Skilled Labour Shortages : Understanding the Business Perspective

TITLE OF PROJECT

Skilled Labour Shortages: Understanding the Business Perspective

BACKGROUND

Manufacturing is one of Canada’s most important economic sectors by almost all statistical measurements, including GDP, imports, exports, research and development, and employment.  It plays a critical role in the economic success of the entire country as well as each province.  While the business outlook for Canada’s manufacturing sector is positive over the next three to five years, it faces a number of challenges both domestically and internationally that may impede future growth.  

While the most pressing challenges are to defend against competition arising from emerging economies and to expand into new markets, the most common barrier to growth raised by manufacturers in discussions with Industry Canada is their ability to attract and retain skilled labour.  Companies report – through discussions with officials, surveys, studies and their associations - that they currently face skilled labour shortages, and that they expect them to worsen in the coming years.  Persistent labour shortages in the Canadian manufacturing sector may restrict investment, and lead firms to forego production or cut back on plans for growth.

Canada’s population is aging at a time when population growth rates are slowing, both of which may exacerbate labour shortages.  Technological advances in the workplace are raising skills and knowledge requirements, which have further increased demand for highly skilled workers.  Moreover, acute demand for skilled workers in natural resource sectors is set to increase and natural resources firms compete directly with manufacturers for labour.  

A 2012 Canadian Manufacturers and Exporters (CME) study, “Canada’s Labour Market: A Reality Check for Canadian Industry and Government” found that nearly 50 per cent of manufacturing companies face labour shortages across a wide range of occupations, with most occupational shortages expected to worsen. Occupations such as sales and marketing, skilled production, general management and engineers are deemed to be the most critical for company’s success over the next 5 years but at the same time are in short supply.  

Responsibility for the federal government’s analysis of Canadian labour market remains with the Department of Employment and Social Development Canada (ESDC), which collects and synthesizes data and information regarding jobs, skills and regional labour market trends in support of its policy role.  Among ESDC’s current initiatives is its work to improve the reliability of labour market data and the breadth of its coverage by expanding the number of occupations and regions covered by its data sets.  ESDC’s Sectoral Initiatives Program will also help to enhance the development of labour market information.  It seeks to identify industry-level skills challenges, and in turn will offer ESDC a more refined insight into the types of policies and programs that are needed to address skills shortages in strategic sectors of Canada’s economy.  

Industry Canada can complement this work by approaching the same set of issues from a firm-level perspective.  One of the department’s primary roles is to engage with business stakeholders to understand their experience relating to key issues and the best ways to address them.  As such, it is within the scope of our responsibilities to fully understand the skilled labour issue from the business perspective. Industry Canada is best positioned to assess what is meant by firms’ concern regarding skills shortages as a major business challenge.

PROJECT REQUIREMENTS/OBJECTIVES

There is considerable work being done to compile, synthesize and map data on the demand and supply for labour and skills in Canada.  As a business-facing department, Industry Canada is positioned to complement this quantitative work with a case-study, qualitative analysis.  We intend to engage a consulting firm to undertake case studies of a cross-section of Canadian manufacturing companies to gain a representative set of firm-level perspectives on how skilled labour shortages are directly impacting their growth strategies. In particular, we would like to answer five overarching questions: 

1.	According to firms, what skills shortages are they currently facing?

2.	What strategies have they taken to overcome skills shortages? 

3.	What opportunities are Canadian manufacturing firms losing out on due to skills shortages and/or mismatches that they face? 

4.	How do challenges, strategies and opportunity costs differ for representative firms in the manufacturing subsectors and different regions of Canada?  

5.	What are the gaps in public policy that could address their skills shortages?

SCOPE OF WORK

This project would complement existing efforts to develop robust data sets on the supply and demand of skilled labour with in-depth, firm-level information about the nature of skills shortages in Canadian businesses and what the impact and cost of these skills shortages are to firms.   By collecting this detailed, firm-level information and drawing out thematics, this project will contribute to interdepartmental and multi-stakeholder discussions on policies to respond to this issue. 

The contractor, which will have experience in developing sector analysis methodologies, conducting case studies and analysis pertaining to Canada’s skilled labour environment, and a network of business contacts within the manufacturing sector that it can leverage, will conduct a study that provides an in-depth exploration of the experiences of manufacturing firms that have been impacted by difficulty attracting, retaining and developing skilled labour. In particular, it should seek to assess whether prolonged skilled labour shortages have given rise to negative implications for these businesses, such as constrained growth, lower firm productivity, lower revenues, profitability, and outsourcing and off-shoring of production activities.

PROJECT DETAILS

Tasks: 
The contractor will develop: 1) an overview of the state of manufacturing skilled labour markets in Canada, by region and industry; 2) a methodology for selecting representative firms and conducting firm profiles; 3) conducting 10-12 case studies; and 4) preparing a cross-cutting synthesis of this analysis.

1)	Overview of the state of manufacturing skilled labour markets, by region and industry

•	Provide an overview of the existing analysis and discussion around skilled labour shortages. 
-	Background research on industries’ reports of skilled labour shortages and a literature review of perspectives on how the issue can be addressed, which could make use of reports from industry representatives such as the Canadian Council of Chief Executives, Canadian Manufacturers and Exporters, and the Canadian Chamber of Commerce
-	Provide context to the study and situate the follow-on research findings

•	Assess any regional differences in skilled labour pressures.  This will include: 
-	Analysis of how industry needs have influenced the regional variation in skilled labour demand gaps
-	An assessment of how manufacturing sub-sectors situated in the same region compete for the same pool of skilled labour
-	An assessment of what the impact has been of increasing demand for skilled workers in Canada’s natural resources sector

2)       Methodology
•	Develop and provide a written methodology for selecting firms that will be used in the case studies and to effectively profile the issue across the manufacturing sectors.  This should ensure that coverage of manufacturing sectors is varied by industry and by region, based on criteria established in the selection methodology. 
-	The selection methodology should be able to identify common and divergent elements amongst candidate firms.  By identifying common elements amongst the firms, the contractor will be able to demonstrate that broad conclusions drawn out from these interviews are applicable to a range of manufacturing industries.  By identifying divergent elements, the contractor will be able to demonstrate the varying degree to which labour pressures are affecting manufacturing industries. Overall, it will better position the contractor to be able to offer analysis about the implications of skilled labour shortages from the case studies conducted
•	Develop and provide a summary of the approach that will be used to encourage the selected firms to participate in this project.
•	Develop and provide a summary of the methodology that will be used by the contractor to gather useful and appropriate information from firms.  This should include a framework for how the contractor intends to synthesize information gathered in interviews so that it offers Industry Canada clear insights into how the skilled labour issue is impacting firms and what, if any, is the appropriate policy response.

3)	Firm Case Studies 			

•	Based on the contractor’s methodology, select 10 to 12 firms to use for separate case study analyses, ensuring that the firms chosen represent a range of manufacturing sub-sectors from a variety of regions across Canada.  The list of firms compiled by the contractor will be reviewed by the Project Authority prior to it being finalized. 

•	Based on the contractor’s methodology, conduct case studies with participant firms to develop a thorough understanding of how skills gaps and/or mismatches have impacted these businesses.  

The information collected in these case studies should at a minimum include: 
-	The firm’s experience with skilled labour shortages and the occupations that they are having particular difficulty in maintaining a sufficient supply of labour. 
-	Substantive evidence of how lack of access to skilled labour has impacted their business (e.g. evidence of foregone investments, reduced profitability, loss of new business opportunities, loss of export opportunities, lower product quality, challenges in using or implementing new technologies) 
-	The business strategy and/or actions that the firm is using to help mitigate skilled labour pressures that it is experiencing (e.g. investments in new technologies, investments in training and up-skilling, consolidation of product offerings, re-locating its activities outside Canada, introducing incentives to attract skilled labourers from other sectors/firms, accessing the Temporary Foreign Workers Program, partnerships with educational institutions, targeted recruitment, etc) 
			
•	Review relevant documents and data sources to verify and validate firm responses and to supplement case study findings.  The aim in doing so is to draw out objective conclusions about a firm’s statements that its business activities were negatively impacted by its inability to access skilled labour. 

•	Draft a report based on each individual case study that provides in-depth details and analysis about each firm’s experience with skilled labour pressures.  These reports can include confidential information.  All confidential information included will be kept internal.  
										
4)	Analysis of cross cutting thematics

•	Draft final summary report for publication and discussion with key stakeholders:
-	Use case study reports to author a report which provides a higher level summary of case study findings, which will be shared publicly.  This final summary report must omit a firm’s confidential information that they have provided to the contractor during the case study (e.g. financial information, investment decisions, and planned future business decisions).  
-	Identify and assess the key conclusions drawn from firm case studies to provide concrete illustrations of how skilled labour gaps/mismatches are bringing about negative implications for the manufacturing sector, without referring to a specific firm’s experiences. 
-	Identify the manufacturing sub-sectors and activities in which the skilled labour issue represents a primary limitation on business activities and growth.	
-	Provide firm views on how government support has assisted these firms (or not) in obtaining skilled labour and offer insights into what further government support is needed. 

Activities
	
Key activities include: 
	
1.	Participate in an initial consultation with the Project Authority via telephone conference. 
2.	Review and discuss with the Project Authority a detailed plan for the scope of work, with associated timelines and responsibilities for implementation. 
3.	Provide updates to the Project Authority on progress, issues and findings. 
4.	Prepare methodologies and approaches to be used for conducting case studies, including a methodology for firm selection, successfully ensuring firm participation, and compilation and synthesis of relevant information. Share draft list of selected firms with Project Authority for final review and approval. 
5.	Prepare overview report of existing analysis and discussion around skilled labour shortages. 
6.	Research and prepare case study reports for each of the firms studied for Task #2 that will be shared only with Industry Canada officials, for consultation with the Project Authority. 
7.	Research and prepare a report that offers key conclusions for the broader manufacturing sector for Task #3, for consultation with the Project Authority. 
8.	Deliver a presentation to senior government officials in Ottawa, Canada on the findings of the report. 
	
Deliverables
	
1.	Submit the detailed plan for the scope of work, with associated timelines and responsibilities for implementation.  Four per cent of the total value of the contract is due upon the receipt of this submission, no later than four days from contract signing. 
2.	Submit a draft report for Task #1 (5.1.1) in MS Word, for review and discussion with Project Authority, no later than one week from contract signing.
3.	Submit the final report for Task #1 (5.1.1) in MS Word, no later than two weeks from contract signing. 
Twenty per cent of the total contract value is due upon receipt of deliverables number two and three (draft and final report for Task #1). 
4.	Submit a draft report for Task #2 (5.1.2) in MS Word, for review and discussion with Project Authority, no later than four weeks from contract signing.  
5.	Submit the final report for Task #2 (5.1.2) in MS Word, no later than five weeks from contract signing. 
Twenty per cent of the total contract value is due upon receipt of deliverables number four and five (draft and final report for Task #2).
6.	Submit a draft report for Task #3 (5.1.3) in MS Word, for review and discussion with Project Authority, no later than 9 weeks from contract signing. 
7.	Submit the final report for Task #3 (5.1.3) in MS Word, no later than ten weeks from contract signing. 
Thirty-six per cent of the total contract value is due upon receipt of deliverables number six and seven (draft and final report for Task #3). 
8.	Submit a draft report for Task #4 (5.1.4) in MS Word, for review and discussion with Project Authority, no later than fourteen weeks from contract signing.  
9.	Submit the final report for Task #4 (5.1.4) in MS Word, no later than fifteen weeks from contract signing. 
10.	Submit to the Project Authority a presentation in MS PowerPoint based on the key findings of the combined reports for Task #2 and #3. 
11.	Deliver a presentation to senior government officials in Ottawa, Canada on the findings of the report. 
Twenty per cent of the total contract value is due upon receipt of deliverables number eight, nine, ten, and eleven (draft and final report for Task #4, and presentation submission and delivery). 

The contractor will provide the Project Authority with regular updates on the status of work via email and/or telephone.  All deliverables are to be provided in English.