Study shows not all labour shortages are ‘created equal’

Key Takeaways:

• Researchers found no shortage of job seekers for positions requiring a bachelor’s degree or more.
• Instead, these job shortages were attributed to a a mismatch between the skills required for the job or the wages offered.
• The evidence showed that national and local shortages of job seekers with appropriate education levels have been observed only for job vacancies requiring a high school diploma or less.

The Whole Story:

Not all labour shortages are created equal.

New research from Statistics Canada shows that the national labour shortage is more complex than one might think, particularly when it comes to jobs that require higher levels of education. 

Labour shortages are growing

According to researchers, In 2022, the number of job vacancies in Canada averaged 942,000, two and a half times the average of 377,000 observed in 2016. 

“The substantial growth in the number of job vacancies observed during this period has brought to the forefront the concept of labour shortages, the notion that, in some sectors of the economy, there might be an insufficient number of workers available to fill vacant positions,” wrote researchers.

The report explained that assessing whether there are enough workers to fill specific job vacancies is challenging because vacant positions have different skill requirements—minimum education, amount of experience, occupational and language skills—while workers may be competent in several occupations and have different skills, some of which are not captured in surveys.

To tackle this, researchers asked several questions:

• In recent years, has the national number of job vacancies requiring a given education level exceeded the number of job seekers with such an education?
• If so, in which regions has this greater number of job vacancies been observed?
• If so, for which education levels has this greater number of job vacancies been observed?

Educated job seekers exceed positions 

Statistics Canada answered these questions using data from the Job Vacancy and Wage Survey (JVWS) and the Labour Force Survey from 2016 to 2022. 

They found that during every quarter from 2016 to 2022, the number of unemployed individuals with a bachelor’s degree or higher education exceeded the number of vacant positions requiring such an education. 

For example, 113,000 vacant positions required a bachelor’s degree or higher education during the fourth quarter of 2022, about half the number of unemployed individuals who had such an education and were either born in Canada or were landed immigrants (227,000). The total number of vacant positions requiring such an education (113,000) was even lower than the number of unemployed immigrants (123,000) with a bachelor’s degree or higher education.

Likewise, from 2016 to 2022, the number of unemployed individuals with a partial or complete postsecondary education always exceeded the number of job vacancies requiring such an education.

In contrast, the number of vacant positions requiring a high school diploma or less education exceeded the number of unemployed Canadians with such an education only since the third quarter of 2021. For example, during the fourth quarter of 2022, 497,000 vacant positions required a high school diploma or less education while 296,000 unemployed Canadian-born individuals and 70,000 unemployed immigrants had such an education.

Trend consistent across the country

Statistics Canada found the trend to not be isolated. During the third quarter of 2022—which recorded close to 1 million job vacancies nationwide—the number of vacant positions requiring a high school diploma or less education surpassed the number of unemployed individuals with such an education in all the economic regions. For example, Montréal had about 35,000 such job vacancies during this quarter while the number of unemployed individuals with a high school diploma or less education averaged about 18,000. During the third quarter of 2022, hourly wages offered in these vacant positions averaged at most $20.35 per hour nationwide.

Mismatch of skills and wages

The study found no evidence that the recruitment difficulties experienced by Canadian employers seeking to fill positions requiring some postsecondary or higher education can be attributed to a lack of job seekers with such education levels. Instead, they suggest that the source of these recruitment difficulties likely reflects several things: a mismatch between the skills required for the job or the wages offered and the skills possessed (or recognized by employers) by highly educated unemployed individuals or their reservation wages.

“A lack of concordance between the field of expertise required for the job and the field of study of job seekers or between the working conditions that prevail in some occupations and those desired by job seekers, the non-recognition of foreign credentials or foreign work experience, insufficient work experience, and inadequate language skills are examples of such mismatch,” write the researchers. 

Their conclusion was that not all job vacancies are equal. Some require relatively little education and offer relatively low wages while others require highly educated employees and offer relatively high wages.

“This article shows that employers’ difficulties to fill job vacancies requiring high levels of education cannot, in general, be attributed to a national shortage of highly educated job seekers or to local shortages of such job seekers,” they said.

A problem with nuance  

They concluded that for these jobs, there is potentially a large enough pool of highly educated workers at the national and local levels. But since these jobs are not homogenous, vacancies may arise because of a lack of concordance between the skills required for the job and the skills possessed by highly educated job seekers. A lack of individuals trained in specific areas, a lack of concordance between job seekers’ reservation wages and the wages offered in some vacant positions, and job seekers’ potentially imperfect knowledge about the existence of these vacancies may also be contributing factors.

The authors noted that the evidence shows national and local shortages of job seekers with appropriate education levels have been observed only for job vacancies requiring a high school diploma or less education. Furthermore, these shortages have been observed only recently, since the third quarter of 2021. 

“The degree to which these job vacancies can be attributed to labour shortages in specific low-skilled occupations instead of relatively low-wage offers and fringe benefits or other factors remains an open question,” they said.