Job skills shortages in Canada could worsen over the next decade if measures are not taken to attract, train and retain workers, say TD Economists in their report “Canada’s Talent Deficit”.

The report, by Don Drummond, senior vice president and chief economist and senior economist Derek Burleton, concedes that labour shortages appear to be easing in 2001 due to this year’s slowdown in economic growth, especially in the high-tech sector. However, the continued low unemployment rate, currently at 7%, is a sign of ongoing tightness in the labour market.

“Although we see upward pressure in the jobless rate in the months ahead, our bet is that the rate will top out at about 7.5% in late 2001, which is still low by historical standards,” Drummond says. “Over the next decade, the economy is facing the two-pronged challenge of satisfying rapid growth in demand for workers possessing technical skills and baby boomers pondering early retirement. This poses a downside risk to gains in Canadian living standards over the long term.”

Apart from ongoing cyclical pressures, the report identifies certain structural influences that have contributed to shortfalls of skilled workers in many occupations. Examples include the supply of technologically skilled workers which has not kept pace with the rapid proliferation of technology across the economy over the last decade, and the current shortages of highly- trained doctors, nurses, and teachers, reflecting cutbacks in government spending over the last five or six years.

The skills shortage problem threatens to worsen as Canada’s baby-boomers approach retirement. Not only will the first wave of the baby boomers reach 65 years of age by 2011, but the increasing trend towards early retirement suggests that both governments and businesses will face the squeeze on labour availability even sooner.

“In addition to the increasing desire to substitute leisure for work, changes in pension rules in the public and private sectors, which offer unreduced pensions in many cases before the age of 60, have been an important driver in this choice to retire early,” says Drummond.

Since the demographic pressures can be projected with considerable certainty, the private sector could take a leadership role and encourage older workers to stay in the labour force by establishing flexible work arrangements and compensation packages tailor-made for them. The need to retain older workers also raises the question of whether such things as mandatory retirement and age of entitlement to public pensions should be reconsidered, TD says.

In addition to retaining older workers, TD economists recommend a greater focus on raising the average skill set of Canadian workers through education and training. “It is crucial that businesses recognize the payback from investing in training, both on-the-job and in- classroom,” Drummond argues. “Governments can play a leading role by striking partnerships with educational institutions and the private sector.”

Immigration can also play a role in boosting the labour supply. In this area, the federal government has already sprung into action, announcing changes to immigration policies that aim to speed up the entry of highly-skilled workers.