3 Ways to Reduce Manufacturing’s Skills and Labor Shortage in Canada

3 Ways to Reduce the Manufacturing Labor Shortage in Canada

The skills and labor shortage in Canadian manufacturing has been a problem for some time, but it has recently gotten much worse. In 2021, 82% of manufacturers said they faced immediate shortages, up from 39% in 2016.

This graphic from Canadian Manufacturers & Exporters (CME) highlights the extent of the skills and labor shortage, and the steps that can be taken to address it.

A Closer Look At the Labor Shortage

There are more job vacancies than job seekers in manufacturing, for the first time since this data started being collected in 2015.

Labor shortages are most common in general labor and skilled production positions, such as welders and machinists. These shortages persist despite manufacturing jobs paying an average hourly wage of $23.45, well above the average minimum wage in Canada of $14.12.

Manufacturers’ bottom lines are being squeezed by these shortages: 42% have lost opportunities or paid penalties due to a lack of workers.

What can the government and manufacturers do to address the skills and labor shortage in Canada?

An Action Plan for the Skills and Labor Shortage

Canadian Manufacturers & Exporters (CME) recommends 3 main steps.

1. Increase Economic Class Immigrants

The Canadian government can nearly double the target for economic class immigrants from 240,500 in 2022 to CME’s recommended target of 500,000 per year.

As Canada’s population ages and its fertility rate remains low, immigrants are driving Canada’s labor force growth. From 2006-2021, the proportion of landed immigrants in the labor force increased by more than six percentage points.

In addition to increasing immigration, the government can update the definition of economic class “skills” to include a wider array of skills needed by employers. For their part, manufacturers can support immigrant workers with various programs like language training or mentorship.

2. Increase Employment of Youth and Under-represented Groups

Manufacturing has historically had a higher percentage of racial minority workers compared to the all-industry average. However, there are other population groups that manufacturers can tap into to address the skills and labor shortage. 

For instance, women make up nearly half of the workforce but less than a third of all manufacturing workers. This level has remained relatively flat for decades.

Similarly, fewer young people have been choosing a career in manufacturing. The percentage of youth working in manufacturing is three times lower than it was in 1976.

The government can support employment of these groups by increasing the funding of inclusion programs and building awareness campaigns, like CME’s Women in Manufacturing initiative. 

For example, one non-profit campaign aimed at youth highlighted how manufacturing involves creativity, leading technology, and building a better world. It had a measurable impact on changing teens’ perception of the sector:

• 10 percentage point increase in youth perceiving the industry as interesting and accessible
• 20 percentage point increase in teens agreeing they could see themselves working in the sector

The campaign also appealed proportionately to men and women, an impressive accomplishment given that women are underrepresented in the industry.

3. Invest in Automation and Advanced Manufacturing Technologies

Capital investment in things like machinery, equipment and software is strongly correlated with higher productivity. Unfortunately, Canada has seen one of the lowest levels of capital investment and productivity growth in manufacturing, harming its global competitiveness.

While some manufacturers have responded to the intense labor shortage by investing in automation, many have not. In fact, only 55% of manufacturers plan to invest in advanced technologies by 2023.

What are the top obstacles holding them back?

In order to help manufacturers invest in automation and expand their capacity, governments can:

• Implement an investment tax credit to provide financial support.
• Develop awareness campaigns on the benefits of technology adoption.
• Provide financial support for training programs.
• Work with schools to ensure curriculum matches manufacturers’ needs.

This assistance will be critical in encouraging manufacturers to adopt advanced technologies.

Building a Productive Workforce

Government and manufacturers can work together to address the skills and labor shortage in Canada. Through a combination of expanding the labor pool and investing in automation, manufacturers will be better positioned to build capacity and grow.

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