By now, Albertans – and communities across western Canada – have become deeply aware of the economic and financial impact of low commodity prices.
This is not limited to but most closely associated with the drop in value of the province’s oil. In September 2014, Western Texas Intermediate (WTI) crude oil sold at approximately $95 US per barrel, whereas it has averaged $44 US per barrel two years later, in September 2016. As a result, Government of Alberta revenue declined by approximately 16.4% from $49.5 billion in 2014-2015 to an estimated $41.4 billion in the current fiscal year. The number of unemployed workers in Alberta has reached 8.4% of the active labour force, a substantial increase from the 4.6% unemployed in September 2014. Alberta is not alone in this; resource-rich Saskatchewan has seen its unemployment rate double in the same period, from 3.4% to 6.8%.
There is a hidden cost to these high levels of unemployment: as the economic slump in western Canada persists, labour will begin to migrate from the region in pursuit of jobs. According to recent reporting by ATB Financial’s Chief Economist, Todd Hirsch, more than 7,000 people now leave Alberta each quarter for British Columbia, where the unemployment rate is 5.5%. In Ontario, the unemployment rate remains at 6.7% but already nearly 5,000 people leave Alberta for that province each quarter and any rebound in Ontario’s manufacturing sector in the next year could see that number quickly swell. More anecdotally, chartered flights from Fort McMurray, Alta. have declined 50% in the past year and direct flights between Fort McMurray and St. John’s, Newfoundland have ended, suggesting another substantial outflow of labour from northern Alberta’s oil boomtown. Meanwhile, Saskatchewan experienced a net loss of 3,644 people due to interprovincial migration in 2015.
This outflow of skilled labour from Alberta and Saskatchewan could present long-term challenges as both provinces seek to diversify their economies and establish new industries, since a shallower labour pool will affect the quality and cost of labour for new business. These provinces could also miss out on any opportunities presented by a rebound in commodity prices, since there is an unavoidable lag in identifying, attracting, and settling workers with the requisite skills to extract resources like Saskatchewan’s potash or Alberta’s coal.
Furthermore, the outflow of labour could mean that post-secondary funding in Alberta, Saskatchewan, and to some extent Manitoba is subsidizing the creation or expansion of new industries in other provinces. Alberta provides approximately $2.3 billion in operating grants annually to 26 post-secondary institutions, while Manitoba supports its post-secondary institutions with approximately $0.7 billion in funding. This has generally been regarded as an investment in a skilled workforce and innovative entrepreneurs. Faced with an uncertain job market in their home provinces, however, many western Canadian university graduates may join the outflow and take their talents out of the region or out of the country.
Though such a loss in human capital is difficult to measure, policy-makers must consider strategies for labour retention in order to stem the outflow. The prospect of future labour shortages requires a wide-ranging discussion in western Canada about policies that have been attempted elsewhere. For example, in Denmark, job retraining programs have been used in an effort to equip the unemployed with skills presumably needed to succeed in emerging industries, though there is some debate as to the efficacy of this initiative. Closer to home, Nova Scotia has had some success in reducing the outflow of those between the ages of 25 and 34, and the province has seen some success in reducing its unemployment through the creation of programs that encourage youth entrepreneurship.
Whatever the solution that governments ultimately pursue, it is imperative that the conversation about labour retention begin in earnest. At the moment, the severity of the demographic crisis facing Alberta, Manitoba, and Saskatchewan seems not yet to be fully realized by policy-makers and industry leaders. On one hand, the pending retirement of baby boomers will mean substantial growth in labour demand. On the other hand, the loss of a generation of young entrepreneurs and workers will also leave the regional economy stalled and starved of labour.
– Paul Pryce is a frequent writer on public policy and economic trends in western Canada