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JOB MISMATCH A REAL PROBLEM IN NORTH AMERICA

by Daniel Gloade on March 31, 2014

The Canadian Government claims that one of this countries’ labour crisis is the mismatch between job vacancies and potential employees.  In other words, employers can’t hire people because no one has the right skill set or that there are no potential employees willing to move to the employer’s location.  In political terms, this job mismatch shifts the blame of unemployment from government policy to the Canadian people (particularly the young).  The subtext is that young people do not keep track of the job market.  They have therefore fail to train (not going to school or getting educated in non-demand jobs) or fail to re-locate in an area rich in job vacancies.  This job mismatch is also cited as being the reason why immigration law has been recently reformed to make it easier for employers to hire non-Canadians.

A recent report from the Office of the Parliamentary Budget Officer states that the problem of job mismatch is overstated.  You can find a recent article from the Record here.  The actual report can be found here.

Reading the actual report is interesting.  It shows the Beveridge Curve.  The Beveridge Curve shows the ratio between job vacancies and the number of unemployed over time.  The smaller the ratio, the better the match between the labour market and the job market.  In Canada, currently there are approximately 2.8 unemployed people for every job vacancy.   The OPB states that while this ratio is not as good as it was in 2008, it has substantially improved since the recession

No one discussed, however, how Canada’s Beveridge Curve compares with that of other countries.  I found some research from the International Labour Organization which contains Beveridge Curves from other countries.  The research can be found here.  What I saw frightened me.

The average ratio of job vacancies to unemployed people for developed countries is approximately 1.5.   Canada`s ratio is similar to the United States (approximately 2.3 unemployed persons for every job vacancy).

Two questions arise.  The first is why Canada`s ratio so high compared to the rest of the world.  The second related question is why is the ratio so high in North America (Canada and the United States) compared to Europe and the rest of the developed world.

I believe that the main reason for this disparity is that the North American job market is far more dynamic that in Europe.  The United States and Canada has a very high rate of job destruction. Many more people lose his or her job at any given month in North America as opposed to the rest of the world.

The average time someone is unemployed in Canada however, is only approximately 5 months.  For most other countries, however, people are unemployed for a number of years.

It suggests that in North America, the job market moves much faster.  Both the job market and the labour market adjust much more quickly than in Europe.  I believe that this job fluctuation shows that the Canadian people are adapting to a constantly changing job market much better than those citizens in non-North American countries.  I also feel, however, that the faster the job market dynamics, the less time potential employees have to `syn up` with the job market.  I don`t feel, therefore, that the job mismatch is the fault of Canadians, particularly the young.

 

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