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A LOOMING LABOUR CRISIS: B.C. needs to act now

Top government priorities: skills and training. Funding in place? Yes. Clear game plan? No. Find out why.

You don't need to be a demographic whiz to see B.C.'s looming labour market crisis on the horizon. A real crisis. Not the little shocks that have already hit, as a shortage of skilled trades pushes up costs, delays projects, and even leads investors to think twice about B.C. But a real, across-the-board earthquake of a labour market imbalance, with 150 employers competing for every 100 new entrants into the job market, and shortages that go way beyond the construction trades..

The challenges now are real. Here's only one example: The Bambu, a planned 161-unit condo in a great old-town Victoria location, sold 90 per cent of its units at full asking price. But Anthem Properties, the project developer, pulled the plug in January, months before construction was to start. Anthem's CEO Eric Carlson blamed soaring labour costs as one big factor. Buyers, their money taken out of a hot market for months, were steamed. The lot remains a gaping hole downtown.

Today's problems are nothing compared to what's ahead. Right now, B.C. has almost enough workers, just the wrong mix of skills. The province can solve that problem, although bitter debates ensue over the best way to do that. Much bigger challenges lie just a few years ahead. We have no quick fixes for the profound labour-market shortages facing B.C. and the rest of Canada. Provincial Finance Minister Carole Taylor warns that over the next 12 years, B.C. will have one million job openings - a reflection of retirements and economic growth - with only 650,000 new entrants into the labour force.

Look ahead just a little further, and it gets worse. In 15 years, the last of the baby boomers will leave the workforce, and about 70,000 people a year will hit age 65. But those boomers weren't quite so keen on having children as their parents. By then, only about 45,000 British Columbians will turn 20 each year. That's great news for the kids going into grade one today, who will graduate into a red-hot job market. Not so good, though, for the provincial economy. Wage costs can rise only so far before projects become uneconomical, inflation takes off, and economic growth begins to falter. Companies can do much to cushion the blow, striving to become the employer of choice and finding new ways to reward and retain employees. The government can look harder at boosting productivity, so that fewer workers can produce more. But ultimately a skills shortage can cripple an economy.

Skills and training top priorities for B.C. government

The B.C. government has recognized the problem. When Taylor unveiled her first real budget for a roomful of reporters and stakeholders, she identified skills and training issues as her two main priorities. Putting the skills shortage at the top of her agenda shows the seriousness of the issue. Economic Development Minister Colin Hansen, charged with driving the province's growth strategy, says that the skills issue forms our biggest economic challenge. "Our number one priority is to make sure that we wind up with opportunities in B.C. for every young person who wants training," he says.

However, recognizing a problem and dealing with it successfully are two different things. The government's efforts have highlighted the deep divisions on training issues between unionized labour and the business community. At the same time, they have produced a rare, almost unknown, consensus from unions, business, and just about anyone involved with the problem: B.C. needs to do more.

Phil Hochstein, executive vice-president of the Independent Contractors and Businesses Association of B.C., says that builders across the province share the same problem of finding skilled people. Employers offer premiums and special deals, but there just aren't enough workers who know how to do the job. You can see the results for yourself, he says, from almost any vantage point in Vancouver. Keep an eye on that high-rise going up across the way. Back in 2000, construction companies counted on their crews to add a new floor to a concrete high-rise every four days, setting up the forms, pouring the slab, and then moving up to the next level.

"Now you're doing that every six or seven days," he says. The equipment is better and people on the job are working as hard, but they don't have the skills and experience, so it takes longer. If a building takes a year instead of seven months to climb into the sky, a lot more money has gone out the door before any starts coming in. Someone is going to pay. Eventually, this will hit a breaking point where the market can't cope.

Hansen knows about the concerns. He's taken a break from the budget debate, slipping into the corridor outside the red-carpeted chamber, clearly keen to talk about the skills issue. The shortage is certain, says Hansen bluntly, and the potential economic damage serious. The implications cut across almost every aspect of life in the province, from immigration and education to economic competitiveness and the cost of finding a place to live. "There's no one answer," he says.

Solving the problem is going to take an attack on several fronts. The province needs to encourage people with skills to move here, Hansen says. That used to be much easier, as B.C.'s booms tended to coincide with other province's busts, and workers were prepared to follow the jobs. But the skills shortage is hitting almost every province, and the barriers to moving have become greater. Two-income families are less willing to uproot both working partners to seek employment somewhere else, and B.C. housing prices scare off potential migrants from other provinces, say recruiters.

Barriers for skilled immigrants "enormous," says Hansen

Skilled immigrants from other countries will also help solve the problem, says Hansen, but the barriers now are enormous, and recruitment from overseas a challenge. Expanding the provincial nominee program, which streamlines immigration for investors and people with needed skills, would be a start, says Hansen. B.C. is working with the federal government to expand the program far beyond the current limit of 1,400 accepted a year.

Mention immigration to Hochstein, and prepare for a blast. Whatever the federal government might claim, it actively blocks attempts to get needed workers into B.C., says this spokesperson for most non-union builders in the province. Back in 1966, about half the immigrants coming into Canada were non-workers: children or retired people. "That's grown to 74 per cent in 2004," Hochstein complains. Almost one-fifth of immigrants in 1966 were from the trades and technology sector; by 2004, that fell to one in 20. "Immigrating people built this country, and we're going to need and rely on that," he says.

There is lots of work for skilled immigrants, with many candidates keen to come to B.C. from Germany, South Africa, and England. "There's no shortage of English-speaking, trained workers wanting to come in," Hochstein says. "The supply isn't the problem, the demand isn't the problem - it's the sucker in the middle, the federal government." Even getting in trade workers from other countries on temporary work permits is a nightmare, Hochstein says. Employers have to advertise across Canada to prove that no one in the country can do the work. Even if they establish their case, the next employer is sent on the same chase a week later, he says.

Hochstein says that his sector needs trades only. People are available within B.C. for the less skilled work on job sites. Other industries, like tourism, are looking for a larger role for people from other countries on short-term work permits to help with the job crunch. "Immigration people are owned by the trades union people," Hochstein charges. Union input is valued, while his association has never been consulted, he claims. Immigrants from the skilled trades just aren't valued, he says, whereas it's easy to get professionals or investors into the country.

But with only 16,000 people on work permits in B.C today, out of a labour force of 2.2 million, even a doubling of the numbers won't dent the problem. Some 33,000 landed immigrants arrive each year, but many aren't destined for the workforce, don't have immediately needed skills or will face language or certification barriers that will prevent them from working in their field.

Government has taken industry-knows-best approach to apprenticeship training

Training and developing our own workforce is the real solution. That's why Taylor came up with $400 million over the next four years to expand training opportunities. But money alone isn't an answer. Governments still have to figure out how to spend it - a big challenge when it's so hard to guess what the market is going to need two years from now, let alone in two decades. Back in 1990, governments across Canada decided we were on the way to having too many doctors. Therefore, they cut back on costly medical school spaces to save money. We now know that they got this wrong: They failed to anticipate the loss of doctors to the U.S., falling physician productivity, and a soaring demand for specialized services.

Now, says labour economist Herbert Schuetze, the provinces are trying to catch up. The B.C. government has funded a new medical school just across the campus from his University of Victoria office. Hansen says he's convinced that industry and business should take the lead in setting training priorities. "If you look back on the last several decades, government has not done a good job in forecasting," he says. It's one of the most controversial aspects of the government's evolving approach. Post-secondary institutions used to get funding with a big set of government instructions about what programs they should offer. Early on, the Liberals decided the schools should make those choices, based on their assessment of market demand, and provided unconditional funding. In the last year, the government shifted its direction again. "We are now working with industry to design the training that's needed," Hansen says.

Companies, or industry sectors, figure out what training they need, and the college is contracted to supply it. The shift caused "more than a little grinding of the gears" and a lot of stress for college middle managers, Hansen concedes. But he's convinced that it will produce students that industry needs, who can find work quickly. The government has taken the same industry-knows-best approach to apprenticeship training, a continuing union-government battleground. Government and unions used to manage apprenticeships, with employers playing a small role. Now, in that classic B.C. way, the pendulum has swung wildly the other way: the new Industry Training Authority's nine-person board has one director from a union, the rest from business. The model is streamlined: counsellors who supported people moving through the often-complicated apprenticeship process were chopped across the province. The needs of industry and business are driving training. Hansen sees that as a good thing.

The aim is to keep the economy moving, and get people working. A training program that prepares them for waiting jobs is the ideal. Companies know what they need, right now. The new approach has meant some big changes. The number of people starting apprenticeships has soared: about 25,000 today, compared to 14,000 three years ago. But the number of people completing apprenticeships has fallen. The number of graduates with red-seal certification, the national standard, has fallen by 50 per cent from before the changes. Alberta, with a much smaller population than B.C., is producing three times as many graduates. That's mainly because B.C. passed legislation in 2003 that allows partial trades certification.

Cuts have shortchanged workers and economy

Why insist that people go all the way through a carpentry apprenticeship? asks Hansen. If housing projects need framers, let people get through that chunk of training and start working. It's a complex policy issue. Industry wants workers to fill job vacancies today, and many workers want to cash in on the boom. Unions, which used to be part of apprenticeship planning, oppose this approach. What happens when the framing jobs end, and a 35-year-old with a family and mortgage finds that he doesn't have the rest of the carpentry skills he needs to keep working? Is he really going to pick up the rest of his apprenticeship then? How will only-partially-trained employees affect productivity?
Wayne Peppard of the B.C. Building Trades Council says that cuts have shortchanged both workers and the economy. And B.C. Federation of Labour president Jim Sinclair says that everyone will be hurt unless the problems are fixed. "If we can´t turn out the skilled labour we need, then we can't develop our economy and compete in the world," he says. The focus on how many people are registered in apprenticeships is all wrong, Sinclair complains. The real question is how many are completing the programs. On that basis, the B.C. government´s changes - especially cuts to staff that helped apprentices navigate the system - have been a failure, he says. "If we have so many people enrolled in it, why are so few actually qualifying?" he asks. When B.C. companies have to seek skilled workers from around the world, this indicates more than a hot economy, he adds. Something has gone seriously wrong with our own efforts, Sinclair says. Unions should be part of the solution to the current problems, he says, and they´re not.

These are legitimate concerns, just as it's legitimate for the government to worry that trade unions, like doctors or any other occupational group, have a vested interest in limiting the supply of workers so that wages stay high for those already in the field. Just as seriously, the current approach risks short-term thinking. Companies worried about meeting their commitments for the next three years are not considering the skills issues that might come our way in 2016, or the future challenges for partially trained workers. One answer, notes Doug Alley of the B.C. Business Council, is to make sure that mid-career training is available and accessible, and that people emerge from schools with the kind of core skills that let them adapt to a changing marketplace.

Ultimately, market forces fix most trade shortages, notes Schuetze, the labour economist. When workers are in short supply, wages go up and more people decide to train for that field. As costs rise, employers look for productivity gains. Supply increases, demand falls, and things get back into balance. But there are problems. The market correction can take time, and bad things can happen along the way. Like all markets, this relies on getting the right signals out to participants. Mining engineers might be in terribly short supply in B.C. for the next decade, but how do you get that message out to 16-year-old math whizzes thinking about their education options? How do you convince parents that trade school, not university, might be the best option? It's not enough to put up some training money, step back, and see what happens. "My recommendation wouldn't be to rely on market forces," says Schuetze.

Governments can identify future skill shortages and create incentives to attract people to specific fields, perhaps forgiving their student loans if they stay in the province. The B.C. government can target training funding. But Hansen is leery. The Industry Trade Authority is charged with looking at future demand, he says, but he doesn't sound that confident. "It's still a challenge - it's not a science, it's more an art."

Difficult, sure, says Schuetze, but government has a role. "It's clear that we can forecast areas where we should do something." But the government is not there yet. Taylor's budget promised $30 million a year in tax breaks to encourage companies to train workers. But the government has not yet created an actual plan, nor targeted particular skills or sectors. "Now we're going to sit down with the B.C. business community and industry to work together on how this credit will work," she says.

It's good news that the government has recognized the problem, but not so good that it still ponders solutions as the crisis grows nearer. Jock Finlayson wrote a prescient report for the B.C. Business Council on the skills crisis, asking an alarming question: "Will labour shortages derail the B.C. economy?" It warned about pressure on wages, economic challenges, and lost stability. It even offered many solutions currently under consideration. What's alarming is that he wrote it in 2001. Five years later, the question is even more urgent, and the need for action even greater.

Paul Willcocks is a Victoria freelance writer. Contact: willcocks@ultranet.ca
Reprinted from the Summer 2006 issue of PeopleTalk (vol. 9 no. 2)
B.C. government needs big leap to gain employer-of-choice status

The coming skills crunch means that the public sector, like all employers, is going to compete fiercely for the best people. Government can't just write big cheques, for reasons both practical and political. Instead, it has to become an employer of choice, able to attract and retain candidates based on a quality work life and the chance to grow and contribute.

That's going to take a big leap. The most recent internal employee attitude survey, released last year by Auditor General Wayne Strelioff, would make many HR professionals grab their Maalox and perhaps dust off their resumes. It found that government workers do not trust their top bosses and think that their departments make crummy places to work. Fewer than half would recommend that a friend apply for a job in government.

Nevertheless, Premier Gordon Campbell has made public-sector renewal a priority. That's one reason why he tapped Jessica McDonald, still in her mid-30s, as his deputy minister in charge of government operations. "For me, it's about someone who looks at this as a calling, and who cares deeply about the public service," Campbell says.

McDonald sounds evangelical about opportunities in the public sector. In her view, a commitment to communication and innovation at every level will ensure that people see it as a great place to work. "It's getting into the nooks and crannies where all those public servants are [and] talking about the outcome that government is trying to get to, " she says.

Finance Minister Carole Taylor says the same kind of thinking lies behind the government's new flexible approach to wage negotiations, which allows for different settlements with different sectors and employee groups. Government does not often pay the highest salaries, she says, so it needs to demonstrate creativity to increase workplace satisfaction. How? Through opportunities for training, involvement in decision-making, and an enriched work life.

The past has been bumpy, she acknowledges. "We'll have to completely turn that around if we're going to have the best and brightest working for us," she says. But hey, Taylor adds, none of this applies solely to government: the private sector will face the same issues. This points to an overall greater role for HR professionals as the labour crunch tightens. Companies will have to develop challenging, rewarding careers for people at all levels to hang on to their best current employees and fill vacancies.

Kael Campbell set up Red Seal Recruiting Solutions in Victoria to help companies deal with the immediate trades shortage, find skilled workers, and help match them with companies. This marks a big shift for employers used to just advertising a vacancy and waiting for applicants, he says. "They have to sell the job and the community and the company," he says. "An employer has to have a mentality from the top down that they want to be the employer of choice."

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