The Skills Gap is Widening: How are Manufacturers Responding?

The challenge becomes more complex, requiring more complex and nuanced responses

By Jayson Myers

Labour and skills shortages are taking a big bite out of business for manufacturers across the Prairies and across Canada. 

According to CME’s 2022 Labour Survey, 82 per cent of Canadian manufacturers are experiencing a combination of labour and skills shortages. They are most severe when it comes to skilled production workers, general labour and assembly jobs, and supervisory roles, less so for positions in marketing, business development, and technology. A full 62 per cent of manufacturers have lost or turned down contracts due to worker shortages, while 47 per cent have delayed or cancelled investments in new plant and equipment. Delivery delays and operating costs are increasing. Customer satisfaction and the mental health of existing workers are both suffering as a result.

Data from Statistics Canada tells a more detailed story for the Prairies, as well as for the country as a whole. Statcan’s Business Conditions Survey (BCS) for the third quarter of 2022 indicates that 38 per cent of manufacturers across Canada are experiencing labour shortages while 42 per cent are finding it difficult to recruit skilled workers. Combined, the figures come close to CME’s result.

The BCS also finds that 30 per cent of manufacturers across Canada are finding it difficult to retain skilled employees. The problems increase the larger a company is, and conditions are not improving. Over 57 per cent of manufacturers across the country say that challenges in recruiting and retaining staff are worse today than a year ago.

No sector is immune

Manufacturers face employment difficulties, but so does every other sector of the Canadian economy. The labour market is tight. Canada’s overall unemployment rate fell to a record low of 4.6 per cent in October 2022. It was 3.2 per cent in manufacturing. Job vacancy rates, which now average 5.3 per cent for manufacturing and 5.9 per cent for the economy as a whole, have doubled over the past five years. 

There are some notable differences in the Prairies. In Manitoba the manufacturing unemployment rate has averaged a mere 1.6 per cent this year. Yet, while 30 per cent of Manitoba manufacturers are facing labour shortages, 33 per cent are finding it hard to recruit skilled workers, and 29 per cent are experiencing difficulties retaining skilled workers, they are doing better than the national average and, at 3.8 per cent, currently have one of the lowest job vacancy rates in the country. 

Conditions in Saskatchewan and Alberta are more challenging, especially when it comes to attracting and retaining skilled workers.

In Saskatchewan, the manufacturing unemployment rate is 2.5 per cent. Just over 37 per cent of manufacturers in the province are facing labour shortages, 47 per cent are finding it difficult to recruit workers with the skills they need, and 34 per cent are having trouble holding on to skilled employees. 

Conditions are even tighter in Alberta even though, at 3.5 per cent, the manufacturing unemployment rate is slightly higher than the national average. Statcan reports that 43 per cent of Alberta manufacturers are currently facing labour shortages, 45 per cent are having trouble recruiting skilled workers, and 38 per cent are experiencing difficulties in retaining skilled employees.

In both Saskatchewan and Alberta, labour shortages, skills retention, and recruitment are obstacles for about one-third more companies in the manufacturing sector than for all businesses in those provinces even though job vacancy rates of 4.0 per cent are lower than the Canadian and their respective provincial averages.

It’s just getting started

Don’t expect labour and skills shortages to disappear anytime soon! Demographics are against us. Twenty-six per cent of Canada’s manufacturing workforce will be retiring within the next 10 years. It’s a bit better on the Prairies, but not by much. Manitoba manufacturers will lose a fifth of their employees by 2032, Alberta manufacturers 22 per cent, and Saskatchewan manufacturers 19 per cent.

Where will all the new workers come from? It won’t be from growth of the manufacturing labour force without serious interventions by manufacturers themselves.

Although Canada’s labour force has grown by 10.3 per cent over the past decade, the number of workers employed or seeking jobs in manufacturing has fallen by 2.1 per cent. Same story on the Prairies – with one exception. Manitoba’s labour force has increased by 7.6 per cent since 2012 but by only 2.1 per cent in manufacturing. In Alberta, the overall labour force grew by 10.5 per cent yet it shrank in manufacturing by 8.0 per cent. The exception is Saskatchewan. That province’s labour force has expanded by 5.6 per cent over the past 10 years, but individuals employed or looking for work in manufacturing is a full 14.7 per cent higher than in 2012.

Young people are an answer

A key determinant of labour force growth in manufacturing is the number of young people looking for employment in the sector. Across Canada 1.0 per cent fewer individuals aged 15 to 24 are now employed or looking for jobs in manufacturing than 10 years ago. In Alberta 27.1 per cent fewer young people are now in the manufacturing labour force. However, it’s a much more positive picture elsewhere on the Prairies. The number of young people under 25 years of age entering the manufacturing labour force is up 20 per cent in Manitoba and by 9.2 per cent in Saskatchewan. 

Of course, it’s one thing to have young people looking for jobs and another to find young employees with the skills and experience that companies require. Across Canada the overall unemployment rate for individuals under the age of 25 is about twice as high as the national average. The same goes for manufacturing. It is the same case for the overall unemployment rate in each of the Prairie provinces. 

However, Prairie manufacturers seem to be more reluctant to hire younger workers than other employers. Youth unemployment rates in manufacturing are four times higher than rates for the sector as a whole in Manitoba, Saskatchewan, and Alberta.

Under-representation matters

One way that manufacturers are looking to fill job vacancies is by hiring workers from under-represented groups. One third of companies across Canada say they are looking to diversify their workforce, 38 per cent in Manitoba and Saskatchewan, and 26 per cent in Alberta. They are having mixed results. Across Canada, for instance, women account for 29 per cent of all manufacturing workers, up from 28 per cent a decade ago. There are three per cent more women working in the sector than in 2012, but three per cent fewer women under the age of 25. 

Women account for a slightly lower proportion of manufacturing workers on the Prairies. Just over 26 per cent of all manufacturing workers in Manitoba are women, up from 24 per cent a decade ago. However, Manitoba’s women manufacturing workforce has expanded by 12 per cent since 2012, with one-third more women under the age of 25 working in the sector. 

In Saskatchewan, women account for 22 per cent of all manufacturing employees, up from 19 per cent in 2012. The number of women working in the sector has jumped by 29 per cent over the past decade, although the number of females under
25 years of age has remained the same.

The proportion of women employees in Alberta manufacturing has remained steady at 26 per cent of the workforce over the past decade although there are five per cent fewer women working in Alberta manufacturing than in 2012 and 50 per cent fewer women under the age of 25.

Manufacturers are also hiring more Indigenous employees. Across Canada, Indigenous employment in construction and manufacturing jobs has increased by 39 per cent since 2012. But, despite being home to almost 40 per cent of Canada’s Indigenous population, it’s been slower growth in the Prairies where the number of Indigenous workers in the two sectors has grown by only 17 per cent over the past decade.

Respond like you mean it

Manufacturers are also introducing more flexible work schedules, although with 44 per cent of companies in each of the Prairie provinces implementing measures to improve the work-life balance of their employees, western Canada lags slightly behind the 48 per cent average for the country as a whole.

Raising wages to attract new workers is a more difficult proposition for manufacturers. At $23.50 per hour the average entry wage rate for Canada’s manufacturing sector in 2022 is 2.6 per cent lower than for the economy as a whole. While it has increased by 16 per cent over the past five years, it hasn’t kept pace with the average 21 per cent increase offered by all employers across the country. 

Prairie manufacturers are lagging even further behind. In Manitoba entry wages average $20.12 an hour, about the same level as five years ago. On the other hand, the average entry wage for all businesses in the province has increased by eight per cent since 2017 to $21.13, about five per cent higher than in manufacturing. Saskatchewan manufacturers are paying an average $23.34 per hour for job entrants this year – exactly the same as five years
ago and only a dollar above the average paid by all employers. Alberta manufacturers are offering an average hourly entry wage of $25.93 this year. That’s eight per cent more than a decade ago but again only one dollar more than the average for all employers who have increased compensation for new job entrants by more than 14 per cent since 2017.

Automation is not a panacea

Automation is always another option. In the third quarter of 2022, 19 per cent of manufacturers across Canada reported that they intend to adopt automation or digital technologies over the next 12 months to offset the impact of labour shortages. Prairie manufacturers are more aggressive with 29 per cent of companies in Manitoba, 27 per cent in Saskatchewan, and 21 per cent in Alberta looking to automate in order to replace jobs. The problem is that while automation may alleviate labour shortages, technical skills gaps are bound to increase.

The bottom line

Bottom line: Prairie manufacturers need to pick up their game if they are going to be able to attract the skilled workers they will need to compete and grow. Employers in other sectors are doing better when it comes to diversifying their workforce, improving working conditions, offering higher wage rates, and attracting younger people into their workforce.

As manufacturing transforms into a more automated and digitally driven business, technical skills will become more important than ever. But, every employer will be competing for workers with digital skills. Early outreach to schools, work integrated learning, and more flexible working arrangements will be critical.

Above all, though, is the need to demonstrate that manufacturing is not the dirty, dangerous, and disappearing smokestack industry that many Canadians think it is. It’s up to manufacturers themselves to show that careers in the sector that are interesting, meaningful, well-paying, and appealing to a new generation of skilled workers looking to make a difference in the world.

Jayson Myers is CEO of Next Generation Manufacturing Canada – the country’s advanced manufacturing supercluster. An award-winning business economist and leading authority on technological change, Myers has counselled Canadian prime ministers and premiers, as well as senior corporate executives and policymakers around the world.