Canadian Manufacturing Sector Strong Despite Continued Need for Skilled Workers

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The Canadian manufacturing industry is one of the largest industries in Canada, employing more than 10 percent of the Canadian workforce (more than 1.8 million people) with roughly 80,000 manufacturing facilities across the country. The industry makes up 12.9 percent of Canadian GDP, and generates more than $3 Canadian dollars in economic activity for every dollar of output. The leading manufacturing sectors are equipment for industries and transportation, food products, coal and petroleum products, and primary metals. Much of these manufacturing goods are exported, and the Canadian export industry employs roughly five million workers through both direct and indirect means.

Manufacturing also plays a large role in R&D in Canada, making up two-thirds of all business investment in R&D and half of all R&D activities in Canada. Often this is because of the complex and wide-ranging challenges facing manufacturers. To address this, the Canadian Manufacturing Coalition (CMC) has narrowed in on key issues in order to develop progressive initiatives for a competitive Canadian manufacturing sector. The general areas of improvement that they are focusing on are: investment and innovation, international trade, major projects (including natural resource development and infrastructure construction), and skilled labor and training.

The country’s aging population disproportionately affects the manufacturing industry in Canada. Many workers within the manufacturing industry, especially in skilled trades, are of an older average age than other sectors (currently 30 percent of workers in the manufacturing sector are baby boomers). Additionally, the aging of Canada’s workforce in general is predicted to continue. Below replacement fertility rates, an increase in life expectancy, and the aging of the baby boomer population are all coalescing to skew the population to older on average. For example, in 2011, approximately 5.0 million Canadians were 65 years of age or older. This number is expected to double by 2036 to reach 10.4 million seniors. By 2051, about one in four Canadians will be 65 or over.

Additionally, though a skilled workforce is a competitive advantage for Canadian manufacturers, a shortage of skilled workers is the biggest challenge many Canadian businesses face today. 46 percent of the Canadian Manufacturing Coalition considered attracting and retaining labor to be an issue when surveyed in 2012. An additional 49 percent of those surveyed cited that they were experiencing a labor shortage the same year. Additional factors will continue to make finding and retaining skilled workers a challenge for the manufacturing sector. These include the changing demographics to a more aging population, regulatory alterations, competition from emerging markets, competition for talent, and economic uncertainty. In fact, the organization Skills Canada has predicted one million skilled trade workers will be needed by 2020.

A longer-term solution to shortages of skilled workers is for firms to train their own employees. In this area, Canada has lagged behind in its investment in training when compared to other nations globally. It ranked just 20 out of 26 compared to other OECD countries in hours of training in 2014. Also, the Conference Board of Canada found that spending on learning and development per employee fell 25 percent between 2006 and 2010. Some reasons for the loss in spending on training include global competition which results in the need to cut costs, local poaching of talent from other companies, and a general reluctance of Canadian firms in Canada to invest in human capital. Therefore, it might be in the Canadian manufacturing sector’s interest to shift some of the R&D investment in manufacturing infrastructure to that of human capital in the years ahead.