Lack of highly educated talent not driving labor shortages in Canada

Shortages appear to be mostly centered in jobs requiring little education

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Labor shortages in Canada appear to be mostly centered in jobs requiring little education, while employers finding it difficult to fill positions requiring higher levels of education probably aren’t facing challenges because candidates lack the necessary degrees, suggests a new research paper from Statistics Canada.

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The paper, published on May 24, said that for every job vacancy requiring a university degree in the fourth quarter last year, there were at least two unemployed individuals with the necessary degree. In contrast, the study found the number of vacant positions requiring a high school diploma or less has exceeded the number of unemployed Canadians with equivalent education since the third quarter of 2021.

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The findings suggest employers’ complaints about a labor crunch cannot, in general, be attributed to a national shortage of highly educated job seekers.

“To administer the proper treatment, you have to come up with the proper diagnosis,” René Morissette, the paper’s author and senior economist at Statistics Canada, said.

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“The early diagnosis that we came up with focuses mainly on labor shortages. What this paper shows is that the early diagnosis was perhaps an over-simplification of reality and that we might need to come up with a more nuanced diagnosis of the problem,” he added.

To administer the proper treatment, you must come up with the proper diagnosis

Rene Morissette

In 2022, the number of job vacancies in Canada averaged 942,000, about two-and-a-half times the average of 377,000 in 2016. To address high vacancies and labor shortages, government officials and businesses often point to immigration as a solution. Indeed, shortages were a key reason behind the federal government’s decision last year to increase immigration targets that aim to bring in 500,000 newcomers annually by 2025.

Morissette’s paper states that for the 113,000 vacant positions in the fourth quarter last year that required a university degree, there were 227,000 unemployed Canadians and permanent residents that met the educational criteria, out of which 123,000 were unemployed immigrants with a bachelor’s degree or higher.

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Those numbers aren’t an anomaly. Morissette writes that during every quarter from 2016 to 2022, the number of unemployed individuals with a bachelor’s or higher degree exceeded the number of vacant positions requiring such an education.

“The finding is pretty striking,” said Morissette. “It suggests that for these high education vacant positions, employers’ challenges cannot be attributed to a lack of highly educated workers. It needs to be attributed to something else.”

The “something else” the author refers to includes an array of reasons, such as a skills mismatch between what is required and what a job-seeker possesses, newcomers’ struggles to get appropriate licenses to work in their fields of expertise or to learn the language, or even an exodus of staff over deteriorating work conditions. For example, Morissette pointed to labor shortages in health care arising from nurses leaving the industry “because the working conditions are no longer what they desire.”

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However, low-skilled positions are also difficult to fill. There were 497,000 vacant positions requiring a high school diploma or less in the fourth quarter last year, compared to 296,000 unemployed Canadian-born individuals and 70,000 unemployed immigrants with matching credentials. That means job shortages in Canada are made up almost entirely of low-skill positions.

Employers’ challenges cannot be attributed to a lack of highly educated workers. It needs to be attributed to something else

Rene Morissette

The paper says the relatively large number of such vacancies likely reflects factors such as low wage offers and fringe benefits, work schedules that might not align with the preferences of job seekers, and shortages of candidates with relevant experience in some — but not necessarily all — low-skilled occupations..

Tonie Chaltas, chief executive of Achev, a group that supports newcomers, said the paper highlights provinces’ need to break down barriers preventing immigrants from getting jobs.

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“While several government programs are prioritizing immigration pathways for skilled workers, once workers arrive here, they continue to face barriers such as Canadian work experience requirements and credentialing,” said Chaltas. “Some professional bodies are starting to address these barriers, but employers also have a critical role to play.”

Laura Gu, an economist from the Bank of Nova Scotia, said in a statement that going beyond education levels is necessary to get a “clearer picture of the dynamics of the labor market and wage growth.” A lack of skills is driving up labor demand, not education levels, he said.

Morissette acknowledged that view, but said it’s difficult to assess whether there are enough workers to fill a specific job based on skillset because aspects, such as problem-solving skills or spoken languages, normally depicted on a person’s resume aren’t measured in labor force surveys, from which the data is collected.

That’s a key reason why Morissette decided to use education to segregate the collected data.

“Certainly, we are not saying that there’s no shortage anywhere, but we are saying that other factors play a role,” said Morissette. “So when you think about these things, you have to have multiple factors in mind. It’s not a simple story.”

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