We’re missing jobs, not skills, Mr. Kenney

Posted on July 18, 2013 in Debates

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TheGlobeandMail.com –
Jul. 18 2013.   Jim Stanford

This week’s cabinet shuffle was probably the first in history unveiled on Twitter. And cabinet’s most pugnacious tweeter, Jason Kenney (the new Minister of Employment and Social Development), wasted no time going online to map out his coming approach. Within minutes of his appointment, he tweeted, “I will work hard to end the paradox of too many people without jobs in an economy that has too many jobs without people.”

That message spoke volumes about Mr. Kenney’s view of the Canadian labour market. The government will continue to play down job creation as an economic priority. Instead, the minister fully accepts the “mismatch” theory: Namely, that the key challenge is matching up unemployed Canadians with employers anxious to use their services. Help employers find the right workers, in the right place, at the right price, and presto – problem solved.

This approach implies that the unavailability of skilled and willing workers is significantly constraining Canada’s recovery. It’s been invoked to support many Conservative policy thrusts, from the controversial Temporary Foreign Worker program to repeated cuts in Employment Insurance eligibility.

But the theory is wrong, both theoretically and empirically. Except in very rare circumstances, the labour market almost never runs out of workers. The usual problem is a general, persistent inadequacy of employer demand for labour. That’s as clear as ever today. Measured appropriately as a share of the working-age population, employment in Canada has recouped less than one-quarter of the ground it lost during the 2008-09 recession, and progress has been stalled since January, 2011.

Officially, unemployment is 1.4 million, and that’s just the tip of the iceberg. Declining labour force participation (as workers give up looking) represents 325,000 more workers. Other forms of hidden unemployment (including involuntary part-time and other precarious positions) takes the tally well above two million – pushing the true unemployment rate above 12 per cent. The clear constraint is the number of jobs, not the availability of willing workers.

Skills aren’t the problem, either. More Canadian workers have postsecondary training than any other country. Millions of Canadians don’t remotely use their existing skills to their full potential. While investments in more training always make sense, there is no general skills shortage.

Meanwhile, Statistics Canada reports just over 200,000 unfilled job vacancies in the entire economy. That number has declined (not grown), and is small relative to the overall economy (equivalent to barely 1 per cent of the labour force). Moreover, even the best-functioning labour market must have some vacancies (simply because it takes time to advertise, receive applications and hire). The number of jobs unfilled because of a genuine lack of qualified applicants is surely fewer than 100,000.

Even officially, then, there are more than six unemployed Canadians for each job vacancy. Practically, the ratio is more like 20 to one. Job creation should occupy 95 per cent of Mr. Kenney’s attention. Instead, he will likely focus on more social engineering: adjusting the expectations, attitudes and flexibility of the unemployed, rather than trying to stimulate job creation.

A more appropriate 140 characters might go something like: “I will work hard to spur job creation, private and public, so every willing Canadian can work and support their family.” Now that would be worth tweeting about.

Jim Stanford tweets about economics for the Canadian Auto Workers at @jimbostanford.

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