Help (Will Be) Wanted: Overcoming Labor Shortages in Canada’s Oil and Gas Industry

One of the most talked about issues in Canada’s oil and gas industry today is the topic of labor shortages. Projections ­indicate that Canada will face a shortage of both skilled and unskilled labor in the near future. This lack of access to labor is ­limiting the capacity of the industry as a whole to grow and be ­economically ­successful. If there are not enough people with the right skills to ­complete a job, the job simply cannot get done. Or, if the number of people who have the necessary skills to complete a task is so small that they can command very large wages, these increased wage costs could render a project economically unviable.

How significant is this labor shortage problem? While projections vary, the vast majority of authors agree that labor shortages are a ­significant hurdle for future economic growth in the sector. For example, the ­Petroleum Human Resources Council of Canada estimates that up to 9,500 jobs will be unfilled in the oil and gas industry by 2015. While this is not consistent across all sub-industries—some will expand while others contract—the overall trend indicates that labor shortages will be a significant barrier to growth for Canadian oil and gas companies as they move forward.

If this is a significant problem, what is driving these labor shortages? Two broad trends are seen as the root causes of projected shortages in labor:

1. A lack of workers who possess the skills and technical knowledge needed to complete certain jobs within the industry (for example, many individuals in the pipeline or oil sands sector require specific skills and accreditation to complete their work) creates a shortage of certain skilled workers.
2. Older workers retiring will create an additional demand for workers within the oil and gas sector.

What can be done to address labor shortages? While there is no ­single “silver bullet” change that can immediately solve the ­problems, a ­number of small changes introduced by private companies and ­Canadian ­provincial governments could collectively help to ease ­labor shortages. These changes are designed to either increase the ­number of skilled workers that the Canadian economy can draw upon in the ­future, or to attract skilled workers from around the world to fill the ­demand for skilled work in the country. Examples of some of these changes are listed below:

1. Tax reform: Canadian governments are changing their tax structures to encourage individuals to develop new skills to match industry demands. For example, Manitoba is using preferential tax treatment to incentivize skilled workers with post-secondary education to move and work in Manitoba. This is in the form of tuition tax rebates that enable up to 60 percent of the cost of tuition to be paid for by the government. This could be up to $24,000 for an individual student as they complete a degree.
2. Encouraging worker retraining: By encouraging older workers to retrain and acquire new skills, these workers can stay in the workforce longer and reduce the demand for skilled labor. For example, Human Resources and Skills Development Canada has previously funded programs and worked together with the provinces to ensure community organizations have the resources necessary to train older workers to re-enter the labor force. This project was previously extended into 2012.
3. Pension reforms: Reforming pensions to incentivize older workers to remain in the workforce for a longer period of time. This will reduce the eventual demand for skilled labor in the labor force as people stay in the workforce longer. British Colombia restructured the retirement options of older citizens in 2008, to encourage working later in life. This included raising the retirement age, and creating phased retirement plans so that individuals can work and receive a portion of their pension at the same time.
4. Encourage interprovincial migration within Canada: By making it easier for workers to move across Canada, workers can go to where their skills are most highly demanded. A significant portion of the “New West Partnership,” an agreement between British Colombia, Alberta, and Saskatchewan, is designed to make it easier for workers to move between these provinces to where their labor is most needed.
5. Encourage international immigration from abroad: Both federal and provincial governments are working to attract skilled immigrants to come and work in Canada. This enables more skilled workers to be supplied in our labor markets. This involves steps such as relaxing credential recognition from abroad, making it easier for immigrants to be integrated into Canadian society, and improving cooperation between governments when dealing with immigration issues. In 2010, Human Resources and Skills Development Canada completed a pilot project for the “Foreign Credential Recognition Program.” This program overall was positive in coordinating numerous stakeholders involved in recognizing foreign credentials.
6. Cooperation between education and industry: One consistent call is for additional cooperation between post-secondary institutions and companies to enable graduates to participate in apprenticeship programs. In this way companies can acquire an employee that has skills and exposure to how a company works, while the new graduate gains valuable hands-on experience.