Human Resources Committee on June 13th, 2006

[The Chair, Conservative, Dean Allison]

I'd like to call this meeting to order.

Pursuant to Standing Order 108(2), we're going to continue with our study on employability in Canada.

I would like to welcome those of you from Statistics Canada today to enlighten us a little more on employability issues here in Canada.

I believe Maryanne Webber has an opening statement for us. I'll let you get started, and then we'll start with some questions after you're finished.

[Maryanne Webber, Director General, Labour and Household Surveys, Statistics Canada]

Good morning.

I'd like to begin by thanking you for inviting us to the committee. We're very pleased to be here. I'll speak to the slides, I guess, and perhaps you can follow along.

In our presentation on employability issues we'll be covering what we know from available data. We hope it will be of some use to you. We will review data on skilled worker shortage, labour mobility, seasonal workers, older workers, skills in literacy, and groups that have found it difficult to break into the labour market, such as recent immigrants and aboriginal people. I hope this will provide you with new facts and insights on these important issues.

I will also share with you some information on the surveys that provide us with the data, especially the labour force survey, or LFS, which is our central data source for this presentation.

Today, we will be looking at a wide range of labour market issues. I will be making fairly brief comments on the graphs and notes. Afterwards, I hope we will have an opportunity to answer your questions. The issues we will be looking at today will not be touched on in any depth. If you would like more detail on a given issue, we would be happy to return in the fall and make a more detailed presentation on it.

Before going any further, I would like to introduce my colleagues, who will assist me in answering your questions.

Susan, would you like to introduce yourself?

[Susan Stobert, Manager, Participation and Activity Limitation Survey, Statistics Canada]

My name is Susan Stobert. I'm the manager of the participation and activity limitation survey.

[François Nault, Director, Culture, Tourism and the Centre for Education Statistics, Statistics Canada]

My name is François Nault. I am the Director of the Centre for Education Statistics.

[Philip Cross, Manager, Current Economic Analysis, Statistics Canada]

I am Philip Cross, manager of current analysis.

[Alain Bélanger, Coordinator, Research and Analysis, Demography Division, Statistics Canada]

I am Alain Bélanger, Research and Analysis Coordinator in the Demography Division.

[Maryanne Webber]

I'm on the second page, at the top slide. I'll be going quite quickly through these, because we have a fair bit of material. Hopefully we can come back to discuss in more detail any one you're interested in.

As you're aware, the Canadian economy and labour market are very healthy right now. In fact, we reported on Friday that the unemployment rate is the lowest since 1974 and that the share of the Canadian population that is employed has never been higher. Combined, these indicators suggest that the current labour market is one of the best this country has ever seen.

What is behind this? As we will see, the west is booming, and central Canada is remaining remarkably resilient in the face of the impact of the high Canadian dollar on our manufacturers.

These strong economies, combined with the fact that the aging of the population is starting to constrain labour supply, has caused very low unemployment and rising wages. As workers we're not going to complain, but for employers who have been used to a labour surplus, the difficulty in finding workers—such as the difficulty Statistics Canada is experiencing right now with hiring people to conduct the census—is having an impact.

First, I'd like to say a few words about the labour force survey and how we determine its most important output, the official unemployment rate. The LFS is a monthly survey of 50,000 households. All adults in selected households are interviewed, so this amounts to over 100,000 interviews per month. It's a very large sample for this survey.

The LFS divides the population into three groups: the employed, the unemployed, and persons not in the labour force. “Not in the labour force” means they are outside the supply of labour.

The LFS has been around for over 60 years and follows international standards on the measurement of employment and unemployment. Our numbers are comparable to those of many countries, including the U.S.

The survey dates back to World War II. It was originally intended to monitor the reintegration of soldiers returning from World War II, but it serves a very broad purpose today. The data are used for monitoring economic progress, for conducting research into labour issues such as the research you are doing, and for program delivery of employment insurance funds.

LFS data are very timely. Results are published on the first Friday of every month, just two weeks after the data have been collected. The LFS data are very heavily used, in part because it's a rich data set with lots of content, but also because it goes back so far in history.

I'm on the third page now, with the upper slide. Before proceeding, I'd like to comment on a couple of key concepts you might find useful.

First, the labour force survey's employment measure counts employed people rather than jobs. A couple of consequences of that are that vacant jobs are not counted and that the main employment estimates count as one worker a person who holds two or three jobs. In other words, it's a measure based on the person. We do, however, have data on people who hold multiple jobs, either from the LFS or from other data sources, if that's a theme that interests you in the future.

Second, “unemployment” does not mean the number of people who are on employment insurance. Rather, the labour force survey asks people who are not employed whether they have looked for work in the past four weeks and whether they're available to work. People who say yes are counted as unemployed.

There are two situations in which there is no job search required to be counted as unemployed. One is the situation of people who are on temporary layoff, the other of people who have a new job due to start within the next four weeks. Basically, this measure of unemployment shows the unutilized supply of labour, and the unemployment rate is the share of the supply of labour that is unutilized.

Although it's a very telling measure, the unemployment rate is only one important labour market measure. For example, the unemployment rate can fall even though there are no new jobs being created. If, for instance, people withdraw from the labour market, other things remaining equal, the unemployment rate is going to fall. So it's important to keep an eye on other measures, such as the participation rate, which shows the total number of people who are in the labour supply.

The next chart shows the employment level since January 1976. Employment in Canada increased for a 13th consecutive year in 2005, which is the longest stretch of employment gains since the large-scale increases in the sixties and seventies. This growth so far has accelerated in 2006.

As a result of the increases, the share of the population 15 years and over who are working has hit a record high, reaching 63.2%. That was in May of this year.

The corresponding rate in the States is 63%, so we actually now have an employment rate in excess of the U.S. employment rate.

The top slide on the fourth page shows employment indexed back to January 1996. Labour markets all across the country are doing well, especially in Alberta and B.C., which have seen sustained employment growth. Compared to a year ago, employment is up 5.2% in Alberta and 3% in B.C., which has the fastest growth in the country. Alberta, without a doubt, has the strongest and tightest labour market on the continent--not just of all the provinces, but also of all the States.

While the west booms from the surge in prices for natural resources, the value of the Canadian dollar has gone up considerably. That, in turn, has entailed major declines in employment in Canada's factories. In fact, manufacturing has fallen 8% since the end of 2002, when the downward trend began. However, central Canada has remained remarkably resilient to the impact of these cuts. Employment in Ontario and Quebec has continued upwards, as other increases have offset the decline in manufacturing. In fact, in May there was a record surge in full-time employment in Ontario, but that's in the services sector. In Quebec the unemployment rate fell to 7.9%, the second lowest rate in 30 years.

The lower slide on page 4 shows the unemployment rate since 1974. Demand for labour is strong as the economy continues to improve. As a result, unemployment has fallen to lows not seen in a generation. In May the rate was 6.1%, the lowest since 1974.

It's not only strong demand for workers that is causing low unemployment; the baby boomers, the oldest of whom turn 60 this year, are starting to retire, and that's having an impact on the labour supply.

When the economy is as strong as it is and supply contracts, the unemployment rate naturally tumbles. In fact, if the trend continues, there will soon be fewer than one million unemployed Canadians, a level we haven't seen since the early 1980s, and the supply contraction associated with the baby boomers' retiring is only beginning.

Next is the top slide on page 5, on wages. With the labour market as I've described it, it will come as no surprise that wages are rising in Canada. Compared to a year ago, the average hourly wage is up 3.8%. Wages are increasing across the country, but in Alberta they are up 7.3%. Albertan employees are the best paid in the country; about six months ago, they actually surpassed Ontarians as the workers with the highest wages.

The next topic is labour shortages.

Much has been said about the hot economy and the consequential impact on unemployment and wages. Low unemployment by occupation is a key signal of shortages. When workers are hard to find, their unemployment rates naturally fall.

Using LFS data, one can see signs of shortages emerging in a number of areas. The lower chart on page 5 shows unemployment rates for occupations in which we've seen the lowest rates for 2005. The top two bars relate to the health sector; two of the other bars are highly skilled professional groups. The fifth one is contractors and supervisors in the trades and in transportation, and their low unemployment is related to the boom we've experienced in construction recently.

The top chart on page 6 shows population pyramids through time. I hinted earlier at some emerging challenges facing the Canadian labour market. As you know, the population is aging.

The baby-boomers, born between 1946 and 1965, were concentrated at the base of the pyramid in 1971. At the time, it was already clear that they were a very large group of individuals. In 1986, they were aged between 20 and 40, and in 2001, between 35 and 55. So we can therefore see how this group is aging.

In 2007, the baby-boomers — who will be between 50 and 70 - will remain the largest group of individuals in the Canadian population. They are more numerous than the generations coming after them, in spite of the increasingly significant attrition rate caused by death.

Of course, there are many implications to this.

First of all, it could constrain economic growth by reducing production. Second, the smaller replacement workforces coming behind the baby boomers will have to support baby boomers in their retirement and in their use of the health care system.

The bottom slide on page 6 shows the participation rate. It's a projection of participation rates to 2017. Only time will tell where the participation rate will be 12 years from now, but one thing is very clear: aging will put pressure on the share of the population engaged in the economy. In fact, the labour force participation rate may be back to where it was in the 1970s.

You see there two scenarios for the projection.

The first scenario in the chart works with a few simple assumptions. One is that the rates of participation will remain at the 2005 level; the population will grow at a moderate pace; and rates of institutionalization, hospitalization, and that sort of thing will remain at 2005 levels.

The second scenario assumes that the participation rate among older workers will increase until 2010 and then stabilize. You can see that it gives a slightly higher participation rate, but one thing is very clear: you can keep older workers in the workforce longer, but it just delays the inevitable. They retire now, they retire later, or eventually they pass away, but leave they must. Canada is not alone in this scenario. We may face increasing competition from other countries for the best and the brightest of international migrants.

To deal with worker shortages, several things can be looked at. Workplace solutions that can be envisaged are listed on the top slide on page 7. They include boosting the working age population, boosting productivity, boosting hours worked, and increasing labour force participation among certain key groups in which the participation rate is still low.

I direct you to the lower slide on page 7. As I mentioned earlier, the labour market in Alberta is the hottest in both Canada and the U.S. right now. With unemployment as low as it is, there are significant labour shortages in that province, so it's a good place to look at what's happening with labour mobility. Each quarter, Statistics Canada produces population estimates by province, and that's basically what you see there: the population estimates.

Alberta has shown the strongest population growth. That growth is likely associated with its booming economy. In the last quarter of 2005, the province's population jumped by 25,000 people. That rate is five times the national average.

Next is the top chart on page 8. The gains in Alberta come mainly from an influx from other provinces, so people are moving into Alberta from other provinces. In the last quarter of 2005, Alberta received a net increase of 17,000 persons from other parts of Canada. With such a powerful draw, seven of the 13 jurisdictions had a drop in population at the end of 2005. That 17,000 increase is an all-time high for net interprovincial migration into Alberta.

There's another survey at Statistics Canada called the workplace and employee survey. It sheds some light on other aspects of labour mobility. We know from the WES that Canadian employees are mobile. In 2002, about 76% of employees were in the same job for the same firm as they had been a year earlier, but that leaves 9% who had changed employers, another 9% who had left the workforce, and 6% who had moved to a new job with the same employer. There is some indication of mobility there.

Worker turnover is also relatively high in Canada. In fluid labour markets like those in Canada or the U.S., people can become unemployed, so we have a high turnover in terms of numbers of people losing their jobs--but hiring is also more common, so people in Canada are unemployed for shorter periods. A recent study by the OECD on long-term unemployment showed that 9.5% of Canada's unemployed were jobless for a year or more. That may seem high, but the average for the OECD countries as a whole was 32%, and in the U.S. the figure is 12.7%.

Next is the lower slide on page 8. It relates to older workers.

The median age of retirement fell dramatically in the past two decades. From the mid-1970s to the mid-1980s, it hovered at around age 65. But in the late 1980s, it started dropping quickly and continued to do so until hitting a low of age 60.6 in 1997, and it has fluctuated around that level ever since. In 2005, the median age of retirement was 62.6 years for men and 60 for women. So it's a bit lower for women.

The top slide on page 9 shows the participation rate for older people. So even if a typical retirement age in Canada is around 60, there has been a sharp increase in the labour force participation rate among older people. That's a potential pool of additional labour down the road for dealing with shortages.

Around 31% of people 55 and over are active in the labour market. That's up from a low of 24% in 1996. Part of this is because of the entrance of the baby boomers into this age group. Effectively, they've made the older age group younger, because there's such a large number of them. However, economic conditions have also changed, and there are more opportunities now for older workers.

Another important point is that baby boomers are more highly educated than the generation that preceded them. That's a significant point, because there's a clear association between level of education and labour force participation. The better educated someone is, the longer he or she is likely to be active in the labour market.

The lower slide on page 9 shows labour productivity. It's a comparison between Canada and the U.S. It shows definitely that there's a gap.

There are differences in the way productivity is measured between Canada and the U.S., but there's a general sense that productivity trends can be compared between the two countries. So we certainly see in that chart a labour productivity gap between Canada and the U.S.

The top slide on page 10 deals with literacy. This is an international literacy survey in which Canada participated, which was conducted in 2003. It shows the distribution of the adult population by four broad literacy levels. The line across the chart is essentially the bottom of what's called “level three”. Level three is the level of literacy that's considered necessary to essentially function in a developed economy.

The proportion of Canadians who are above level three is actually quite good compared to other countries. What the slide doesn't show, though, is that there are differences between the Canadian population overall and recent immigrants in particular. Their literacy levels are quite lower, and that is actually an impediment to employment. Previous literacy surveys have also shown a relationship between literacy and earnings. So those are important issues, and there will be studies coming out in this area in the future.

[Lynne Yelich, Conservative, Blackstrap, SK]

While you're on that, will you explain each level? You said level three is the necessary level. So level two is what, reading and writing, or...?

[Maryanne Webber]

They're all concerned with reading and writing, prose literacy, but level two is one where people may have trouble reading fairly basic documents, or reading prescriptions, labels on medicine bottles, things like that. So it's essentially not adequate to function in the kinds of jobs that are typically available in Canada.

Level one is obviously very low. If you look at level one, for instance, something like 15% of the Canadian population is at that level.

[Lynne Yelich, Conservative, Blackstrap, SK]

Do you have the demographics of what makes up that 15%? Do you have any idea where that 15% comes from? Is it immigrants? Is it aboriginals?

[The Chair, Conservative, Dean Allison]

Go ahead and answer the question.

[François Nault]

Yes, we look at a number of characteristics of those people. In fact, we're doing a special study of those Canadians who are at a lower literacy, and we will have the results in the fall. I think they concentrated more on the older population. The study surveyed people who are 16 and over, including the 65-plus age group. They also concentrated on the population who have a lower education. Obviously, there is a strong correlation between the level of education and the level of literacy. You're right in saying that they concentrated more on immigrants and also on the aboriginal population.

[The Chair, Conservative, Dean Allison]

Please hold the questions until they're done.

Thank you.

We'll continue.

[Maryanne Webber]

The bottom chart on page 10 deals with seasonal workers. The idea here is that one of the ways to deal with labour shortages is for Canadians to work more hours. Over the course of the year, there are significant periods where some seasonal workers are not working.

If you look at the chart, the first set of bars shows all temporary workers. Temporary workers are people who believe their jobs are not going to continue. There's about 13% of all employees who reported in 2005 as being temporary workers. If you look at the other three bars, there's a breakdown of the components that make up the total of temporary workers.

Term or contract employees, and that includes employees who work through a temporary help agency, constituted the lion's share of temporary employment in 2005, representing 6.4% of all employees. The other important thing is that temporary work has actually grown by 40% from 1997 to 2005.

A comment on seasonal employment is that it's about 3% of all workers, but it's not the same across the country. It's very prevalent in Newfoundland and Labrador and P.E.I., where one in ten workers is a seasonal employee. It's also high in New Brunswick and Nova Scotia.

The top chart on page 11 shows another population. I'm referring to the aboriginal population, who are underrepresented in the labour market. The aboriginal population is young. The median age of aboriginal people in Canada is projected to increase from about 25 in 2000 to 28 in 2017. We expect to see significant numbers of young aboriginal adults in the 20 to 29 age group entering the labour market. The size of this group is expected to increase by over 40% by 2017. You can expect a phenomenal increase in the proportion of aboriginals in the young adult population in Saskatchewan and Manitoba. It may almost double in Saskatchewan, and Manitoba will rise as well.

The bottom chart on page 11 concerns aboriginal people living off reserve in western Canada. It shows that they are less likely to be active in the economy than non-aboriginal people. Education has a huge impact on that. In fact, the participation rate among aboriginal post-secondary completers was 88%. That's a shade above the rate for non-aboriginal post-secondary completers.

The top of page 12 shows labour market conditions for all aboriginal people. In both Alberta and British Columbia, aboriginal people who have completed post-secondary education have higher participation rates than the non-aboriginal population with post-secondary education. Again, that is an indication that education matters.

The bottom of the slide on page 12 deals with immigration and population growth generally.

For many years, natural growth was the main engine of Canadian demographic growth. Since the early 1990s, this is no longer the case. Immigration is now more significant. The migratory contribution to total population growth is continuing to increase, and since 2001, two-thirds of it can be attributed to migratory growth — in other words, immigrants coming to Canada.

With the aging population and low birth rate, the number of deaths is likely to increase, while the number of births is likely to remain more or less the same. Natural growth will thus become negative by the end of 2020. Population growth will therefore be possible only through an increase in immigration.

The slide at the top of page 13 deals with labour market conditions for recent immigrants. While immigrants are an increasingly important source of population and labour force growth, their integration into the Canadian economy seems to have worsened. Despite the economic boom in the late 1990s, the 2001 census shows that the employment rate of immigrants of core working age, in the 25 to 54 age group, who had arrived in Canada during the five previous years.... The point there is that for recent immigrants, the employment rate is lagging well behind that of the native-born Canadian population of the same age. It's 65% for recent immigrants, compared to 81% for those born in Canada.

The last slide at the bottom of page 13 concerns persons with disabilities and the potential for increasing the supply of labour by increasing their participation. About 10% of working-age Canadians, approximately two million people, live with some form of disability. About 45% of persons with disabilities are in the labour force compared to about 80% of the non-disabled population.

Increasing access to the labour market for persons with disabilities provides benefits to Canadian society as a whole. About 40% of persons with disabilities not in the labour force cannot work because of their disabilities, but that leaves a potential labour pool of over 600,000 persons. Enabling these people to work requires workplace and job accommodation. The most common needs identified have been job redesign, modified hours, and physical changes to the workplace.

That's it.

[The Chair, Conservative, Dean Allison]

Thank you very much. I know you've given us lots to consider, and we appreciate the overview.

We're going to start with some questioning now and maybe some clarification for all those slides we've been through. We will start with the first round, which will be seven minutes of questions and answers.

Thank you.

Ms. Brown, did you want to lead us off?

[Bonnie Brown, Liberal, Oakville, ON]

I'll begin.

I'm looking on page 12 at the immigrants as a source of population growth, and I'm looking at the peaks and valleys from 1976 to 2004-05, and then this projected steady decline. I don't understand why you think that's going to be the future for us.

[Maryanne Webber]

You're looking at the bottom slide on page 12?

[Bonnie Brown, Liberal, Oakville, ON]

Yes.

[Alain Bélanger]

Actually, it's not the number of immigrants that is declining in the projections. It's the number of births and the natural increase, so it's the red part of the chart.

[Bonnie Brown, Liberal, Oakville, ON]

The blue part looks pretty depressing too. The blue part is the new immigrants you're expecting to come, is it not? And the red part is the births out of the—

[Alain Bélanger]

The red part is the difference between births and deaths, and that has been declining for a while, and will continue, because the population is aging.

[Bonnie Brown, Liberal, Oakville, ON]

I understand that, but what I don't understand is the blue part.

[Alain Bélanger]

The blue part actually is increasing in this projection. I guess it's only an optical effect because of the sharp downward slope of the natural increase. But if I had put the blue part below the red part, you would see that it's increasing, because under these scenarios the immigration rate is remaining constant at the current level that we have observed over the last 15 years, at seven per thousand. Also, because the population is growing, the number of immigrants is increasing slightly over time.

So I think it's only an—

[Bonnie Brown, Liberal, Oakville, ON]

Can you understand his answer?

[The Chair, Conservative, Dean Allison]

Yes, I think that as a result of the declining.... It does look like a bit of an optical illusion, but immigration is remaining constant there.