Ep.52: When Your Boss is an Algorithm
With Emily Guendelsberger and Sean O’Brady
Most industrialized countries are experiencing worker shortages and skill gaps due to low birthrates, aging populations, and new technologies that require workers with new skill sets. A global survey of nearly 40,000 employers in 43 countries and territories found 45 percent of employers reported having skill shortages (Manpower Group, 2019).
Canada is experiencing these issues, and the Atlantic provinces are facing an even more serious situation. Current trends show a decline in the natural population with more deaths than births being recorded, and with the growing number of retiring baby boomers, the workforce in Atlantic Canada is likely to shrink. From 2012 to 2018 the labour force shrank by 54,400 (Statistics Canada, 2019a). Additionally, the proportion of aging population is higher in Atlantic Canada compared to the rest of the country. In 2018, those aged 65 and above comprised 20.5 percent of Atlantic Canadians (Statistics Canada, 2019a). This age group is forecasted to increase to 30.9 percent by 2035, along with a projected 5 percent overall decline in the total population in the region (Kareem & Goucher, 2017).
There are two major types of labour and skill shortages in the market: cyclical and structural. Cyclical labour and skill shortages can be alleviated by increasing wages, initiating recruitment campaigns, and implementing innovative workplace practices (Skills Canada B.C., 2004). However, structural labour and skill shortages can be difficult to solve in the short run due to a shortage of potential workers with the required quality of skills, driven by demographic and technological changes (Fang, 2009).
Demographic, economic, technological and public policy factors have a direct effect on shortages of skilled workers in Newfoundland and Labrador (NL). Specifics on each of these factors are provided in Table 1 below.
While Canada’s population has grown in the last decade, NL has been the only province with a shrinking population due to the aging population, declining fertility rates, and out-migration — as shown in Table 1. It also had the lowest percentage of international immigrants in the total population. The province also had the highest median age and the highest proportion of residents who were 65 and older.
|Canada||Newfoundland & Labrador||New Brunswick||Nova Scotia||Prince Edward Island|
|Population change, 2017-2018 (%)||1.34||-0.52||0.54||0.95||2.04|
|Net interprovincial migration, 2017-2018||N/A||-2,733||481||3,048||177|
|International migration, 2018||303,257||1,275||4,113||5,137||2,012|
|Percentage of immigrants in the population (%)(2016)||21.9||2.4||4.6||6.1||6.4%|
|Median age 2018 (years)||40.8||46.5||45.9||45.1||43.5|
|Age 0-14 (%)||16.1%||13.9%||14.4%||14.1%||15.5%|
|Age 15-64 (%)||66.8%||60.8%||64.8%||65.5%||64.7%|
|Age 65+ (%)||17.1%||25.3%||20.8%||20.4%||19.8%|
A shrinking and aging population makes labour and skill shortages the most serious in NL compared to the other Atlantic Provinces. From 2014 to 2018 the labour force shrank by 14,835 or 4.4 percent. Moreover, there will be nearly another 35,000 more people exiting the labour market by year 2028, which represents approximately 10 percent of the total labour force.
|5 to 14 years||52,124||52,005||51,993||51,412||50,687|
|15 to 54 years||275,246||271,857||268,806||264,543||259,099|
|55 to 64 years||84,259||84,913||85,556||85,686||85,717|
|65 years and over||92,894||96,218||100,186||104,064||108,017|
|Percentage of 65+||17.6%||18.2%||18.9%||19.7%||20.5%|
Figures 1, 2 and 3 below show that net interprovincial out-migration is a defining trend for NL since 2000, as younger workers are leaving to go to other provinces to pursue employment and educational opportunities (ACOA, 2019).
Even as NL’s demographics threaten to shrink the labour pool, the demand for workers has steadily increased. This can be attributed to economic recovery which can come from robust natural resource development, more capital investment (for example the West White Rose and Voisey’s Bay projects) and the growth of the tourism, international education and high-tech industries. Table 3 shows that after an economic contraction due to the collapse of oil prices, the NL economy has recovered since 2017, creating more employment. This growth was accompanied by a tightening labour market due to retirement and out-migration, with NL’s labour force participation rate being approximately 7 percent lower compared to the rest of Canada (Table 3). According to a Canadian Federation of Independent Business report, there were 2,400 unfilled jobs in NL in 2018 (CFIB, 2018).
|Change, real (%)||‐1.2||‐1.2||1.8||0.9||-2.9||4.1||0.2|
|Investment, Gross Fixed Capital Formation ($m)||12,035||12,087||13,873||10,978||9,684||11,313||9,250|
|Change in investment, real (%)||2.0||‐1.8||8.8||-18.0||-12.9||14.4||-19.7|
|Labour force (in thousands of workers)||270.9||270.8||268.7||262.9||261.4||262.3||260.3|
|Change in labour force, real (%)||-1.3||0.0||-0.8||-2.2||-0.6||0.3||-0.8|
|Employment (in thousands of workers)||238.6||236.2||232.6||224.1||225.3||228.1||225.2|
|Change in employment, real (%)||-1.7||-1.0||-1.5||-3.7||0.5||1.2||-1.3|
|Unemployment rate (%)||11.9||12.8||13.4||14.8||13.8||13.1||13.5|
|Participation rate (%)||61.0||61.1||60.5||59.0||58.9||59.2||58.8|
While there has been a decline in labour force participation, the unemployment rate remained stable and GDP has been growing at a slow rate. Normally labour force participation increases with economic growth. This deviation may suggest that NL’s economy is in a transition from a resources-based economy to a knowledge-based economy (Government of Newfoundland and Labrador, 2019a), and some employees are exiting the labour market due to the lack of suitable skills to find a job in the new economy.
Tables 4 and 5 show that oil related industries employed fewer people in the economy and contributed less to provincial GDP between 2013 and 2017. Meanwhile the contribution of the service industries to GDP and employment have gradually increased or remained relatively stable over time.
|Oil Extraction & Support Activities for Oil and Mining||28.2%||28.4%||25.7%||15.1%||14.4%|
|Finance, Insurance, Real Estate & Business Support Services||12.3%||12.6%||13.0%||15.6%||14.7%|
|Professional, Scientific & Technical Services||2.6%||2.3%||2.4%||2.6%||3.1%|
|Information, Culture & Recreation||2.3%||2.4%||2.5%||2.8%||2.7%|
|Oil Extraction & Support Activities for Oil and Mining||8.8 (3.8%)||9.2
|Finance, Insurance, Real Estate & Business Support Services||15.1 (6.5%)||15
|Professional, Scientific & Technical Services||9.2 4.0%||10.6
|Education Service||18.1 (7.8%)||17.6
|Information, Culture & Recreation||6.6 (2.8%)||7.5
This trend is in line with the provincial economic growth strategy to diversify NL’s economic output while maintaining the strength of existing core industries (Government of Newfoundland and Labrador, 2019a), while increasing the capacity in service sectors such as information and communications technology (ICT) and international education.
Technology changes the nature of work and skills needed at work. This can lead to less labour force demand in some fields, and a shortage of skilled workers in other fields, as well as potential skill gaps. Some jobs require new skills and some new jobs are created in response to technology. An employer survey by the World Economic Forum shows that at least half of all employees will require significant re-skilling or up-skilling to be able to work with changing technology (World Economic Forum, 2018).
In NL, the highest number of job openings will be in technical occupations (ACOA, 2019). Occupations with at least a college diploma in public administration, education services, professional, scientific and technical services are among the top ten industries seeking employees across NL. About 14 percent of job ads require at least a university degree or higher education credentials. (The Job Vacancy Report 2017, Government of NL). However, only 4.6 percent of unemployed Newfoundlanders held a university degree or higher education degrees in 2017 (Statistics Canada, 2017). According to the 2016 Census, 49.1 percent of people aged 25-64 years old had a college diploma (Statistic Canada, 2016). Therefore, unemployment is more likely to be structural due to contrasting skills.
A report on occupational ratings (Table 6, Department of Finance, Fall 2018) shows the kind of occupations likely to be in demand in the upcoming years, broken out by educational and training requirements. They include natural resources industries with occupations such as processing, manufacturing and machine operating, which will likely continue to need workers. Additionally, occupations in the knowledge-intensive economy, such as highly skilled managers in financial and business services, will also likely be in high demand.
|Occupations that usually require university education||Occupations that usually require college education or apprenticeship training||Occupations that usually require secondary school and/or occupation-specific training||Occupations where on-the-job training is usually provided|
|Competition for qualified labour will be strong||Managers in health, education, social and community services, sales, natural resources production and fishing||Control operators|
|New labour supply will be required to meet anticipated job openings||Managers in all fields
Professionals in business and finance
Professionals in business, finance and administration
Supervisors in manufacturing and utilities
Administrative support occupations
Tourism and security related occupations
|Labourers in processing, manufacturing and utilities, and some elementary service occupations
NL is facing more serious structural skill shortages compared to other provinces, even as the economy transitions from resource dependence to greater diversification. To alleviate skills shortages, it is necessary to focus on re-skilling or upskilling the existing labour force as well as developing a new pool of skilled workers. Immigrants, temporary foreign workers, refugees, and international students are part of the solution and immigration policies in NL can facilitate the growth of this new source of skilled workers.
International migration accounts for most population growth in Canada. According to Statistics Canada, population growth through immigration has been twice that of natural increase (Statistics Canada, 2019b). Since the inception of the Temporary Foreign Worker Program and the points system in the 1960s, immigration policies have had a significant effect on mitigating the short- and long-term labour and skill shortages. The Canadian Experience Class was introduced to attract and retain skilled workers and international students who have Canadian work experience or education experience to become permanent residents and alleviate skill shortages. These policies have contributed to the success of Canada’s labour market, economy and social outcomes (IRCC, 2018).
As part of the Government of Canada’s immigrant selection criteria, most newcomers to Canada are economic immigrants chosen by the point system that is based on several factors, including education and age. As a result, the newcomers tend to be more educated than Canadian-born workers (Docquier and Marfouk, 2004; Grogger and Hanson, 2011), and younger (Statistics Canada, 2019a), which means they are more productive and will stay in the workforce longer. In addition, immigrants play an important role in an open economy due to their knowledge of the markets and products of their country of origin (Dunlevy, 2004; 2019).
The most important contributions of immigrants include their innovation and entrepreneurship. Immigrants are fundamentally heterogeneous in terms of their abilities and skills as a result of their different education, cultural backgrounds and working experience, which can be considered important sources of innovation (Hanson 2012; Ozgen et al., 2014) and productivity (Huber et al., 2010; Hou et al., 2018; Harrison, Harrison· & Shaffer, 2019). Due to their relatively higher risk appetite, and lack of employment opportunities that provide decent income, immigrants are also more likely to start their own business, which can in turn create more jobs for the local community. For example, more than half of new Silicon Valley ventures are established by immigrants, and the same is the case for Canada as a whole (Green et al, 2016). Between 2003 and 2013, the average annual net job growth per Canadian firm was higher among immigrant-owned firms than among firms with Canadian-born owners, as was the likelihood of being a high-growth firm (Garnett et al. 2019).
According to the Government of Canada statistics presented in Table 7 the number of immigrants in NL increased significantly from 2007 to 2018 (IRCC, 2019a). Partially thanks to the introduction of the Atlantic Immigration Pilot Program in 2017, more immigrants are now moving to NL as Table 7 shows.
|Total Immigrants Welcomed||546||627||606||714||685||732||835||899||1122||1118||1171||1275|
In fact, only 2.4 percent of the total population of NL are immigrants, compared to 21.9 percent for Canada as a whole (Statistic Canada, 2016a). Newfoundland and Labrador attract relatively fewer immigrants and struggle to retain newcomers. As shown in Figure 4, only about half of immigrants stayed in NL five years after admission (Statistics Canada, 2018b).
In 2014, there were 2,261 international students in NL with $48.2 million in annual spending. The presence of these students in turn created 511 jobs (Statistics Canada, 2016b) demonstrating that international students not only increase consumption and create more jobs, but also fill labour skill shortages as new skilled workers (CBIA, 2018a). Currently, there are about 2,800 college level international students enrolled at Memorial University and the College of North Atlantic. By developing an appropriate international education policy and attracting more international students, the economy of the province can grow even further (Government of Newfoundland and Labrador, 2019a). However, the number of international students in NL represent only 1 percent of the total students in Canada, while British Columbia attracted 24 percent and Ontario attracted 48 percent respectively in 2017 (CBIE, 2018b). Even though the retention rate of international students rose to about 17% in NL between 2004 and 2015 (Toughill, 2018), it is still low compared to Ontario and Quebec, which retain over 70 percent of international students (Smith, 2016).
Canadian employers often hire temporary foreign workers to fill immediate skills and labour shortages on a temporary basis. Including positions that Canadian citizens and permanent residents are not available or willing to fill, such as seasonal work (Curry, 2016), highly skilled occupations in technology, and low skilled occupations in the service sector (Lemieux and Nadeau, 2015).
In 2017, 78,788 temporary foreign workers were admitted in Canada, including caregivers, agricultural workers and other workers who require a Labour Market Impact Assessment (LMIA). In addition, 224,033 work permits were issued under the International Mobility Program (IMP), which are exempt from an LMIA due to agreements that promote economic, social, and cultural exchange between Canada and other countries (Hussen, 2018). Temporary foreign workers can transition to permanent residence status through the Canadian Experience Class, Provincial Nominee Programs and the Express Entry Program (Prokopenko & Hou, 2018). There is a growing number of temporary foreign workers who obtain permanent residence and most of them are highly skilled workers (Prokopenko & Hou, 2018). In the past the Canadian Federation of Independent Business emphasized the demand by employers for temporary foreign workers in NL by explaining that,
“There are times we cannot find people regardless of what we do. We can raise wages, offer benefits, do what is necessary and members are still not getting the applicants required (across the country)”
(The Telegram, 2014).
More recently, an employer survey and study on the hiring of temporary foreign workers also showed the need for these workers in NL due to the difficulties in attracting workers at all levels (Fang et al, 2017).
Various organizations including government agencies, businesses, and academic institutions have raised concerns about labour and skill shortages in NL. Employers have a crucial role; the experiences and opinions of the private sector are a strong reference for decision making to address skill gaps and challenges across NL.
In May 2019, PPF organized consultations with employers at the St. John’s Board of Trade to engage employers from different sectors including energy, information technology, education, tourism, and business services to discuss pressing topics such as:
Through discussion, the consultation was intended to:
Table 8 summarizes the input of employers through their experience with labour and skill shortages and their recommended solutions to address these shortages.
|Sector||Skill shortages||Challenges||Potential solutions|
|Engineering and energy||
|Education, government and services||
|Sector||Skill shortages||Challenges||Potential solutions|
|Information and communications technology||
Newfoundland and Labrador faces a shortage of skilled workers, especially in areas such as computer engineering, information technology, sustainable food safety, healthcare, social work, and bilingual services. This situation is particularly acute in rural communities.
NL has found it difficult to attract people from other provinces because of a perceived unstable economic situation and high unemployment rate. Similarly, it is difficult to attract immigrant workers because the immigration process and regulations are considered long and tedious, which discourages employers from hiring newcomers. Employers are also hesitant to hire immigrants out of concern that they may not fit culturally, that they will not have adequate language skills, they aren’t well trained, and/or that they will leave soon after arriving. Many employers, particularly in information technology, are contracting business out, and some have moved their business to other provinces where it is easier to find and hire skilled workers.
Sector representatives and employers consulted in St. John’s made the following key recommendations:
In conclusion, NL face deep structural labour and skill shortages which will affect long-term economic development and prosperity. Residents of the province need to know that the economy of the province can be improved by better attracting and integrating newcomers. Immigrants, international students, and refugees arriving in NL need to know about skill and labour shortages in different industries and the opportunities that exist for them. Finally, settlement agencies need to work with the government, employers, and training institutions to ensure the smooth settlement and integration of newcomers to the province.
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This report is part of PPF’s Immigration & Atlantic Revitalization project that is examining immigrant retention and skilled labour shortages across Atlantic Canada.