Labour or Skills Shortage?

Do we have a labour shortage or a skills shortage in Canada? Firms are complaining that they cannot find enough skilled workers, yet the unemployment rate still stands at a healthy 7 per cent or so.

Much of the evidence about a skills shortage appears to be anecdotal rather than hard, quantifiable statistics. While firms have a tendency to complain that they cannot find workers they need at the wages they want to pay, economists would prefer to see hard evidence – evidence such as a low unemployment rate and wage levels rising well above average for those jobs that appear to be in short supply.

The forthcoming federal budget is mooted to deal with the skills shortage issue. How it will do so is not yet clear, but there are a few compelling models in use by other countries that the government might turn to for ideas. Germany, for one, has an apprenticeship program that is the envy of the developed world. South Korea is another country that has established a network of vocational schools, based on the German model, to reduce that country’s shortage of skilled plumbers and machinists. Whatever, the precise nature of the solution, it is clear that firms and the institutions that offer skills training will have to work more collaboratively and cooperatively than ever before and avoid existing in parallel universes.

Even if the skills gap is closed, firms are likely only to hire if demand and growth warrant it. Creating a surplus of skilled workers will be no better than having a surplus of unskilled workers.



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