But it may be time to slow pace of oil sands development

When it comes to discussions about the labour force in Alberta, it’s hard not to be reminded of the old children’s fable, Chicken Little.

No matter who you talk to – in government, business or media circles – they all seem to be saying “the sky is falling.”

But is the situation really that bad? Is the future prosperity of Alberta really at risk?

The short answer is: no – at least not yet.

It’s true, of course, that high commodity prices have led to unprecedented levels of investment in Alberta. And it’s also true that the rapid pace of economic growth has created a very tight labour market.

However, many of the worst predictions about labour shortages are based on questionable assumptions.

Like the assumption the Alberta economy will continue to grow at its current blistering pace; or that workforce participation rates will decline and that current levels of migration to Alberta from other provinces will remain roughly the same.

As with any prediction, overly pessimistic assumptions lead to overly pessimistic conclusions.

Business pundits also hit a sour note when they sound the alarm about wage inflation in Alberta.

After more than twenty years of income stagnation, pardon me for asking an obvious question: aren’t wage increases a good thing? What’s the point a strong economy if it doesn’t bring an improved standard of living?

It’s also important to note that higher wages aren’t just good for workers. Good wages lure people. So, if employers want to convince more Canadians to take jobs in Alberta, higher wages should be seen as part of the solution, not part of the problem.

Having said all that, while the problem may not be as bad as some of the doom-sayers would have us believe, there still is a problem.

Several large oil companies – most notably Husky Energy – are now musing aloud about building new oil sands upgraders in the U.S., instead of Alberta. And they’re pointing to Alberta’s tight labour market as the reason.

At the same, time there is no doubt that the booming energy sector has created a problem by “poaching” employees from other parts of the provincial economy.

So how do we build a “Goldilocks” labour market – one that’s not too hot, and not too cold? The answer comes in two steps.

First, we have to come to grips with a basic question: is there such a thing as too much growth?

The “labour shortage” crowd assumes that Alberta should keep growing at its current break-neck pace. But do we really need to build all these projects at once?

Certainly most skilled tradesmen would prefer to have twenty years of stable employment rather than seven or eight years of frantic development followed by a jobs bust.

More reasonably paced development would also allow public infrastructure to catch up with growth; it would reduce the energy sector’s “poaching” of workers; and it would make it easier to address the environmental concerns associated with oil sands development.

The good news is that the Alberta government has control of policy levers that could make this happen.

For one thing, they could simply stop doling out oil sands leases like they were water.

In addition, the time has clearly come to revisit Alberta’s infamous one-percent oil sands royalty. This corporate give-away is over-heating the Alberta economy. And with oil at $70 a barrel, such “investment incentives” are obviously no longer needed.

Given the strong international demand for oil, even if steps were taken to slow the pace of development, the Alberta economy would still remain strong – we’d just be replacing a “runaway freight train” with one that chugs along more happily.

That leads to the second part of the equation.

If the freight train can be brought under control, then we can move past panicky “quick-fix” solutions like dramatically increased use of temporary foreign workers and instead focus on the kind of longer-term solutions that Alberta really needs.

For example, we should be tapping the labour force potential of aboriginal communities; increasing permanent immigration levels; and using government programs and incentives to convince workers to move from high unemployment regions like Newfoundland to low unemployment regions like Alberta.

Most importantly, any serious labour force development plan can’t ignore the issue of apprentice training.

We’ll never be able to keep up with demand for tradesmen unless employers actually provide jobs for apprentices. And that’s the problem – even in Alberta’s hot economy where so many employers are crying “labour shortage” – employers are not holding up their end.

According to the Construction Owners Association of Alberta, there are more than 20,000 “trades” employers in the province – but only 11,000 have actually taken on apprentices. This helps explain why less than half of young Alberta apprentices complete their training in the prescribed timeframe.

The perversity of this situation cannot be over-emphasized.

The businessmen who say they can’t find skilled workers and who are calling for permission to import thousands of guest workers are often the same ones who helped create the problem by not taking on apprentices. Clearly, this has to change.

In the end, policy makers looking for ways to deal with Alberta’s labour market woes need to re-learn the lesson of the Chicken Little fable: don’t panic.

What Alberta needs is to carefully apply the brakes on future oil sands development. We also need measured reforms in areas like training and education.

Gil McGowan, AFL President
July 2006