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Is Canada’s skills shortage real, or are businesses to blame?

Canadian companies say there’s a shortage of skilled workers, but are they investing in training? (Shutterstock)

Is Canada’s skills shortage real, or are businesses to blame?

Apparently Canada’s labour market has a problem.

Plebians, pundits and politicians alike say Canadian employers face a serious skills mismatch, or even a full-throttle skills gap. Job applicants are variously described as over-educated, under-adapted or over-credentialed.

Positions are reputedly going unfilled because employers have trouble finding workers with the right skills — hard skills, soft skills, IT skills, STEM skills, writing skills or presentation skills — not to mention those who possess traits like punctuality, discipline or a can-do attitude.

We know these problems exist because studies say so. Mind you, these reports are often written by consultants (e.g. McKinsey) hired by large employers, industry associations or chambers of commerce.

Even when these studies make nuanced claims, the headlines shout that universities are to blame. And this position is parroted widely.

The common prescription for this purported ailment is to compel universities to produce workers who are better suited to today’s (and tomorrow’s) workforce. In Ontario, we even have a non-profit that adopts this position, the Higher Education Quality Council of Ontario (HEQCO).

But before we start implementing solutions to an allegedly serious problem, let’s take a breath and review some facts.

Where are the high wages?

Proponents of a skills-mismatch crisis generally point the finger at universities for not doing enough to turn students into “workforce-ready” workers. An alleged glut of under-employed or unemployed graduates is provided as evidence of a skills mismatch.

However, as the Brookings Institute notes (and this is consistent with mainstream economic theory), if there is in fact a skills mismatch, it would be reflected in disequilibrium between the supply and demand of workers. How would we know such a disequilibrium exists?

In fields without enough qualified workers, you’d expect wages to rise as companies compete for a limited pool of candidates over the short term.

Managers might grumble about high wages, especially if the work is labour-intensive, but what a lovely time those workers would have, picking and choosing among employers.

In fact, consistent with economic theory, we did see this in Alberta’s oilpatch earlier this decade. But that was a regional event, common to boom-and-bust resource extraction industries, and not reflective of the national economy as a whole.

Standard schooling provides basic training

In the longer term, companies with labour-intensive work might substitute machines for human beings, even as ambitious people strive to acquire those in-demand skills associated with higher pay.

One way these people could get those skills is to be hired into an entry-level position, then be trained in-house with the necessary company-specific skills. In other words, the employer makes an investment in its workforce.

Another way applicants could get those industry- or occupation-specific skills is to pay for the training themselves.

Frankly, for general industry-specific and occupation-specific skills, workers usually already do this, in part by going to school. General skills such as literacy and numeracy are acquired through kindergarten to Grade 12. Industry- or occupation-specific skills are gained through a mix of apprenticeships, volunteering, internships and colleges.

And let’s not forget universities. They provide students with the opportunity to develop not just industry- or occupation-specific skills, but (even in the much-maligned humanities or social sciences) the critical thinking skills needed to become a lifelong learner.

Asinine to blame universities

For practical reasons, formal schooling cannot provide training in company-specific skills, or in skills that relate to the unique functioning of one company. Company-specific skills need to be acquired in the context in which they will be used — at the company in question.

Even if we ignore the cost of higher education providing up-to-date firm- or site-specific training, curriculum developers have no crystal ball. They cannot foresee all the changes that will shape market conditions and identify skills that will and won’t be needed in 10 years. If industries can’t reliably predict the future, it is asinine to expect higher education to do so.

Even Ontario’s Higher Education Quality Council agrees. And to be fair to HEQCO, they have published reports that should caution us to be more careful about alleging skills-mismatches, suggesting they indeed are interested in evidence-based research.

What evidence do we see for this alleged skills mismatch? Certainly, Canada’s labour market data doesn’t support such a claim. There is no over-heated national labour market caused by an under-supply of qualified workers. Pay rates aren’t skyrocketing as they would if employers were caught in a spiral of upward wages.

Bankruptcies aren’t up

Given the lack of headlines, presumably myriad companies aren’t going out of business because they cannot find enough skilled workers. Certainly Canada’s business bankruptcy statistics don’t show a trend of steadily mounting bankruptcies but instead appear to reflect more general business cycle conditions.

And those consultants’ reports asserting a skills mismatch?

Scrutinize them beyond the executive summary, and the data often don’t substantiate the claims. In cases where they do provide information about employers’ training practices (e.g. The Canadian Chamber of Commerce’s 2013 Upskilling the Workforce report), they reveal that employers are actually spending less and less on employee training.

Another 2013 Special Report by TD Bank Economics corroborates this claim, and more generally questions the evidence of a skills mismatch. (That claims about skills mismatch continue to be made even after these kinds of reports have been around for most of this decade suggest that evidence-based research is being ignored. That, however, is not my current point.)

If employers care enough about their own operations, they should invest in training their workforce in company-specific skills.

Maybe we don’t have a skills mismatch. Maybe we have a wage mismatch. Or a disconnect between employers’ sense of entitlement and their responsibility to their own operations.

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