Demographics – The Impacts of an Aging Population on the Labour Market

February 13, 2007

Nicole Herod, Manager, Communications

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Canadian Apprenticeship Forum – Forum canadien sur l’apprentissage (CAF-

FCA)• CAF-FCA was established in June of 2000.• CAF-FCA is a pan-Canadian, multi – partite

organization including representatives of:• Business • Labour • Inter-Provincial Alliance of Apprenticeship Board

Chairs • Educators• Canadian Council of Directors of Apprenticeship• Equity groups• Human Resources and Social Development

Canada

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Vision and MissionCAF-FCA Mission:

• To influence pan-Canadian apprenticeship strategies through research, discussion and collaboration by the apprenticeship community.

• To promote apprenticeship as an effective model for training and education, contributing to the development of a skilled, high quality, productive, inclusive and mobile labour force.

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CAF-FCA Vision

CAF-FCA is a driving force for healthy, vibrant and progressive apprenticeship systems, on a pan-Canadian level.

Vision and Mission

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Barriers to accessing and completing apprenticeshipNine generic perceived barriers:

1. negative attitudes about apprenticeship and trades

2. lack of information or awareness about apprenticeship

3. unwelcoming workplaces

4. costs of apprenticeship

5. economic factors

6. lack of resources

7. concerns about essential skills of apprentices

8. shortcomings of workplace-based and technical training

9. regulations

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Upcoming Projects in Canada = Top 10• Bruce Nuclear Power Station (Kincardine, Ontario)

$4.25 B

• Eastmain1 Hydroelectric Development (Quebec) $2B.

• Canada Line (Vancouver) $1.8B

• Golden Ears Bridge (Vancouver) $1.1B

• Niagara Tunnel Project (Ontario) $985 M

• Montreal Metro Expansion (Quebec) $803 M

• Canaport LNG (NB) $750M

• Portlands Energy Centre (Toronto, Ontario) $730M

• Red River Floodway Expansion (Manitoba) $690 M

• Sea to Sky Highway (BC) $625M

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Workforce Profile

• “Over the next 15-year period, employers may be looking at replacing over 400,000 workers in the manufacturing context.

• 72% of “near-retirement workers” are males.

• Canada’s reliance on immigration for labour force growth is also evident in the manufacturing sector

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Workforce Profile

• Workers in the skilled trades occupations – construction, electrical, machinist, mechanics etc make up a significant share of employment in the manufacturing sector – Plastics, transportation, wood manufacturing…to name a few.

• This is about 380,000 workers in the skilled trades, of which one in eight is over aged 55.

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You, Me and Them:(Dr Linda Duxbury, Professor, Sprott School of Business)• It is “sellers” market whereby there are more

good jobs than there are employees

• Birth rates are declining throughout the world

• Population is aging

• Greater international competition for labour

• Competition for talent amongst sectors…

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Looming Labour Force Shortage

• Last 25 years the labour force grew 226,000 per year

• In the next 10 years, it will only grow by 123,00 per year

• By 2016 the annual growth will be near zero

• For every two people retiring, there will be less than one to take their place.

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Immigration not the full solution – Complex Issue• Part of the solution, but consider this:

• Over past 5 years immigration accounted for 70% growth in Canada’s labour force Over past quarter century immigration 166,000 per

year By 2016 need to reach 520,000 (low) to 650,000

(high)• Obstacles for Immigrants getting into Canada

Processing time Credential recognition

• China is one of Canada’s top sources for talent

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Enter the Dragon

• Watershed event happening in China• Moving to a more open market • Focus on training; looking at a Sector Council

approach similar to Canada’s• Increasing its share of the market

Greater market overlap over time of Canada’s traditional markets with US

Return on Apprenticeship Training Investment.

Part of the Solution…

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CAF-FCA Board focused on 3 Business Lines

• Promotion• Skilled Trades Campaign – just completed

• Research• Essential Skills• ROTI• Other

• Think Tanks – Collaboration/Discussion• Employer Engagement

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Return on Training Investment

• To obtain a more thorough understanding of the costs and benefits of apprenticeship as it relates to:

• employers, unions, apprentices, training deliverers and governments.

• A multi-phased project

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Survey of EmployersThis phase investigated the return on training

investment as it applied to employers.

• CAF–FCA ran a pilot study by testing a survey tool with a group of employers

• Data collection was then conducted in 15 trades using the revised survey tool.

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MethodologyThrough a detailed survey questionnaire,

information regarding wages, charge-out rates, training costs ( ie cost of journeyperson time, wastage) and qualitative measures on the benefits of apprenticeship

11,550 employers were contacted, 1,941 (16.8%) qualified for the study

Approximately 1 in 5 qualifying employers completed the survey for a total of 433 employers

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Trades Selected Automotive Service Technician

Tool and Die Maker

Bricklayer Construction Electrician

Carpenter Heavy Duty Equipment Mechanic

Cook Insulator

Industrial Mechanic (millwright)

Mobile Crane Operator

Machinist Refrigeration and Air Conditioning Mechanic

Motor Vehicle Body Repairer

Sprinkler System Installer

Sheet Metal Worker

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Cost-Benefit Model

Model based on a standard cost-benefit analysis for a single firm that hires apprentices

Net benefits (or costs) are calculated per apprentice per year

Benefit of apprentices is their “value added”

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Cost Components Wages and Benefits – includes base pay and non

compulsory and compulsory benefits (EI, CPP) Opportunity Costs – includes lost journeyperson time,

wastage Disbursements – related to employer shares of costs

to support ongoing training and development of apprentices

Administration – costs associated with hiring and training

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Benefit Components Revenue generated by Apprentice – based

on total annual chargeable hours of work, charge - out rates etc.

Tax Credits – where applicable

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Research Findings

Apprentices for all 15 trades generate net benefits for employers within a short period of time

Majority of employers (66.1%) indicated apprentice’s productive value exceeds training costs by end of second year

Majority of employers (67.6%) indicated their journeyperson derived a benefit from training an apprentice

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Research Findings

Employers also saw a significant benefit of employing a journeyperson that was trained as an apprentice.

Majority of employers across all business sizes and regions viewed a “homegrown” journeyperson as more productive than an externally trained journeyperson

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Research Findings

Apprenticeship training makes good business sense and is the Path to Quality Workforce.

On average, for each $1 invested in an apprentice, a benefit of $1.38 accrues to the employer

All 15 trades included show an overall net benefit of apprenticeship training.

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Trade by Trade Results

Trade

Duration of Apprenticeship

(Years)1

Costs2 ($)

Benefits3 ($)

Net Benefit4

($)

Benefit-Cost Ratio5

Excl. Tax Credits

Excl. Tax

Credits

Excl. Tax

Credits

Automotive Service Technician 4 219,354 327,835 108,481 1.49

Bricklayer 4 202,530 270,729 68,200 1.34

Carpenter 4 192,080 214,207 22,127 1.12

Construction Electrician 5 275,424 338,040 62,616 1.23

Cook 3 77,601 119,703 42,102 1.54

Heavy Duty Equipment Mechanic 4 208,231 304,247 96,016 1.46

Industrial Mechanic (Millwright) 4 246,061 298,493 52,432 1.21

Insulator 4 202,149 267,441 65,292 1.32

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Trade by Trade Results

Trade

Duration of Apprenticeship

(Years)1

Costs2 ($)

Benefits3 ($)

Net Benefit4

($)

Benefit-Cost

Ratio5

Excl. Tax

CreditsExcl. Tax Credits

Excl. Tax

Credits

Machinist 4 184,956 283,669 98,713 1.53

Mobile Crane Operator 4 248,068 256,318 8,250 1.03

Motor Vehicle Body Repairer 4 180,647 295,281 114,634 1.63

Refrigeration and Air Conditioning Mechanic 4 242,960 319,084 76,124 1.31

Sheet Metal Worker 4 251,698 300,017 48,320 1.19

Sprinkler System Installer 4 206,153 338,933 132,780 1.64

Tool and Die Maker 4 173,469 290,473 117,004 1.67

Average 4 207,425 281,631 74,206 1.38

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Example:Cost-Benefit Results – AST (46)

Year 1 Year 2 Year 3 Year 4 Total

Benefits Charge-Out Revenue $ 64,837.90 $ 75,989.22 $ 89,331.18 $ 90,252.98 $ 320,411.29

Costs

Wages and Benefits $ 26,202.01 $ 29,701.29 $ 33,778.90 $ 41,780.23 $ 131,462.43

Journeyperson Time $ 22,402.83 $ 16,617.37 $ 11,178.58 $ 7,976.02 $ 58,174.79

Wastage $ 5,446.65 $ 2,699.24 $ 1,552.81 $ 1,419.50 $ 11,118.20

Disbursements $ 1,073.22 $ 969.58 $ 735.54 $ 578.40 $ 3,356.74

Administration $ 3,453.80 $ 3,453.80 $ 3,453.80 $ 3,453.80 $ 13,815.20

Total $ 58,578.51 $ 53,441.28 $ 50,699.62 $ 55,207.95 $ 217,927.36

Net Benefit $ 6,259.39 $ 22,547.94 $ 38,631.56 $ 35,045.03 $ 102,483.93

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Validation Roundtables

5 roundtables were held to validate the cost benefit results and to determine if any significant costs and benefits had been missed.

Roundtables were held in: Halifax Automotive Service Technicians Regina Construction Electrician Vancouver Refrigeration and Air Conditioning

Mechanic Edmonton Industrial Mechanic Ottawa Economists

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Findings from Roundtables

Employers confirmed cost-benefit results are accurate although there are regional differences.

Employers agree on average apprentices generate a net return to their organization.

Economist roundtable supported the methodology, and noted the breadth of study exceeds that of previous research.

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Research Limitations

National level data statistically significant

(n-400+) Sample size is not large enough to provide a

regional analysis Trade specific data should be viewed with

caution given small sample size

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Questions Arising from the Research

• Are there significant differences in the net cost of training an apprentice in a larger organization versus a small business?

• What are some of the regional differences that impact the return on training investment?

• What are some of the trade-related differences that may impact the return on training investment?

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Apprenticeship Training makes good business sense and =

a strong bottom line!

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Next Steps

• Currently studying – ROI for Apprentices and Training Institutes

• Apprentices – survey Employers and people in the trades appear to be #

1 influencer for apprentices to decide to enter trades Higher than average academic standing prior to

entering trades For the apprentice Return on Investment is very

high compared to other forms of education (especially for a young apprentice)

• Training Institutes – case studies

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Think Tanks

• Employer Engagement• 3 targeted employer engagement activities in next

fiscal• These events will be linked to the concept of

employer engagement and understanding reason to participate or not participate in Apprenticeship Training.

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In summary…• Impact of: Aging population (retirements),

declining world-wide birthrates, current immigration rate insufficient to meet future demands – fewer available and qualified workers

• Abundance of work (projects)

• Moving into a “sellers” market

• No one answer to looming labour shortage:• Immigration not the sole answer, part of the

answer• Investment in human capital part of the answer

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Conclusion

• Once employers become aware of:• labour market issues, and• business case for investing in human

capital

…they can proactively plan and implement their own strategy for attracting and retaining their future workforce.

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Contact Information

• www.caf-fca.orgCAF-FCA

116, Albert Street, Suite 812

Ottawa, Ontario

K1P 5G3