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ARCHIVED - Looking Ahead: 10-Year Outlook for the Canadian Labour Market (2006-2015)
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Highlights
| The Canadian labour market is currently quite healthy... | After struggling for the greater part of the 1990s in the wake of restrictive monetary and fiscal polices aimed at stabilizing inflation and quelling budgetary deficits, the Canadian labour market has now been performing well for several years, as revealed by key indicators: employment has grown at an average annual rate of 2.0% over the past 10 years, the participation rate in 2005 was near its record high at 67.2%, and the employment rate reached a record level of 62.7%. In addition, the unemployment rate fell to 6.8% in 2005, thus reaching its lowest annual average level on record; that trend has continued in recent months, with the rate dropping to 6.1% in May 2006. |
| ...and is expected to remain buoyant over the next decade | Total employment is expected to grow at an annual average rate of 1.1% over the 2006 to 2015 period. Although this represents a slowdown relative to the 2001-05 period (when the rate of growth was 1.8%), the Canadian economy should still create about 1.9 million new jobs over the next 10 years. This employment forecast is primarily influenced by projected changes in economic activity. Over the next five years, Canada's real gross domestic product (GDP) is expected to advance at an average annual rate of 2.9%, before slowing down somewhat to reach 2.6% over the following five-year period (2011-15). The major factor behind this deceleration is a slowdown in the underlying growth potential of the economy, as sluggish overall population gains will constrain labour force growth. The aging of the population will have an additional dampening effect on labour force growth as a result of retirements. |
| No widespread labour shortages are expected to emerge over the next ten years | As inflation has largely remained within the Bank of Canada's target band (1% to 3%) for many years now, it is expected that the Bank will be able to set monetary conditions that allow demand to grow in line with the slower growth in potential. As a result, no sustained generalized shortage of workers is anticipated in the Canadian labour market. |
| The share of employment in service-producing industries is expected to continue on its upward trend well into the future | Over the next 10 years, employment growth in the service sector (1.2%) is expected to outpace that in the goods-producing sector (0.8%), continuing a long running trend. This is largely the result of stronger labour productivity growth in the goods-producing sector, as manufacturers are expected to continue improving efficiency in order to remain competitive in the face of the lofty Canadian dollar and intense international competition. In fact, GDP growth in the goods-producing sector (3.0%) is expected to slightly outpace that of the service sector (2.7%) over the next ten years. |
| Employment growth is expected to be strong in the health, computer system design and professional services sectors | Among services, employment growth should be particularly strong in the health, computer system design and professional services sectors. This vigorous growth will be mainly the result of increased public spending in health care made possible by the improved financial position of governments, to the continued shift towards a knowledge-based economy and to increased investment in research and development. Within the goods-producing sector, high energy prices will continue to spur investment spending and output in the oil and gas sector, while the computer and electronic products, other transportation equipment (especially aerospace), and fabricated metals manufacturing industries will benefit from strong global demand and high corporate profits. In contrast, the auto and parts sector is expected to struggle in the face of faltering auto demand in North America, as are the forestry industry and the wood products manufacturing industry, which will be affected by the weakening of residential construction. |
| The majority of future job openings will be the result of retirements | With the retirement of many baby-boomers, the majority of job openings over the forecast period will stem from the need to replace retired workers. Over the 2006-15 period, it is expected that about 1.7 million new non-student jobs will be created as a result of increasing economic activity (expansion demand), while close to 3.8 million existing positions will be freed up by retirements. In other words, about 70% of all job openings during that period will be associated with the need to replace retired workers, up from an average of about 51% over the last ten years. Retirements will account for an even higher share of total job openings over the longer term. |
| Two thirds of all job openings over the period from 2006 to 2015 are expected to be in occupations usually requiring postsecondary education or in management | Over the 2006-15 period, about two thirds (65.9%) of job openings resulting from both expansion demand and retirements are expected to be in occupations usually requiring postsecondary education (university, college or apprenticeship training) or in management, up slightly from 63% over the last ten years. The highest rate of expansion demand is expected to be in occupations that require a university diploma (annual average rate of 1.6%), spurred by the continued shift to a knowledge-based economy and by increased public spending in the health care sector. In contrast, the pace of employment growth in the lowest skilled occupations (requiring only on-the-job training) is projected to be much weaker (annual average rate of 0.6%). Overall, high-skilled occupations will account for about 70% of all new jobs created over the 2006 to 2015 period, compared to 60% over the last ten years. About 2.4% of workers are expected to retire each year over the 2006-15 period, up from an average of 1.9% over the last ten years. Retirement pressures will be strongest where the usual age of retirement is lower and where a larger proportion of the workforce is approaching that age — as is the case within management occupations and in those usually requiring postsecondary education. More specifically, 2.8% of workers in management occupations and 2.5% of those in occupations usually requiring university education are expected to retire each year during the 2006-15 period. Key occupations that will face strong retirement pressures include elementary/secondary school teachers and registered nurses, as well as managers in public administration, health, education, social and community services. |
| The educational attainment of Canada's labour force will continue to rise over the next 10 years, albeit at a slower pace than in the past | The labour force with postsecondary education is projected to remain the fastest-growing component of labour supply. More specifically, the number of labour force participants holding a university degree is expected to rise by 2.2% annually on average over the 2006-15 period, comprising 24.4% of the labour force by 2015, up from 21.8% in 2005 (and 13.7% in 1990). On the other hand, the labour force with less than high school education is expected to continue to decline over the medium term (by an average of 1.0% per year). Although the educational attainment of the labour force will continue to advance, the rate at which it does so will slow down. The baby-boomers were much more educated than their parents. The children of the baby-boomers are also more educated than their parents, but by a narrower margin. |
| School leavers will remain by far the main source of new labour supply in the Canadian economy | It is often claimed that immigration will account for all of Canada's net labour force growth in the coming decades. Indeed, over the forecast period, population aging leads to diminishing rates of growth for the population of working age and for the labour force, and these growth rates would be weaker in the absence of new immigration. However, students coming out of the education system — "school leavers" — will remain, by far, the primary source of new supply for the labour market, averaging approximately 550,000 new entrants a year over the next decade. |
| There is currently limited evidence of imbalances among broad skill levels... | Evidence suggests that the strong rise in demand within high-skilled occupations has been adequately met by a rising supply of qualified workers. Real wages by broad skill level relative to the economy-wide average have been fairly constant since 1997, while unemployment rates by broad skill level relative to the average have not shown any discernable trends since 1987. Accordingly, these indicators suggest the absence of significant imbalances between the skills demanded by employers and the availability of qualified labour, across broad skill levels. |
| ...but imbalances could emerge in the future | Employment growth is expected to outpace labour force growth across all skill levels, resulting in unemployment rate declines. Although unemployment rates for all skill levels are expected to decline, movements in unemployment rates relative to the economy-wide average are expected to diverge somewhat over the 2006-15 period, suggesting the emergence of excess demand situations over the next 10 years. Managers and occupations requiring a college education are expected to experience greater than average unemployment rate declines as employment growth is expected to be stronger than labour force growth. The aging of the population could exert some pressure on those two skill levels. In contrast, for occupations usually requiring at least a high school education and those requiring on-the-job training, employment gains are expected to outpace labour force gains at a lower-than-average rate, resulting in a lower decline in their unemployment rates. In occupations requiring at least a university education, the unemployment rate is expected to decline in line with the economy-wide average. |
| There are currently situations of imbalances in the labour market in some occupations... | Although there is currently limited evidence of imbalances between the broad skill levels demanded by employers and the availability of qualified labour, this can hide instances of imbalances at a more detailed occupational level, with excess supply in some occupations coexisting with excess demand in others. In fact, numerous occupations are currently considered to be in a state of either excess demand or excess supply. |
| ...with management and the health sector being especially affected | Currently, the largest number of occupations showing signs of shortages at the national level is concentrated in management occupations and in the health sector. Pressures are particularly acute for physicians, therapy and assessment professionals (e.g. physiotherapists), head nurses and nurse aides. Other health occupations, such as registered nursing assistants, audiology technicians, physiotherapy technicians and medical radiation technologists, are also facing pressures. Among other occupations showing signs of shortages are those related to oil and gas drilling and services, home builders and renovators, contractors and supervisors in trades, computer engineers and software engineers. Occupations deemed to be currently in excess supply are mostly in low-skilled categories facing deteriorating labour demand conditions. For example, organizational restructuring, automation and advances in computer technology are reducing the demand for office equipment operators. Technological advances in navigation, communications and fish tracking, along with harvest quotas, will slow employment growth for fishing vessel skippers and fishermen/women. For machine operators in textile processing and industrial sewing machine operators, international competition is the main contributor to declining demand. Finally, the difficulties experienced in forestry, agriculture and electric and electronic equipment industries have had a negative impact on some occupations in those sectors. |
| Given current trends in supply and demand, occupations in management and in the health sector will continue to face significant labour market pressures | Given current trends in supply and demand, numerous occupations will continue to face significant labour market pressures over the medium term. Several of these occupations are concentrated in the health sector — physicians, head nurses, supervisors, nurse aides, etc. The expected excess demand in those occupations tends to result from factors that restrain supply growth, such as long training time (for example, up to seven years or more of university schooling for physicians) and the limited capacity of educational institutions to accommodate large increases in enrolments. Other occupational groupings expected to experience future labour market pressures include management occupations (e.g. managers in public administration and human resources managers). Shortage pressures in human resources and business service professionals are expected to persist as employers continue to put great emphasis on recruiting and retaining quality employees. Pressures are also expected to continue over the next 10 years for oil and gas well drillers, servicers, testers and related workers, as a result of an increase in demand associated with large capital spending projects related to tar sands development projects in Alberta. |
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