Commentary,  Skills & Training

Lack of Foresight, not Lack of Skills, is the Problem

Training and skills are often held up as a ‘silver bullet’ for supporting transition and adjustment as the labour market changes. But is it true that workers lack the skills needed in the future economy? And will more training ensure they get jobs that actually use their skills?

In this commentary originally published in the Toronto Star, Centre for Future Work Director Jim Stanford tackles some of the myths about training and jobs, and challenges employers to be more pro-active in developing skilled workforces.

Employers Complain about a ‘Skills Gap’ in Canada. But Employers are Part of the Problem.

With advances in technology remaking many jobs and industries, it’s not surprising so much attention has focused on improving the skills of Canadian workers. The hope is that by investing in job-relevant training, workers displaced by new technologies will quickly find new, better jobs – and the productivity of the whole economy will rise accordingly.

Of course, investing in better education at all levels (from early child education right through lifelong adult learning) generates huge economic gains. But the common assumption that a lack of skills is the bottleneck holding back economic success, and that training is a silver bullet for dealing with new technology, is wrong.

It’s time to revisit some common myths about Canada’s so-called “skills gap.”

First, is our skills base really so inadequate? Actually, Canadian workers are better educated than ever – most of all our youngest cohort. The Organization for Economic Development and Cooperation reports that 58% of Canadian workers in 2018 held a tertiary qualification. That’s the best in the world. In fact, millions of skilled Canadians don’t get to use their skills at work. A shortage of jobs where they can apply those qualifications is the bigger brake on growth.

Second, many policy-makers seem to believe that producing skilled workers, of its own accord, will somehow create the jobs that use those skills. It’s a “Field of Dreams” approach: if we train them, jobs will come. But we need just as much emphasis on creating high-quality skills-intensive jobs (nurturing dynamic, high-tech industries like advanced manufacturing, information technology, and specialized health and education services), to create openings for all those well-trained graduates.

Perhaps the loudest skills myth is the never-ending complaint from employers that they just can’t find qualified workers. This is invariably followed by demands that government spend more money to train job-ready graduates, with just the right skills that business wants right now.

Once upon a time, employers did their own on-the-job training. They taught job-specific knowledge and experience, supported workers in gaining more qualifications, and funded multi-year apprenticeships. A skilled workforce was seen as a valuable asset, critical to the long-run viability of the business. And companies invested in that asset accordingly.

That far-sighted approach to workforce development has been a casualty of the modern, just-in-time labour market. Employers prefer to hire and fire workers in synch with short-term fluctuations in sales. For gig workers, that insecurity occurs instantaneously. And job security isn’t much better for millions of others on temporary, labour hire, or contingent contracts. Why invest in job-specific skills, when you don’t know if you’ll be working next week – let alone next year?

Employers have also been spoiled by many years of a buyer’s market. Labour market conditions were generally weak over most of the last generation: with high unemployment and underemployment, and a permanent pool of hungry workers eager for any opportunity. Employers could advertise a job one day, and have a whole stack of qualified applications on their desk the next. In that environment, employers came to expect tailoured qualifications and experience from their applicants. They forgot that job-specific skills should be nurtured within the workplace. Statistical studies have confirmed that employers have higher expectations of applicants when unemployment is higher.

But now the labour market has tightened (with unemployment at its lowest since the 1970s), and that lazy approach to skills doesn’t work anymore. It’s time for employers to rediscover the value of investing in their own training programs. Government must play a role, of course, but by prodding employers to do a better job – rather than letting them off the hook entirely.

For example, colleges and universities can work with employers to implement more job placement and co-op programs, which are proven to improve graduate employability. And aggressive training plans should be a core feature of any government-supported industrial programs, technology grants, or infrastructure projects.

The ultimate responsibility of employers to invest in their own workers can be reaffirmed through fiscal levers. With a training levy, all employers would contribute to workforce training with a premium on eligible wages (including what they pay to contractors). Firms which undertake their own appropriate training and apprenticeships would get a full refund. But firms which free-ride on the investments of others (including by “poaching” qualified graduates from competitors) would pay into the cost of the public training system.

Canadian workers are skilled, motivated, and qualified. It’s time for employers to stop complaining about the supposed skills shortage. And time for them to start doing something about it.

Jim Stanford is Economist and Director of the Centre for Future Work. He divides his time between Sydney, Australia and Vancouver, Canada. Jim is one of Canada’s best-known economic commentators. He served for over 20 years as Economist and Director of Policy with Unifor, Canada’s largest private-sector trade union.