Canada has a productivity problem. Labour productivity growth—the amount of output produced per hour worked—has stalled. The Canadian economy’s labour productivity at the end of 2023 was around the same as it was in 2017. This is the second time that Canada’s productivity growth has been notably weaker than the United States’ in recent decades, with the first occurring between 2003 and 2012.

Skills, knowledge, and ability determine how effectively a worker can complete tasks for a given role. It’s not just the supply of skills in an economy that matters for productivity—imbalances between the skills that employers demand and the skills of an economy’s workforce, including skills shortages or mismatches, affect firms’ performance and the wider economy.

This report examines the intersectionality of skills shortage and how this can affect an employee’s ability to perform their jobs. As well, looking into how this can affect job satisfaction.

Key findings
• Skills shortages hamper productivity growth. We estimate Canada’s GDP would be up to 1.8 per cent, or $49 billion, larger today if there had been no skills shortages over the past 20 years.
• Skills shortages explain around 7 per cent of the productivity gaps that opened in the two most recent periods in which Canadian productivity growth lagged that of the United States—between 2003
and 2012 and again from 2018.
• When skills shortages affect a group of related industries, the effect on aggregate productivity can be large. We identify three distinct groupings of industries within the Canadian economy based on the skill requirements of firms in each sector:
– goods-producing industries
– knowledge-based services industries
– technical and manual services industries.
• Shortages in one sector can impact other sectors in the same grouping because they share similar skill profiles.
• Skills shortages vary over time. Currently, Canada is facing a shortage in the construction sector which is also affecting the utilities and mining industries. These sectors require technical skills, such as setting up, repairing, and operating machinery and equipment and designing structures or engineering systems.
• Between 2018 and 2021 Canada experienced widespread and severe skills shortages across the knowledge-based services industries. These sectors require high levels of foundational, analytical, and interpersonal skills.
• Our measure of skills shortages, which is based on readily available labour market information, can help policy-makers identify sectors facing skills shortages, determine the duration and breadth of a shortage, and calibrate any policy response to match the severity or impact of that shortage. This information can help prioritize both near-term and longer-term policy responses to alleviate skills shortages and boost productivity.

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Source: Skills for Change, Août 2024.