calls by employers for educators to do more job-ready training. But these calls have been increasing at the same time employers’ spending on training has been dropping.”

Drummond shares an anecdote to illustrate how hard it is for educators and students to get a handle on today’s job market. At a recent meeting of provincial and territorial education ministers in Charlottetown, Drummond asked the crowd if anybody knew where to find information about expected employment and wages in different occupational fields. “These were experts who work all day long in the field of education and labour,” he says. “If anyone was going to know, they were in that room. Six people put up their hands.”

To be fair, there aren’t much data to begin with. Only Ontario and B.C. do their own surveys, Drummond says. And every five years, Ottawa puts out a national graduates’ survey, based on follow-ups with grads two years after they finish school. But the survey has been rendered mostly useless after Statistics Canada waited until 2013 to do its survey of 2010 grads, possibly because of funding issues. It sounds like a small point, but it means the most recent data are not comparable to previous years. And, in a sign of the times, it’s only being made available to those who pay for it.

Figuring out where the jobs are isn’t much easier. At present, job vacancy data is aggregated at the provincial level through an employment, payroll and hours survey of 15,000 employers. But it’s not sufficient to understand what’s going on in many industries, let alone individual occupations. Wage information is lacking, too. It’s gleaned from Statistics Canada’s labour force survey, which contacts 56,000 households across the country.

Critics have groused about Ottawa’s willingness to launch sweeping labour policies based on a superficial understanding of the market. In addition to slashing the budget of Statistics Canada, the federal government has also come under fire for relying on unconventional software tools to scan online job boards like Kijiji, where the same positions may be posted more than once. In response, Employment Minister Jason Kenney has promised to spend $14 million annually on new, more robust job market surveys.

Meanwhile, policy-makers and students will be forced to rely on a hodgepodge of third-party job surveys, anecdotal information and gut instinct to figure out how employment in this country works. That, in turn, boosts the likelihood that jobless grads will continue to spend thousands on unnecessary or ill-suited programs as they scramble for a toehold on the career ladder. Sana Khan, a career counsellor, says she’s frequently amazed at the long list of degrees and diplomas that some people have collected with nothing to show for it. “I’m looking at resumés and there are four programs,” she says. “They went to university and then one college and another college. It scares me. I’m like, what are they doing?” She adds that a bigger employer commitment to training, co-op programs and paid internships would go a long way toward alleviating the problem. “There’s a huge disconnect between employers and students.”

Sellathamby, for one, is eying more school, this time a public policy program at Concordia because it includes an internship placement. But he can’t help but feel it’s just a costly way to get his foot in the door—assuming, of course, he picks the right door in the first place. There’s got to be an easier way, he reasons. “There are tons of smart people with undergraduate degrees who shouldn’t be working retail because it’s a waste of their talents. Take those people, put them in a position and train them for a few months. I’m sure they would figure it out.”