Skills Gap Depends on Supply and Demand

Positions that require specific skills can be hard to fill

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Prof. Miana Plesca

Prof. Miana Plesca

Employers complain about having difficulty finding skilled workers; the unemployed claim they can’t find jobs to match their education and training. What’s the reality of the job situation in Canada? Is there a skills shortage?

It’s a more complicated issue than it seems on the surface, says economics professor Miana Plesca. “We haven’t had a lot of data on this, although Statistics Canada does provide some information on vacancies,” she explains.

It’s a question government policymakers would like an answer to as well, so the Social Sciences and Humanities Research Council of Canada (SSHRC) funded 16 research teams to explore these issues. Plesca and PhD student Fraser Summerfield headed one team, which reviewed previous and current studies to see if there truly is a skills shortage.

What’s the answer? Yes and no. Plesca says that at most, there is a skills mismatch.

“We found in general, the answer is no. The percentage of people finding jobs that matched their level of education is no worse than it was 15 years ago and is actually slightly improving. However, there has been a slight rise in over-education – people who are in jobs where they have more education than is actually required for the position,” she says.

Currently, between 20 and 25 per cent of employees are over-educated for their positions. This may be partly because the percentage of people who have graduated from universities or community colleges has grown.

Although employers say they have difficulty finding skilled workers, Plesca points out that if this were true, wages for those positions would be increasing.

“That’s supply and demand,” she says. “If there really was a gap, you’d see those wages going up, and they are not.” There are a few localized exceptions, such as companies looking for engineers with expertise in oil extraction in northern Alberta, but for the most part this does not seem to be a significant issue.

Sometimes a skills gap may appear because employers are looking for workers with a narrow set of specific skills and are having difficulty finding them. In those cases, Plesca says, the research suggests that hiring people with the right general level of education and providing training to develop additional skills works well.

Another cause of the apparent mismatch may be the inevitable lag between a need in the job market and an increase in people with the education to match it. She points out that after the “dot-com bust” several years ago, the number of students who enrolled in computer programming courses dropped significantly. However, employers are now again seeking employees with those skills and complaining that they can’t find them.

That will change soon.

“Right now, computer programming is one of the fastest growing areas of post-secondary studies,” Plesca says. “In a few years, there will be plenty of staff to satisfy the needs of the employers. Until that catches up, they should be considering more on-the-job training for the people they hire.”

Plesca also commented that Canadians rank low in productivity (14th) among developed countries despite ranking high in post-secondary education (first). This is puzzling, Plesca says, because increasing education usually increases productivity.

She speculates that the cause is too many community college graduates. “If you do a two-year community college degree, it teaches you very narrow skills. That limits productivity. A four-year university degree, on the other hand, teaches you critical thinking and broader skills that are more easily transferred between jobs or adapted as jobs change.”

Plesca also sees a need for more apprenticeships, which include some time at community college and more training as a “journeyman.”

Another interesting aspect of the Canadian job market is that twice as many women as men are now graduating from university each year.

“This shift started as long ago as 1978, but the increase has been more dramatic in the past 10 years,” says Plesca. “We are moving towards a work force where the women are more educated than the men, which has never happened before.”

Why this shift? One theory is that women benefit more from education than men do. Women still make about 75 per cent of what men make, but women who have graduated from university make about 40 per cent more than women who have only finished high school. Men with university degrees make about 30 per cent more than men who only have high school diplomas.

However, Plesca points out that these statistics are true only in terms of annual income.

“When you look at hourly income, women get roughly the same benefit from having university degrees as men. The difference is that they work more hours. Women who only have high school diplomas are more likely to work part time or take more time out of the workforce when they have children.”

The results of Plesca and Summerfield’s work will be combined with other research projects to provide insight for future government policy.

As a labour economist, Plesca says the next area that needs to be addressed is how to increase human capital through appropriate education and training.

“We need to look at who should be paying for some of this training – the government, the employer, the employee – and what the benefits will be.”