Chapter 1. Policy context for employment and skills in Canada

Among OECD countries, Canada’s economy weathered the economic crisis relatively well but has faced recent uncertainty as a result of volatility in oil prices. While Canada has a solid foundation of skills upon which to build future growth, demographic pressures will require the country to make better use of the skills of the existing workforce to enhance productivity. This chapter provides an overview of key economic and employment trends in Canada, including a focus on key labour market challenges facing Indigenous Peoples.

Key economic and labour market trends in Canada

Economic trends

Canada experienced a milder recession and a quicker recovery than most OECD member countries. As shown in Figure 1.1, while GDP shrank in 2009, positive growth resumed in 2010 and Canada had been consistently performing better than the OECD average until 2014. In the first half of 2015, Canada experienced a technical recession and, while turning positive in the second half of 2015, Canada’s GDP growth was estimated to be between 1-1.5%. According to OECD projections, after two years of below average performance in 2015 and 2016, GDP growth in Canada will be in line with the average of OECD countries in 2017.

In recent years, the significant drop in oil prices has led to a weaker Canadian dollar and reduced economic activity in regions that are linked to the energy sector, notably Alberta, Newfoundland and Labrador and Saskatchewan (RBC, 2014). Alberta and Newfoundland and Labrador have been hit particularly hard by this shock, however Saskatchewan has been able to weather it better thanks to its more diversified economy. In the rest of the country, lower oil prices are benefiting non-oil related exports, in particular manufacturing, and consumer spending through lower fuel costs.

According to 2014 data, the level of labour productivity in Canada, measured as GDP per hour worked, is higher than the OECD average but significantly lower than in the United States (Figure 1.2). The rate of increase in labour productivity in Canada over the last ten years has been similar to the OECD average (average annual growth rate of 0.9%) but slightly lower than in the United States (+1.1%).

Shortfalls in multifactor productivity (MFP), which reflects the overall efficiency of the production process, is the main cause of weak labour productivity growth in Canada (OECD, 2014). While in the United States gains in MFP have been much higher in the current recovery than in previous cycles, this has not been the case in Canada. Given the strong link between living standards and MFP growth, raising the level of MFP growth is a crucial long-term challenge for Canada. In order to address this issue, recommendations have been made by the OECD, especially in terms of improvements in tertiary education and better innovation outcomes (OECD, 2014).

Population trends

Between 2004-14, the Canadian population grew at an annual average rate of 1.1%, which is higher than the OECD average of 0.7%, and the highest rate among G7 countries (OECD, 2016; Statistics Canada, 2015a). At the sub-national level, above average population growth over the same period was observed in Nunavut (+1.9%) and in the Western provinces and territories, notably Alberta (+2.4%), Yukon (+1.6%) and Saskatchewan (+1.2%).

The annual population growth rate in Canada for the years 2014-15 is estimated to be 0.9% (Statistics Canada, 2015a), the lowest figure recorded in the last 15 years. This slowdown of demographic growth could be attributed to a decrease in the number of international immigrants arriving in the country (239 800 in 2014-15 vs 267 900 in 2013-14). For the first time since 1997, the number of non-permanent residents in Canada declined in 2014-15 (-10 300), notably due to the important fall observed in Alberta (-21 200) but also in Saskatchewan (-2 200), New Brunswick (-200) and the territories (-100).

As in many other OECD countries, the population of Canada is ageing. The population aged 65 years and older, which accounted for 16.1% of the total population in 2015, has been increasing almost three times faster than the whole population (+2.8% annual average growth rate between 2000-15, vs 1.0% for the whole population). In 2015, for the first time the elderly population (65 years or more) exceeds the number of people aged less than 14. Recent projections predict that the proportion of persons aged 65 years or older will continue to increase and reach around 20% of the population in 2024 (Statistics Canada, 2015b). All parts of Canada are not affected by this demographic trend in a similar way, with the territories and Prairie Provinces experiencing slower population ageing in comparison with the Atlantic Provinces as well as Ontario, British Columbia and Quebec.

Education and skills

Overall, Canada has a high level of skills with the largest proportion of individuals aged 25 to 64 with tertiary education among OECD countries (54% vs OECD average of 34%). However, when looking at the highest levels of education attained, only 9% of Canadians hold a master’s or doctoral degree compared to 12% on average in OECD countries (OECD, 2015b). While on average, 13.7% of people aged 15-19 years in the OECD were not enrolled in education in 2014, this proportion was higher in Canada at 16.1%. This includes 7.1% of individuals who are not in education, employment or training (NEET), close to the OECD average of 7.2%.

Based on an analysis of earnings premiums for various levels of education, the OECD found that, in Canada as a whole, skills shortages at the postsecondary education level have remained stable in recent years (OECD, 2014). However, when looking at provincial data, significant increases in real earnings at all education levels revealed the presence of labour shortages in resource-rich provinces such as Alberta and Saskatchewan, with potential negative impacts on economic activity.

Labour market trends

The Canadian labour market has recovered solidly since the trough of the global economic crisis. As Figure 1.3 shows, annual employment growth was relatively high between 2010-13 compared with the OECD average, but became weaker in 2014 and is expected to remain under 1% annually until 2017.

The unemployment rate has been consistently lower than the OECD average since 2010, reaching 6.9% in 2014 (OECD average of 7.6%). The youth unemployment rate (individuals aged 15-24 years old) was lower than the average of OECD countries (13.2% vs 15.1% in 2015). And with only 13.4% of unemployed people who had been searching for a job for more than one year in the last quarter of 2014, Canada had one of the lowest rates of long-term unemployment within the OECD (OECD, 2014).

At the provincial/territorial level, large differences can be observed in terms of both the unemployment rate (Figure 1.4) and employment rate (Figure 1.5). In 2015, Yukon had the second lowest unemployment rate (4.3%) and the highest employment rate (71.5%), while Saskatchewan recorded the lowest unemployment rate (3.8%), and an above average employment rate (67%).

Youth unemployment

In Canada, youth unemployment (“youth” being defined as the population aged 15-24) rose quickly during the contraction but has remained high, accentuating the gap between the youth and adult rates. Historically, youth unemployment rates have been about twice that for the adult population. In some regions that ratio has remained higher. Equally, youth unemployment rates for indigenous people remain substantially higher at 18.8% in 2015, compared to a non-indigenous rate of 13%.

Young people who are looking for work have little by way of financial support and in most cases only basic counselling and job search services. For those youth who fall into the NEET category, prospects are significantly lower than their better-educated counterparts. A concern with slow job growth over the last several years is the possibility of longer-term effects for new entrants into the labour market of a protracted period of insecurity before securing permanent work and downstream effects on consumer behaviour and family formation.

There is considerable debate in Canada about the scale of issues related to youth unemployment (Adele and Delic, 2014; Bernard, 2013 and 2015; Cross, 2015). The gap between the 15-24 rate versus the over 25 rate has been increasing since the early 1990’s and was at 2.4 times in 2012. Additionally, youth labour market participation rates have been declining. While one explanation can be that young people are staying in school; another could be that those youth who are in the labour force are less competitive and having a harder time securing employment. A further argument is that the data is somewhat distorted with the inclusion of 15 year olds in the calculation. Excluding 15-year-olds would reduce overall unemployment estimates by a full percentage point in most recent years. However, there is little disagreement that today’s young people require better skills to secure a future in Canada’s labour market and that young people without those skills occupy a precarious place in the job market.

While the duration of youth unemployment appears to be shorter (e.g. youth find jobs more quickly than their adult counterparts), they are of course less likely to be in receipt of Employment Insurance (EI) benefits and may need to take jobs that are less attractive. There are considerable variances regionally in Canada and one feature of Saskatchewan and Yukon that complicates analysis is the relatively large youth indigenous population living on-reserve, which is not accounted for in most surveys.

Current and projected labour market matching

According to the recent Job Vacancy and Wage Survey (Statistics Canada, 2015d), 400 000 job vacancies were available in Canada in the first quarter of 2015, with Ontario (153 000) and Alberta (74 000) recording the highest number of vacancies. The job vacancy rate, which corresponds to the number of job vacancies or vacant positions as a percentage of labour demand (sum of occupied positions and vacant positions), was 2.6% in Canada. Higher job vacancy rates were generally observed in the provinces and territories of Western Canada, such as Yukon (3.9%) and Alberta (3.5%), than in Central and Eastern Canada.

The highest number of job vacancies was in service support and other service occupations (42 000), which includes occupations such as specialised cleaners, food counter attendants or operators in amusement, recreation and sport. Service representatives and other customer and personal services occupations came second with 31 000 vacancies. Concerning trades related occupational groups, industrial, electrical and construction trades (17 000), and maintenance and equipment operation trades (12 000) had the largest number of job vacancies.

Although the majority of job vacancies were for full-time work (72%) in the first quarter of 2015, this was the case for only 45% of health occupations and 54% of service occupations, compared with 96% for management occupations and 95% for natural and applied sciences occupations.

Differences in the length of job vacancy durations indicate that employers are finding it more difficult to fill job vacancies in some broad sectors such as health and in specific occupations such as trades, transport and equipment operator. Conversely, jobs vacancies in occupations such business, finance and administration or art, culture, recreation and sport are easier to fill.

A recent report by Employment and Social Development Canada found no evidence of labour market imbalances in terms of broad skills levels in recent years (ESDC, 2013a). This report predicts that, over the period 2013-22, the number of job openings will be matched by similar numbers of job seekers for each broad skill level. Two-thirds of the 5.8 million job openings expected for the period 2013-22 will be in occupations requiring tertiary education or in management occupations. On the other hand, one third of job openings are projected to be in occupations requiring only on-the-job training or high school education. Almost all occupations that are expected to face labour shortages are high-skilled occupations. These include trades, transport and equipment, health, management as well as occupations in the primary sector. It can be noted that, with the exception of health, these occupations are mostly male populated. Conversely, a number of low-skilled occupations are projected to display labour surpluses, including occupations related to administrative and clerical work, and also some occupations specific to the primary and manufacturing and utilities sectors. Given the great variety of economic and industrial structures across Canadian provinces and territories, this broad analysis at the federal level may mask significant regional differences in terms of labour shortages and surpluses.

Since January 2011, Statistics Canada has conducted a monthly Job Vacancy Survey that establishes the demand for labour by employers. For the first quarter of 2015, the Yukon had the highest job vacancy rate in the country at 3.9% while Saskatchewan ranked fifth at 3.0% both above the federal average of 2.6%. One noticeable association with tight labour markets is an increase in labour force participation of older workers in those areas. In Saskatchewan for example the participation rate is 44.1% for workers over 55 years of age as opposed to 36.1% for the rest of the country. In the Yukon, the 55+ participation rate is even higher at 50%.

Job vacancies appear to be occurring in specific technical/professional areas such as nursing that will take time to remedy with sufficient workforce entrants possessing the skills required. Many of the 10 occupations with the highest number of job vacancies, however, are entry-level positions or lower skilled jobs. In some cases these reflect discrepancies between the wages on offer and the cost of living in the community. In these cases there can be simultaneously unemployed and vacant positions. An approach that has been used to fill at least some of these vacancies in the hospitality and retail sectors has been the use of nominee programmes where the province or territory can identify the skills that are in demand and recruit those skills internationally.

Another dimension of tighter labour markets is strangely a reduction in internal mobility within organisations as the result of a restructuring of the career process itself and a decline in being able to translate “learning on and through the job” into more senior positions. Employers are looking for ready to work candidates rather than favouring development and successive promotion of internal candidates. The Metcalf Foundation looked at the development of job growth over a 15 year period in Ontario and found that the growth rate of jobs requiring a university degree or college diploma was 50% while the growth rate for entry level jobs requiring lower skills was 27% (Zizys, 2011). The growth in mid-skill level jobs was only 9%, which suggests the emergence of a more bifurcated labour market with limited career pathways and progression opportunities. This shift in requirements for jobs is particularly significant for those trying to enter the labour market without a postsecondary certificate and for older workers who possess a limited range of transferable skills.

Almost a third of Canada’s jobs fall into the categories of self-employed, fixed term or temporary. The post-recession period has not altered growth in these forms of employment which seemed to have peaked prior to the recession.

High rates of self-employment negatively affect overall coverage for Employment Insurance benefits and training programmes. Statistics Canada’s 2013 Survey of Employment Insurance Coverage found that of the 1.312 million unemployed in Canada, 37.5% had not contributed to the Employment Insurance programme and as a result were ineligible. Of the non-contributors, 493 000 (88%) had not worked in the last 12 months. Of the 820 000 contributors, 536 000 or 85.8% were eligible to receive benefits. In Canada access to extended job search support and training is for the most part associated with EI eligibility. Only about 59.2% of clients have access to basic services and among these, over half (55%) would not have worked in the last 12 months.

Indigenous employment and economic development

Statistics Canada reports that 1 400 685 people had an indigenous identity in 2011, representing 4.3% of the total Canadian population (Statistics Canada, 2011). Indigenous Peoples accounted for 3.8% of the population enumerated in the 2006 Census, 3.3% in the 2001 Census and 2.8% in the 1996 Census. The indigenous population increased by 232 385 people, or 20.1% between 2006-11 compared to 5.2% for the non-indigenous population. It is estimated that the indigenous population will continue to grow at a faster rate than the non‐indigenous population in the coming years, and could increase to between 2 million and 2.6 million (representing between 4.6%-6.1% of the total population respectively), by 2036 (Statistics Canada, 2015b).

Three main constitutionally recognised groups represent Canada’s indigenous peoples: Indian, Métis, and Inuit. Indigenous and Northern Affairs Canada provides some guidance on definition and their use in its glossary

The term First Nations came into common usage by late 1970s and 1980s as another term for the word “Indian”. Although the term First Nation is widely used, no legal definition of it exists. Among its uses, the term “First Nations peoples” refers to “Indian” as defined in the “Indian Act”. Some communities have also adopted the term “First Nation” to replace the word “band” in the name of their community. There are 618 First Nation communities in Canada as reported by Indigenous Affairs – 70 of which are located in Saskatchewan and 16 in the Yukon.
Inuit are the indigenous people in Northern Canada, who predominately live in Nunavut, Northwest Territories, Northern Quebec and Northern Labrador. The word means “people” in the Inuit language – Inuktitut. The singular of Inuit is Inuk. There are no Inuit communities covered in this study.
Métis are people of mixed First Nation and European ancestry who identify themselves as Métis, as distinct from First Nations people, Inuit or non-indigenous people. The Métis have a unique culture that draws on their diverse ancestral origins, such as Scottish, French, Ojibway and Cree. Métis are not expressly covered by this study but are included in statistics and programmes for indigenous people in the case study areas.

In 2011, 851 560 people identified as a First Nations person (includes both status and non-status Indians), representing 60.8% of the total indigenous population and 2.6% of the total Canadian population. 451 795 people identified as Métis. They represented 32.3% of the total indigenous population and 1.4% of the total Canadian population. While indigenous peoples in Yukon are overwhelmingly First Nations, Saskatchewan has a large Métis population (52 450) in addition to a significant First Nations population (103 205), representing 5.2% and 10.2% of the provinces population respectively. By 2036, the indigenous population could reach between 18.5% and 22.7% of the population in Saskatchewan, and between 21.7% and 24.6% in Yukon (Statistics Canada, 2015b).

The indigenous population is young with indigenous children aged 14 and under representing up 28.0% of the total indigenous population and indigenous youth aged 15 to 24 representing 18.2% of the total. Although it is estimated that the indigenous population will remain younger than the non-indigenous population by 2036, the former is expected to age more rapidly (Statistics Canada, 2015b).

Indigenous Peoples and the labour market

Labour market information (LMI) on Indigenous Peoples – First Nations, Métis and Inuit – is available through a number of sources including the Labour Force Survey, the Aboriginal Peoples Survey, the National Household Survey and the Census (ESDC, 2013b; INAC, 2013). However, the first two surveys exclude the indigenous population living on‐reserve, which creates a major gap in the indigenous LMI. According to the National Household Survey, there were just over 1 million indigenous people aged 15 years or older living in Canada in 2011. The share of Indigenous Peoples among the population for each Canadian province and territory is shown in Figure 1.7.

Education and skills

According to the 2011 NHS, educational attainment for the indigenous population aged 15 or older lags behind the general population with 38% having no certificate, diploma or degree compared to 19% for non-indigenous individuals of the same age (Statistics Canada, 2013). In 2006, these figures were 44% and 23% respectively. The working age (25‐64 year old) indigenous population increased by 21% between 2006-11 to reach 671 380, of whom 481 330 (or 72%) participated in the labour force.

By comparison, the number of other Canadians in this age group increased by only 5% between 2006-11, making indigenous people one of the most significant growth components in Canada’s labour force. In 2011, the employment rate of the working age population was significantly lower for indigenous people at 63% compared with 76% for the non-indigenous population and the unemployment rate (13%) was more than double that of the rest of the working age population (6.0%). NHS data also show that, in 2011, educational attainment of indigenous people aged 15 or older was significantly lower than that of the rest of the Canadian population (Figure 1.8).

Younger indigenous people had on average higher levels of educational attainment than older ones, with 74.1% of people aged 35 to 44 years holding at least a high school diploma compared to 66.4% of people aged 55 to 64 years (Statistics Canada, 2011). Indigenous women had higher levels of qualification than indigenous men and educational attainment was greater among Métis people, with 54.8% of 25 to 64 year olds having completed postsecondary education compared to 44.8% of First Nations people and 35.6% of Inuit individuals.

According to the results of the 2012 OECD Programme for the International Assessment of Adult Competencies (PIAAC1), literacy scores of Indigenous Peoples were on average lower than that of non-Indigenous peoples, with larger gaps observed in the three territories and in the province of Saskatchewan (Figure 1.9). Similar trends are observed in terms of numeracy scores.

Labour market trends

The labour market downturn that followed the 2008 economic crisis saw the gap between indigenous and non-indigenous populations widen in terms of unemployment, employment and participation rate (Usalcas, 2010). According to LFS data, the number of indigenous people in employment fell by 1.2% between 2008-10, whereas job losses suffered by non-indigenous people in 2008-09 were almost recouped in 2011. Between 2008-09, the indigenous unemployment rate increased by 3.5 percentage points compared to 2.2 percentage points among the rest of the Canadian population (Figure 1.10).

However, the gap between the unemployment rates among these two populations decreased in recent years from a maximum of 6.2 percentage points in 2010 to 4.4 percentage points in 2014. However, the gap widened to 5.6 points in 2015. It is striking to note that unemployment rates among both groups are still persistently higher than they were in 2008, although they have improved since 2009-10. The unemployment rate among young Indigenous Peoples aged 15 to 24 years old peaked at 22.5% in 2009 (15.1% in the non‐indigenous population), fell to 16.7% in 2014 (13.4% in the non-indigenous population), but increased again in 2015 to reach 18.8%, while it continued to fall in the non-indigenous population at 13%.

As shown in Table 1.1 below, the indigenous employment and participation rates were 6.2 and 2.9 percentage points lower than the non-Indigenous rates. Women had a lower unemployment rate in both the indigenous and non- indigenous population. The gender gap in terms of employment and participation rates was larger in the Canadian population as a whole than among the indigenous population. On average, indigenous workers tended to be paid less per hour worked in 2015 (23.31 CAD vs 25.24 CAD for non-indigenous workers).

Table 1.1. Unemployment, employment and participation rate, percentage of Indigenous and non-indigenous populations aged 15 years or more, Canada (excluding territories), 2015
	Unemployment rate			Employment rate			Participation rate
	Women	Men	Total	Women	Men	Total	Women	Men	Total
Non-indigenous population	6.1	7.3	6.8	57.5	65.5	61.4	61.3	70.7	65.9
Indigenous population*	11.7	13.1	12.4	52.3	58.3	55.2	59.2	67.1	63.0
← * Excluding people living on-reserve.
Source: Statistics Canada. Table 282-0226 – Labour force survey estimates (LFS).

Also when looking at provincial differences, the unemployment rate was higher and the employment rate lower among the indigenous population in all Canadian provinces (Figure 5.5and 5.6), the widest gaps being observed in Saskatchewan for both indicators.

Employment by industry

In 2014, there were a greater number of indigenous people employed in the goods-producing sectors (23.6% vs 21.8%) and fewer employed in services sectors (76.4% vs 78.2%) compared to the non-indigenous population (Statistics Canada, 2014).

The largest shares of employment for indigenous people were in trade (15.3%), health care and social assistance (13.6%) and construction (10.9%). This population was particularly over-represented in construction, accommodation and food services and public administration, and under-represented in professional, scientific and technical services, manufacturing, and finance, insurance, real estate and leasing.

Indigenous women were significantly more employed in services industries (91.9% vs 61.1% for men) and less employed in goods-producing industries (8.1% vs 38.9%). Indigenous men were mostly employed in construction, trade and manufacturing, while women mainly in health care and social assistance, trade, and accommodation and food services. The gender difference in terms of sector of employment is more pronounced for indigenous than for non- indigenous people.

Employment by occupations

In 2014, the largest shares of employment for indigenous people were in sales and service (30.3%) and in trades, transport and equipment operators (20.4%), two occupations in which this population was over-represented in comparison with the rest of the Canadian population (Statistics Canada, 2015c). Conversely, indigenous people were under-represented in occupations in natural and applied sciences, and in business, finance and administrative occupations. Significant gender differences could be observed also in terms of occupation, with the largest number of jobs being in sales and service occupations for indigenous women (39% vs 21.8% for men) and in trades, transport and equipment operators for indigenous men (38.1% vs 2.5% for women).

Indigenous businesses and entrepreneurship

In 2014, approximately 40 000 indigenous workers were registered as self-employed in Canada, which represented 8.7% of total indigenous employment (Statistics Canada, 2015c). While this proportion remained lower than in the non-indigenous population (15.4%), the growth of self-employment has been significantly higher within the indigenous population (+10.7% vs +1.4% in the non-indigenous population) between 2011-14.

According to the Canadian Council for Aboriginal Business (CCAB, 2011), while the majority of businesses owned by Métis and Inuit people were located off-reserve in 2011, 72% of First Nations-owned businesses were located on-reserve. The largest proportions of indigenous-owned businesses were in the construction and primary sectors, but impressive growth in indigenous entrepreneurship in knowledge-based industries has been observed in recent years. Given that around 40% of indigenous self-employed business owners employ other people, entrepreneurship can be a crucial factor for stimulating job creation within and outside indigenous communities. Limited access to capital in order to start a business and lack of business skills and formal training have been identified as the main barriers to self-employment within indigenous populations (Statistics Canada, 2015c).

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Note

← 1. More information on the PIAAC survey is available on the following website: www.oecd.org/site/piaac/.