regional manufacturing profile - cstec€¦ · regional manufacturing profile toronto-york-durham...

REGIONAL MANUFACTURING

TORONTO-YORK-DURHAM REGION

HIGHLIGHTS

PROFILE

*place of residence (POR)

The Toronto, York, Durham Region will experience severe recruitment challenges in the manufacturing industry, facing a recruitment gap of over 28,370 workers during the next 8 years. The reasons behind recruitment challenges are threefold:

1) A large demographic challenge: the manufacturing workforce is older than the overall labour force of the region. As these workers retire, the manufacturing industry is projected to have difficulty filling skilled trades and technical positions.

2) Competition from other industries: occupations such as sheet metal workers, electrical and electronics engineers, and industrial mechanics are also highly demanded in other industries such as construction, utilities, and professional services. It will be especially difficult to attract those workers due to faster growth rates experienced by competing industries and higher wages offered in some cases (e.g., utilities and mining).

3) Occupational characteristics: some occupations are harder to fill across the manufacturing industry and the country due to low supply. The Toronto, York, Durham Region will be particularly challenged to find electrical and electronics engineers, metal trades supervisors, industrial electricians, carpenters, and industrial sewing machine operators.

Potential solutions to these recruitment challenges include increasing training and apprenticeship in the workplace, advocating for increases in government support for training, promoting manufacturing as a career option, and establishing training consortia.

Toronto-York-Durham 2014 Economic and Demographic Profile

Population 4,591,618

Employment* 2,242,809

Manufacturing Share of Employment 9%

Real GDP ($2007 Millions) 234,847

Manufacturing Share of GDP 10%

Manufacturing Hiring Requirement (2014-2023) 60,279

Requirement Gap (2014-2023) 28,375

Unemployment Rate 8.2%

TORONTO-YORK-DURHAM

For the purposes of this regional profile, the focus of the analysis is the City of Toronto, York and Durham Region. This covers the entire City of Toronto, all of York Region (Georgina, East Gwillimbury, Whitchurch-Souffville, Newmarket, Aurora, Richmond Hill, Markham, King and Vaughan), and Oshawa Census Metropolitan Area (CMA) to the eastern boundary of Durham (and comprises Clarington, Oshawa, Scugog, Whitby, Ajax, Pickering, Uxbridge and Brock), north to Lake Simcoe. A separate report will be prepared for the western segment of the Greater Toronto Area across to Orangeville, and down to the western boundary of Burlington.

The economy of the three regions was impacted by the 2009 recession with a drop in real GDP of 2.25 percent but bounced back quickly with growth of 3.4 percent in the following year. Although growth has not been as robust in the intervening years, it has hovered around 2 percent per year since 2011, and is expected to experience solid growth, above 3-4 percent over the next several years.

The backbone of the regional economy is its diversified commercial and governmental base, with finance and insurance being by far the largest segment with 32 percent of the GDP. Nonetheless, Manufacturing is an important segment of the economy comprising 10 percent of GDP; followed by professional, scientific and technical services with 8 percent. Government, education and health /social services together comprise another 16 percent of GDP.

THE TORONTO-YORK-DURHAM REGION

2 REGIONAL MANUFACTURING PROFILE TORONTO-YORK-DURHAM REGION

Source: Prism Economics, Strategic Projections Inc.


Real GDP

Industry Share of GDP, 2013

TORONTO-YORK-DURHAM

REGIONAL MANUFACTURING PROFILE TORONTO-YORK-DURHAM REGION 3

Over the next three years, the outlook for manufacturing remains relatively modest. Following a 2.3 percent decline in 2013, the estimated annual growth rate of manu-facturing GDP in the region is expected to be marginally above 1.2 percent.

Current economic conditions present a positive environment for manufacturing to expand its output. The opportunities facing the industry include:

Favourable Canadian vs. U.S. dollar exchange rate

Optimistic U.S. economic growth and therefore demand

Decrease in fuel and therefore transportation costs

Rising manufacturing machinery and equipment investment

Strong demand for industrial machinery and steel

Finance and insurance, the largest sector, is expected to grow by 4 percent over the same period, and because of its relative size, can be expected to remain the region’s economic engine. In contrast, manufacturing is expected to experi-ence the slowest growth of all the major sectors. Other industries, such as construction, professional services, whole-sale and retail trade, information and culture, and other business services are all expected to grow above 5 percent per year and to outpace finance and insurance over the next period.


THE MANUFACTURING OUTLOOK

Annual Change (%) in Manufacturing Output

Per

cent

age

Cha

nge

(%)


Annual Average GDP Growth by Industry, Toronto-York-Durham Region, 2009-2018

Population

Region 2006 2013 2018 5 years Growth Rate (2014-18)

Toronto-York-Durham 4,125,295 4,522,909 4,881,558 1.6%


RISING INVESTMENT IN MANUFACTURING AND RISING PRODUCTIVITY OF THE MANUFACTURING WORKFORCE

POPULATION, DEMOGRAPHICS AND LABOUR FORCE

1 It should be noted that increased investment most likely saved jobs in the manufacturing industry.

The growth of competing industries are expected to translate into higher labour demand. This will create significant recruitment challenges for manufacturing, especially for the occupations that are also needed by other growing industries such as professional services (i.e. electrical engineers), construction (i.e. construction millwrights and industrial mechanics), and transportation and warehousing (i.e. transport truck drivers).

Since the recession hit its lowest point in 2009, manufacturing in Ontario has been investing heavily in machinery and equipment. The chart below displays data on the province which experienced an increase of 35% in investment between the years 2009-2014. However, the rise in investment did not transform into a similar increase in employment. In fact, the rise in manufacturing output can largely be explained by increasing productivity of the manufacturing workforce1.

Source: Prism Economics, Statistics Canada


TORONTO-YORK-DURHAM

Manufacturing Output and Employment, 1991 to 2014


The population in region has risen by 9.6 percent since 2006, nearly 1.4 percent annually, from 4.125 million to over 4.5 million persons in 2013. Over the next five years, this pace is expected to increase slightly to 1.6 percent annual growth, bringing the total population to 4.88 million by 2018. The working age population will age somewhat as the number of individuals in the population aged 65 and over continues to increase. However, Toronto will continue to attract the younger, new entrant population (age 20 – 34 years). Overall the working age population (those between 20 - 64 years), will fall by 2.5 percent.

THE DEMOGRAPHICS OF THE MANUFACTURING WORKFORCE

The aging manufacturing demographics is more pronounced than the overall aging population of the region. The following chart illustrates the age differential between the manufacturing workforce and the total working age population in the Greater Toronto Area. The manufacturing workforce is stacked on the right hand side of the graph, with a larger portion of workers over the age of 45 than the total working age population.



TORONTO-YORK-DURHAM

Toronto-York-Durham, Manufacturing Demographic Distribution

Age distribution of Toronto-York-Durham Region Population, 2006-2024

Po

pu

lati

on

The manufacturing workforce in Toronto, York, Durham is significantly older compared with other industries in the region and as a result will face higher replacement demands in the coming years. With 54 percent of the manufacturing workforce over the age of 45, employers can expect to replace a quarter of their experienced workers over the next 10 years.


THE MANUFACTURING LABOUR

FORCE IN THE REGION IS OLDER THAN THE OVERALL WORKING AGE POPULATION. THE INDUSTRY WILL FACE SIGNIFICANT RECRUITMENT

CHALLENGES AS A LARGE NUMBER OF WORKERS RETIRES DURING

THE NEXT DECADE.

Source: Prism Economics, Statistics Canada, National Household Survey 2011

TORONTO-YORK-DURHAM

Age distribution of the Toronto Region Labour Force, Manufacturing and Total (Excluding Manufacturing)

POPULATION GROWTH FROM SOLID BIRTH RATES AND NET INWARD-MIGRATION

The population of Toronto, York, Durham is renewing itself and growing from births and net in-migration in almost equal numbers. The number of births is expected to remain stable through to 2020, with a birth rate almost double the death rate. Net annual population growth will rise to about 77,000 in 2020 from the level of 58,600 people in 2013 as a result of births and net in-migration rising above current levels.

The following chart illustrates the annual change in the region’s population and shows the number of births, deaths and the net-migration required annually (people moving in and out of the region) to meet population requirements.

COMMUTING WORKFORCE PATTERNS

Attracting workers to the region is not expected to pose challenges. Workers commute considerable distances from surrounding regions. Expanding public transportation and road infrastructure will play a key role in maintaining a broad labour supply pool. The majority of workers live in Toronto, or directly north or west of the city. To a lesser extent, workers commute from further afar stretching out to Clarington and Newmarket.



TORONTO-YORK-DURHAM

Components of Annual Change in Toronto-York-Durham Region Labour Force, 2007-2020


The 25 - 44 year old demographic is an important source of new hires for employers. The educational attainment of this demographic provides insight into general qualifications and planned career paths.

Educational attainment in the region diverges from the provincial average in a number of educational levels important for manufacturing2. The share of the population attaining either just high school or an apprenticeship certification has declined to below the Ontario average of 2011. Moreover, a comparison of data from the 2006 and 2011 Census shows that the share of individuals aged 25 - 44 years attaining apprenticeships has been declining relative to the provincial average. Those with certificates at the college level remained steady but are well below the provincial level. Conversely, those with some level of university education remains steady, while those having completed university or beyond has risen and is well above the provincial average.

THE REGION NEEDS TO ATTRACT PEOPLE WITH THE RIGHT SKILLS

TORONTO-YORK-DURHAM

Places of Residence of Toronto, York, Durham Workforce

2 Note that the Educational Attainment data is for the Toronto Census Metropolitan Area. The Toronto CMA includes Toronto, York, Peel, most of Halton, some of Durham excluding the Oshawa CMA, and portions of Dufferin and Simcoe counties.


Employment in the Toronto, York and Durham region has risen by 6 percent over the past five years, from 2.063 million in 2008 to approximately 2.199 million in 2013. Overall employment is expected to continue to grow for the foreseeable future. This growth in employment and a slower growth in the labour force are expected to bring the local unemployment rate to 7.2 percent by 2016. However, this decline in the unemployment rate is slower than that of Canada as a whole, whose unemployment rate is expected to decline to 6 percent by 2016.

GROWING LABOUR FORCE AND EMPLOYMENT COMBINED WITH A DECLINING UNEMPLOYMENT RATE


TORONTO-YORK-DURHAM


Highest Level of Educational Attainment, Toronto CMA, 25 to 44 years

Labour Force, Employment and Unemployment Rate, All Industries Toronto-York-Durham Region, 2006-2016


Automobile and transportation equipment manufacturing comprise 16 percent of the region’s manufacturing workforce. Other manufacturing activities in the region including food, fabricated metal, and furniture and related comprise an additional 30 percent of the region’s workforce.

EMPLOYMENT IN THE MANUFACTURING SECTOR

Employment levels in the region’s manufacturing industry have been in steady decline over the past decade. This decline came to a stop around 2011 when the industry started to recover from the recession. Although there has been another dip in employment in 2013, the trend for manufacturing employment has been positive since. Forecasts of manufacturing output for the region project expansion during the next decade, which will translate into a slight increase in employment in the next few years. The upward trend will stabilize around 2018 and employment will reach a plateau after that. The following graphs illustrate the employment forecast for the top three manufacturing sectors in the region as well as the total manufacturing industry. Employment is expected to recover modestly during the next 8 years with minor increases in select industries. Total manufacturing employment in the region is expected to stay within the 180,000-190,000 band by 2023. Food manufacturing and transportation equipment manufacturing will exhibit a modest increase in employment. Fabricated metal manufacturing employment will recover slightly but will slowly start to decline again in 2017.


TORONTO-YORK-DURHAM

Manufacturing Sub-sectors - Percentage of Total Manufacturing Employment


TORONTO-YORK-DURHAM


Transportation Equipment Manufacturing Employment, Toronto-York-Durham, 2006-2023


Total Manufacturing Employment, Toronto-York-Durham, 2006-2023


Food Manufacturing Employment, Toronto-York-Durham, 2006-2023


TORONTO-YORK-DURHAM


Fabricated Metal Manufacturing Employment, Toronto, York, Durham, 2006-2023


PROFILE OF MANUFACTURING EMPLOYERS

The diversified manufacturing base of the Toronto, York, Durham region is seen in the range of activities for the five largest segments. Miscellaneous manufacturing, printing and related, and fabricated metal product manufacturing each have more than 1,700 establishments in the region. Food, machinery and furniture come next with each having more than 1,100 manufacturing establishments. Very large establishments with more than 500 employees are concentrated in the transportation equipment manufacturing (10 establishments), food (6 establishments) and chemical manufacturing (6 establishments).

The overall number of manufacturing establishments has declined across almost all segments since the 2009 recession, from 13,855 in 2008 to 12,587 in 2013, a fall of 9.1 percent over five years. Data also suggests that the number of very large employers in the region declined and the large employers that remain have become smaller; the number of establishments with over 500 employees fell from 53 in 2008 to 37 in 2013.

Change in Number of Manufacturing Establishments

Manufacturing Establishments by Employment Size

Source: Prism Economics, Statistics Canada Source: Prism Economics, Statistics Canada

Largest Manufacturing Employers



TORONTO-YORK-DURHAM

Change in Number of Manufacturing Establishments, by Segment

Company Employees Industry

Apotex Inc. 6500 Pharmaceutical and Medicine Manufacturing

Bombardier Aerospace 6000 Aerospace Product and Parts Manufacturing

Global Group Inc. 6000 Showcase, Partition, Shelving and Locker Manufacturing

Procter & Gamble Inc. 3000 All Other Converted Paper Product Manufacturing

Teknion Limited 3000 Showcase, Partition, Shelving and Locker Manufacturing

Parmalat Canada Inc. 2900 Fluid Milk Manufacturing

Norbord Inc. 1800 Waferboard Mills

Fiera Foods Company 1500 Commercial Bakeries and Frozen Bakery Product Manufacturing

Teva Canada Limited 1500 Pharmaceutical and Medicine Manufacturing


TORONTO-YORK-DURHAM

MANUFACTURING LABOUR MARKET HIRING REQUIREMENTS

The forecasts presented above are based on the projected needs of the manufacturing industry in the region. However, they only calculate the total manufac-turing workforce, not the hiring requirement. Workers exiting the labour force also need to be taken into ac-count in order to estimate the hiring requirements and the recruitment gap facing the industry.

To solve this issue, the labour forecast model developed for this project examines demographics and estimates the number of workers who will retire or die over time, hence exiting the labour force and making up the re-placement demand. Hiring requirement is then the summation of the replacement demand and the expansion demand. It is also the summation of the new entrants and the recruitment gap.

The chart below summarizes the results of the labour forecast model for each of these categories. By 2023, the projected 30,683 individuals will enter the workforce to cover only 51% of the hiring requirements. However, the manufacturing industry in Toronto, York, Durham will need to find an additional 28,375 workers (recruitment gap) from other industries and jurisdictions to fulfill its labour needs.

DEFINITIONS Hiring Requirement: The number of workers needed to fill all the positions necessary for full-capacity production

Recruitment Gap: The number of workers needed after new entrants to the workforce are taken into account

New Entrants: Younger generations entering the labour force for the first time

Replacement Demand: The number of workers needed to replace the retiring and others exiting the workforce

Expansion Demand: The number of workers needed to add to the current workforce as the sector grows

Hiring requirement = New Entrants + Recruitment Gap

= Replacement Demand + Expansion Demand

Source: Prism Economics

Labour Demand and Supply in Manufacturing, Toronto-York-Durham, 2014

EXPANSION

REPLACEMENT DEMAND

NEW ENTRANTS

RECRUITMENT GAP

DEMAND SUPPLY


TORONTO-YORK-DURHAM

Within the hiring requirement, some occupations are poised to be in more demand than others. These professions tend to concentrate on skilled trades and technical occupations. As the manufacturing industry is going through a transformation of technological advancement, the kinds of workers it needs in the future is quickly shifting towards more skilled labour. The next table illustrates some of the occupations that will be most in demand within the next 8 years in Toronto, York, Durham’s manufacturing industry.

Occupations Total Hiring Requirement

2014 - 2023 Share of 2014 Employment

9446 Industrial sewing machine operators 1,148 46.0%

7201 Contractors and supervisors, machining, metal forming, shaping and erecting trades 229 44.1%

0016 Senior managers - construction, transportation, production and utilities 1,243 43.5%

2243 Industrial instrument technicians and mechanics 26 41.3%

7231 Machinists and machining and tooling inspectors 1,149 40.1%

9614 Labourers in wood, pulp and paper processing 126 38.0%

7242 Industrial electricians 383 37.7%

7311 Construction millwrights and industrial mechanics 1,118 37.5%

7237 Welders and related machine operators 1,247 37.4%

7511 Transport truck drivers 412 35.8%

2241 Electrical and electronics engineering technologists and technicians 428 35.4%

7241 Electricians (except industrial and power system) 48 35.3%

7205 Contractors and supervisors, other construction trades, installers, repairers and servicers

55 34.8%

0911 Manufacturing managers 2,601 34.4%

9422 Plastics processing machine operators 1,265 34.0%

1521 Shippers and receivers 1,455 34.0%

7233 Sheet metal workers 133 33.6%

9522 Motor vehicle assemblers, inspectors and testers 3,549 32.9%

7452 Material handlers 1,446 32.6%

2133 Electrical and electronics engineers 496 32.2%

All Occupations in Manufacturing 60,279 32.9%


TORONTO-YORK-DURHAM

At present, approximately 9 percent of the workforce in the Toronto region is employed in the manufacturing industry (2014). As employment in other industries continues to grow, this share is likely to decline. Over time, competing employment demands from outside the manufacturing industry, especially in construction, will make the attraction and retention of certain key trades and occupations increasingly difficult for local manufacturers.

The above chart illustrates the competition from construction, professional services, and other industries in hiring certain occupations that could present hiring challenges for manufacturing. These include:

Sheet metal workers

Industrial electricians

Welders and related machine operators

Construction millwrights and industrial mechanics The manufacturing industry in the Toronto, York, Durham Region may find itself at a disadvantage in hiring these workers compared to the utilities and professional services sectors because these are both projected to grow faster than manufacturing and may be paying higher wages to attract skilled workers. A quick look at wage differentials across industries in Ontario suggests that utilities and mining tend to pay higher wages than other industries, and therefore can exacerbate manufacturing companies’ recruitment challenges.

COMPETING DEMAND FROM OTHER INDUSTRIES

Source: Prism Economics, Statistics Canada. PSM refers to professional services and management.

Distribution of Employment by Occupational Category across Industries, 2014

Some industries in the region are better positioned than manufacturing to recruit the workers they need due to their projected faster growth and higher wages (e.g., mining, utilities). Competing demand for same occupations will be one of the major complications manufacturing hiring managers will face during the next decade.


TORONTO-YORK-DURHAM


Wage Differentials across Industries, Ontario, 2007-2013


TORONTO-YORK-DURHAM

The supply and demand labour market forecast model developed for this project generated forecasts for 45 manufacturing-related occupations. These forecasts estimate the labour demand for each occupation in the Toronto, York, Durham Region for the 2014-2023 period. On the supply side, labour force exits (i.e. deaths and retirements) and new entrants (i.e. younger generations entering the labour force) were taken into account to create labour market shortage rankings for select occupations. The following chart is the legend describing the meaning of the ranks ranging between 1 and 5.

Several technical and technologist occupations are projected to pose occasional and chronic recruitment challenges during the next few years. These include occupations such as senior managers, and electronics engineers, and chemical technologists and technicians. Other professions such as industrial engineering and manufacturing technicians will also remain difficult to fill. These occupational categories will be harder to fill than others for the manufacturing industry as a result of the competition from other industries, demographic challenges, and a limited labour supply. Human resources managers may need to widen their search beyond the region to find industrial and manufacturing engineers and computer network technicians during the next few years. The following chart ranks technical and technologist occupations and managerial positions in terms of their recruitment challenges through the forecast period.

MANUFACTURING LABOUR MARKET SHORTAGE RANKINGS BY OCCUPATION

a) Technical and Technologist Occupations and Managers Rankings


TORONTO-YORK-DURHAM


Technician and Technologist Occupations and Managers Rankings, Toronto-York-Durham, 2014-2023

Similarly, several skilled trades occupations are projected to pose chronic recruitment challenges during the next few years. Professions such as industrial electricians, carpenters, and industrial sewing machine operators will remain difficult to fill partly due to the lack of interest in skilled trades training in the region. These occupational categories will be harder to fill than others in the manufacturing industry due to competition from other industries, demographic challenges, and a limited labour supply. Human resources managers will need to widen their search beyond the region to find trades supervisors, construction millwrights and industrial mechanics, and material handlers during the next few years. The following chart ranks skilled trades occupations in terms of their recruitment challenges through the forecast period.

b) Skilled Trades Occupations



TORONTO-YORK-DURHAM

Skilled Trades Occupations and Managers Rankings, Toronto-York-Durham, 2014-2023


TORONTO-YORK-DURHAM

As part of the Toronto, York, Durham Region labour market forecast project, a survey among employers based in the region was conducted to assess their labour needs and perceived challenges. The survey results are not statistically significant due to small sample size. Nonetheless, they are informative and confirm the findings of the model described above.

The occupations that survey respondents identified as posing significant recruitment challenges are similar to the occupations identified by the labour demand forecast model. Survey respondents are facing recruitment challenges in hiring predominantly skilled trades and technical occupations. The occupations cited by respondents are:

Supervisors, machining, metal forming, shaping and erecting trades and related occupations

Supervisors, other construction trades, installers, repairers, and servicers

Machinists and machining and tooling inspectors

Tool and die makers

Welders and related machine operators

Industrial electricians and non-industrial electricians

Carpenters and cabinetmakers

Mechanical engineering technologists and technicians

Industrial engineering and manufacturing technologists

Computer network technicians Survey respondents also revealed that paying above average wages lead to fewer recruitment challenges:

SURVEY RESULTS

Wages and Recruitment Challenges, Survey Results, 2014


TORONTO-YORK-DURHAM

Finally, the Toronto, York, Durham Region can be compared to other manufacturing hubs across the country in terms of recruitment challenges reported by employers in the survey:

Recruitment Challenges across Manufacturing Regions, 2014


TORONTO-YORK-DURHAM

The manufacturing industry in the Toronto, York, Durham Region is positioned for modest growth during the next decade. Output growth will not translate into large gains in employment due to increasing investment levels and rap-idly improving productivity of the manufacturing labour force. As a result, the industry will not face severe recruitment challenges to fill new positions added to the manufacturing workforce.

Instead, significant recruitment challenges will present themselves as a result of the retiring workforce. The manu-facturing industry’s demographics demonstrate a larger segment over the age of 55 than the overall working popula-tion. This will result in high replacement demand during the next few years and even in the longer run.

Recruitment challenges will not be ubiquitous across all occupations. As the manufacturing industry becomes more technologically advanced, the kinds of jobs needed to maintain full capacity output are shifting towards more skilled trades and technical occupations. Both model and survey results confirm this point, identifying these occupations as the main culprits of recruitment challenges now and in the projected future.

Moreover, these recruitment challenges will be exacerbated by competition from other industries poised to grow faster. These industries include professional services, construction, and information and culture. Occupations needed by other industries which tend to pay higher wages (i.e. utilities, mining and oil extraction…) are especially prone to generating recruitment challenges for the manufacturing sector.

Based on this state of the manufacturing labour force, the industry needs to respond as a whole before the recruit-ment challenges become unmanageable. Some potential solutions to the problem include: Increasing training and apprenticeship in your workplace

Collaborating with other regional employers and stakeholders

Advocating for increases in government support for training

Working with educational institutions to ensure programs meet industry needs

Promoting manufacturing as a career option

Establishing training consortia

CONCLUDING REMARKS AND RECOMMENDATIONS

TORONTO-YORK-DURHAM

REGIONAL MANUFACTURING PROFILE

TORONTO-YORK-DURHAM REGION

Prepared by Prism Economics & Analysis for: Canadian Manufacturers & Exporters & the Canadian Skills Training & Employment Coalition

This Regional Manufacturing Profile was prepared for the project “Regional Labour Market Information to Address Skills and Human Resources Issues in the Manufacturing Sector”. This project is sponsored by the Canadian Manufacturers & Exporters and the Canadian Skills Training and Employment Coalition. This project is funded by the Government of Canada’s Sector Initiatives Program. The opinions and interpretations in this publication are those of the author and do not necessarily reflect those of the Government of Canada.

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