Low-wage employers in Alberta are blowing smoke when they whine about labour shortages

Examination of Alberta jobs data shows that labour shortage claims from groups like CFIB are nothing but hot air

EDMONTON, July 4, 2014 /CNW/ - The federal government should tell low-wage employers and the Alberta government to "quit their whining" about recent changes to the controversial Temporary Foreign Worker program, said AFL president Gil McGowan as he released a new study showing that there is no economy-wide labour shortage in Alberta.

The study, entitled "Truth or Scare: Are Claims of a Labour Shortage in Alberta Based on Evidence?" uses empirical, Alberta-specific jobs data to examine the issue — as opposed to the kind of studies released by the CFIB, which rely on surveys of employers who have an incentive to overstate the difficultly they're having filling positions.

"The labour shortage is basically a myth created by employers who want to keep wages low in the face of economic conditions which suggest they should be going up," McGowan said. "It's a myth that's been used to promote policies like the TFW program that are bad for Canadians."

Using a test for labour shortage developed by the Federal government's own economists, the AFL study found that that there is no labour shortage in most sectors of the Alberta economy, including lower-skill, lower-wage sectors like retail, accommodation and food services.

"Now that the federal government has finally put some limits on the ability of low-wage employers to use the TFW program to drive down wages, groups like the CFIB are whining and trying to resurrect the labour-shortage boogeyman," McGowan said. "This report exposes these complaints for what they really are: empty rhetoric from a group of self-interested whiners who want to short-circuit the healthy operation of the Canadian labour market."

Experts agree that there is a three-part test to see if a labour shortage really exists. First, employment levels have to go up significantly. Second, unemployment rates have to go down significantly. And third, wages have to go up significantly. By these measures, with the notable exception of a very small number of occupations related to the energy sector, there is no labour shortage in Alberta.

According to Employment Minister Jason Kenney, the Consumer Price Index (CPI) in Alberta has increased by 31 per cent, but median wages have only increased 14 per cent. In Alberta's food services industry, wages have only increased eight per cent.

"Employers can't say Canadians are unwilling to fill the jobs on offer until they've actually increased wages in keeping with changing market conditions," McGowan said "What our study shows is that Alberta's labour market is booming – but we're not dealing with any economy-wide shortages."

Although the AFL's report is the first comprehensive look at available data, this is not the first time that the labour shortage has been shown to be fake. Over the past year, the Parliamentary Budget Office, former Bank of Canada governor Mark Carney, the Institute for Research on Public Policy, the University of Calgary School of Public Policy, Human Resources and Skills Development Canada, the Canadian Imperial Bank of Commerce, the University of Alberta Economics Department and Fraser Institute Fellow Herb Emery have all released reports that debunk the labour shortage myth.

Key findings in the report:

• Retail Trade exhibits neither a shortage of workers nor rising wages.
• From 2010 to 2013, wages in wholesale trade fell
• From 2010 to 2013, wages in accommodation and food services stagnated
• Between 2007 and 2011, 23,100 Albertans enrolled in an apprenticeship program, but only 9,066 completed those programs
• The only occupational categories that saw rapidly rising wages as a result of shortages were in limited energy-related sub-categories.
• Manufacturing and Professional, Scientific, and Technical Services saw wages increase a third and a quarter below average.

Link:  "Truth or Scare"

Backgrounder

Truth or Scare: Are claims of a labour shortage in Alberta based on evidence?

Alberta Federation of Labour

May 2014

Using the test for a labour shortage developed by the federal government's employment department, the paper finds Alberta has experienced some shortages in some sub-categories of energy-related construction occupations.

There is no evidence of a shortage in food services, accommodation, or retail trade.

The paper concludes that the shortages are, unsurprisingly, linked to the energy-related construction boom. They can be alleviated by specific public policy aimed at building Canada's skilled workforce, pacing development in the oil sands, and improving labour productivity.

Methods

The paper examines various labour shortage measurements and finds the most appropriate one to be the method used by the federal government's Human Resources and Social Development Canada (now Employment and Social Development Canada).

Under the federal employment department's test, an occupation shows signs of a shortage if:

• The specific occupation's employment growth rate is at least 50% above the growth rate for all jobs in the economy; AND
• The specific occupation's wage growth rate is at least 30% above the average wage growth for all jobs in the economy;  AND
• The specific occupation's unemployment rate is at least 30% below the average employment rate; OR the occupation's unemployment rate is close to its historical minimum.

Contrast with other methods commonly finding a "labour shortage"

This paper examines what the market actually does – not what employers say. The paper dismisses "employer survey" data used by the Canadian Federation of Independent Business based on the fact that these surveys are inherently qualitative and may tend toward bias.

The paper also dismisses the often-cited "shortage of 114,000 workers in the next decade" figure used by the Government of Alberta, given that it is a made-up number using a method no other province uses and no one in economics has used since the late 1940s.

Using the federal government's test for a shortage allows us to examine occupational employment and wage trends. It measures only what employers in the marketplace are doing (hiring patterns and wage growth data) – not what they are saying.

Time Period

The paper analyses both short term and long-term trends in Alberta's labour market. Two sets of data are presented: October 2001 to October 2013, and October 2010 to October 2013.

What does the evidence say about labour shortages in Alberta?

The evidence says that labour shortages in Alberta are limited. The construction and energy industries face some shortages in a select few occupational sub-categories.

Does the evidence support the claim there is a labour shortage in accommodation and food services, retail, or wholesale trade?

The paper finds that Retail Trade exhibits neither a shortage of workers nor rising wages.

There is some evidence of rapid employment growth in Accommodation and Food Services and Wholesale Trade in the 2001-2013 period.

However, when we zero in on the 2010-2013 period, we see average wages in Wholesale Trade actually fell and wages in Accommodation and Food Services stagnated. Demand for workers is relatively stable. Given that these lower-skilled occupational categories do not meet the test for a labour shortage, they cannot be argued to be in shortage.

Does the data show rapidly rising wages as a result of shortages?

The only occupational categories that saw rapidly rising wages as a result of shortages were in limited energy-related sub-categories.

The paper finds the energy industry's wage growth had limited pull on non-energy industries. Manufacturing and Professional, Scientific, and Technical Services saw wages increase a third and a quarter below average.

What is the solution?

There is a shortage of some skilled tradespeople in the energy-related construction sector.

The paper makes three recommendations:

• Invest in Apprenticeships
  • Between 2007 and 2011, 23,100 Albertans enrolled in an apprenticeship program, but only 9066 completed those programs.
  • Only 17% of employers able to hire an apprentice actually do.
  • An apprenticeship training fund established by the Government of Alberta would allow better planning for the skilled workforce and eliminate the 'free rider' problem, where employers wait for someone else to train workers and then lure them away with the promise of slightly higher wages
    
• Improve productivity by pacing energy-related construction developments
  • In the first decade of the 21^st century, Alberta's productivity dropped 22% in Mining and Oil and Gas Extraction and 23% in Construction. Pacing development would have increased productivity in this time period.
  • Blame for Alberta's low productivity lies solely at the feet of the Government of Alberta. The province sets the pace of development in the energy sector. Its failure to set a reasonable pace has driven up costs and created much of the productivity problem
    
• Facilitate Interprovincial Migration
  • Government's role is to bridge the financial gap for workers who may wish to move for work. The financial cost is enormous despite the potential long-term payoff. The paper recommends using the Employment Insurance Program to bridge the divide.

SOURCE: Alberta Federation of Labour

MEDIA CONTACT: Olav Rokne, Communications Director, Alberta Federation of Labour at 780.218.4351 (cell) or via e-mail [email protected]