How governments can fill the skills gap

Canada West Foundation gathers stakeholder input and comes up with recommendations to fill the hole in the supply of skilled labour in Western Canada

As part of its initiative to address skills shortages in Western Canada, the Canada West Foundation, a non-partisan, non-profit public policy research institute delivering western perspectives into current Canadian policy debates, held focus groups in Calgary, Regina, Vancouver and Winnipeg in October and November 2004. These focus groups brought together experts from government, industry and post-secondary educational institutions — of all forms, not just universities and colleges — for a half-day session to identify problems relating to skill shortages, and ways that co-ordination among the three sectors can improve.

The following are some of the recommendations based on the focus groups and taken from the report, Toward a Bright Future: Recommendations for Addressing Skills Shortages in Western Canada. The full report is available online at www.cwf.ca.

More funding for post-secondary education to ensure appropriate program and facility capacity: Insufficient and unpredictable funding is at the root of systemic problems encountered by post-secondary education institutions.

In many cases, student demand for programs simply outstrips the available number of placements in the schools and students are turned away. The call for increased funding for post-secondary institutions should not be restricted to governments. Industry could be playing a larger role as well. There are several examples of partnerships between industry (either sectors or specific companies) and post-secondary schools where the former fund an entire program of specialized training. If industry needs specialized labour — and particularly if that industry stands to gain financially by the increased availability of skilled labour — it should be expected to increase its level of funding.

The federal government’s sector council program should place a more regional focus on its activities: Sector councils work to identify and address current and anticipated human resources challenges, and to implement long-term, human resources planning and development strategies for their respective sectors. They also play a role in establishing national standards within certain occupations.

At the moment, most of the sector councils are located in Ottawa. Focus group participants argued that the sector councils based in Ottawa do not have the same effect as the ones based in the regions.

The role of sector councils should be expanded with a mandate to focus more attention on regional or community-based projects within the national framework. The Construction Sector Council’s regional Labour Market Information Committees in various jurisdictions are a good example. One possible way to achieve the greater regional focus would be to maintain two parallel sets of councils: one at the federal level to address national standards, and one at the local or provincial level to work with industry and regional post-secondary institutions. If managed properly, the system would not cost any more, and better use could be made of the unique strengths of both the national and local or provincial councils.

Labour Market Development Agreements need to break the link between federal funding for training and EI eligibility: Labour Market Development Agreements (LMDAs) are a set of agreements between the government of Canada and the provincial governments. Under the agreements, Human Resources and Skills Development Canada and provincial departments responsible for human resource development and training both design and manage labour market development programs and services.

These services can include training, support for training, and living costs for individuals while taking training. The programs and services are funded by the Government of Canada and delivered by provincial departments or HRSDC (models vary among provinces).

The problem with the LMDAs is that federal funds for individuals are linked to the Employment Insurance program. One must be eligible for EI to receive LMDA funding for training. The program focuses entirely on training for the unemployed, but not for the under-employed or those at risk of becoming unemployed because their skills are outdated. Those underemployed or “at risk” are not eligible for the program, and therefore have few means by which to improve their skill sets.

One way to fix this is to “de-link” LMDA funding eligibility from EI eligibility. Other methods by which to measure individual need for skills training must also be found.

Improve the quality and timeliness of shared information on labour demand: At present, most of the provincial labour departments rely almost entirely on data from Statistics Canada’s monthly Labour Force Survey. While this survey is the most comprehensive of its kind in the country and is extremely valuable in terms of broad measures of skills shortages in Western Canada, it does not — nor is it designed to — give any indication of where and what type of labour is in demand.

Information on labour demand is critical if potential employees are expected to find work and if post-secondary institutions are expected to generate the skills that are in demand. This is a gap that could be filled by a joint effort among the provinces and industry. Questions that need to be asked include: What jobs are currently in demand? What skills are required? What skills are expected to be in short supply in the future?

An electronic database could be developed by the provincial governments, and participating companies and industry associations could be responsible for inputting the data on a monthly basis.

This would not simply be a database of job openings to be accessed by job seekers. There are plenty of these already. Rather, it would be an analytical tool used to judge where the skill shortages are most acute. The main idea is to make better use of shared labour demand data among all stakeholders.

Use tax credits to encourage companies to do more direct on-the-job training: Many companies already provide on-the job training to develop their own specialized skilled labour. Nonetheless, much more could be done by employers in this regard. It is not, after all, a lack of labour that is the problem, but a lack of skilled labour. Companies would likely have no problem attracting available workers in return for the appropriate training.

Training new employees, retraining existing ones, or establishing co-op programs can be costly and may result in lower productivity in the early stages. Companies are often willing to do this because of the expected payoff of higher productivity in the future.

The upfront costs of training, however, are often perceived to outweigh the benefits. To make on-the-job training more financially appealing in the short-term, the provincial and federal governments should consider a system of tax credits to encourage more companies to engage in skills training, retraining, and co-op programs. A review of existing training incentives should be done to determine a model that will maximize effectiveness.

Todd Hirsch is chief economist at the Canada West Foundation. He can be reached at (403) 264-9535, or [email protected].

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