The future role of government series

In response to major pressures, including global migration, aging populations, and rapid technological change, the labour market is in constant flux. Governments need to not only respond but also actively rethink how to support employers across the economic spectrum in keeping their workforces full and productive.

How can Canada’s governments evolve their strategies, policies, and programs to create a more inclusive, responsive, and attractive labour market for workers—and, ultimately, a thriving economy?

Over the past few months, Deloitte leaders have come together to consider the evolving role of government and bring perspective to the state of the nation’s labour market. Our aspiration for Canada is to create a labour market that is: coordinated across the entire ecosystem of employers and industries, and enabled by future-oriented workforce development strategies that attract the right talent and upskill and reskill the workforce for the jobs of tomorrow. Furthermore, it is focused on finding opportunities for those who are not gainfully employed, and grounded in the belief that diversity, equity, and inclusion are core assets for Canada’s economic competitiveness.

This article is part of Deloitte’s future role of government series, which examines the trends that are provoking governments to act and seeks to provide Canadian governments with bold ideas to help them address the underlying issues. Read our introductory report, The future role of government: Society is evolving. So must the way it is governed, for more context.

The current state
Critical gaps, structural challenges, and lagging participation

Canada’s labour market faces persistent shortages, which cost the economy nearly $13 billion in 2022 alone.¹ There were also more than one million vacant jobs in 2022 and 59% of employers struggled to find qualified employees.² Industries like health care, construction, and hospitality still have difficulties in hiring skilled workers, in part due to Canadians skilled for those jobs being recruited to work in other countries.

During the pandemic, workforce participation increased among prime working age groups, but the overall labour supply declined as many older workers opted for early retirement. Those in Canada's largest generation—baby boomers—are now all over the age of 60.³ And most working-age Canadians are in the upper end of the age range of 15 to 64. It’s estimated the worker-to-retiree ratio will be three to one by 2027, whereas it was seven to one 50 years ago.⁴ Canada, like many countries, will therefore have to continue to rely on immigration for labour-force growth in the foreseeable future.⁵

Deloitte’s Making it work: Global efforts to transform public employment services shows that Canada’s challenges are not unique. The country must follow its global peers and urgently retool its labour market strategies to retain its competitiveness and its reputation as a highly attractive destination for workers.

Barriers to an international workforce

Creating pathways to long-term success is critical for the population growth needed to support the economy. Onward migration—immigrants leaving Canada—has been consistently increasing since the 1980s and was 31% higher than the historical average in both 2017 and 2019.⁶ This indicates that Canada is not meeting immigrants’ expectations, and it should work to enable more sustainable outcomes with effective labour market strategies for this segment that will become increasingly important for Canada’s economy.

A major cause of onward migration is having barriers related to finding work in relevant occupations, including the time and processes required to transfer foreign credentials—many of which are not recognized by Canada’s various regulatory bodies—and the stigma associated with foreign education and work experience. For example, newcomers often have to complete credential evaluations, language proficiency testing, and recertification through costly training courses. As such, skilled immigrants often end up not being able to practice in their trained professions due to the way Canada’s regulatory bodies recognize international credentials, limiting their ability in some case to fill critical gaps in the labour market and integrate into the workforce. Thus, underemployment persists for many immigrants and newcomers.

Challenges that delay or defer workers with critical skills and expertise from entering the job market discourage newcomers and limit Canada’s ability to drive timely economic impact. The current economic circumstances—rising living costs and a housing affordability crisis—exacerbate the situation by creating additional barriers for the skilled immigrants and global talent Canada needs. In comparison, the United States attracts and retains talent through a larger economic market, a robust startup ecosystem, educational opportunities, and favourable immigration policies for skilled workers, such as the H-1B visa for skilled workers and the O-1 visa for individuals with extraordinary abilities.⁷  

If would-be permanent residents and even citizens keep moving along to less burdensome pastures, Canada’s ability to bolster its economic growth through immigration is clearly at risk. Its government has an important role to play in resetting the appropriate policy frameworks, processes, and systems to help reshape training and employment service portfolios, improve resettlement services, and accelerate job onboarding for newcomers. In the highly competitive global landscape, this should include innovating and investing in initiatives to attract the skilled workers urgently needed in key sectors. Recent legislation banning employers from requiring Canadian experience for job applicants is a step in the right direction, but in a time of critical labour shortages and skills mismatches, there’s more work to be done to open the paths to employment.

Underemployment of equity-deserving groups

Not all Canadians benefit in the same way from the supply of quality job opportunities. A recent Deloitte article, Uncovering underemployment: Tapping into the potential of our workforce, reveals how underemployment impacts different segments of Canada’s population, spanning various levels of education and credentials.⁸ Underemployment is the measure of employment and labour utilization in the economy that assesses how effectively the labour force is being used in terms of skills, experience, credentials, and availability to work. It is most prevalent among women, young adults, newcomers, low-income earners, persons living with disabilities, racial and ethnic minorities, Indigenous Peoples, members of the 2SLGBTQIA+ community, and other equity-deserving groups that experience barriers to participation in society. The structural barriers include non-recognition of credentials, inadequate social safety nets, and an inability to participate in the labour force. Other barriers, such as housing, childcare, and transit issues, also contribute to underemployment. Government needs to help dismantle these barriers and ensure residents are supported so Canada’s skilled labour force is able to reach to its full potential and achieve economic prosperity.

A lack of in-demand skills and disrupted career pathways

In today’s fast-paced environment, it only takes about five years for technical skills to become outdated.⁹ At the same time, in-demand skills continue to be in short supply and trends in automation, digitalization, and the integration of artificial intelligence (AI) into work are reshaping the skills required to compete in the modern labour market. A full 14% of workers in Organisation for Economic Co-operation and Development (OECD) countries are at risk of their jobs changing due to automation, and Canada is experiencing similar disruptions.¹⁰  Companies struggle to find workers while jobseekers struggle to find suitable employment. As a recent Deloitte US article put it, “As never before, it is skills that determine success or failure—for individuals, companies, and regional economies. Skills fuel the engine of economic growth.”¹¹ The risk of displacement is especially pronounced for workers in certain industries, such as hospitality and agriculture. The growing number of displaced workers need access to upskilling opportunities—or to learn a new set of skills—to stay relevant in the evolving job landscape.

Presently, the gig economy represents 20% of the Canadian labour market and is the fastest-growing segment of the labour force.¹² This is inherently linked to the increasing prevalence of technology, as the number of hybrid and gig job opportunities escalates proportionally. Additionally, a large portion of workers in the gig economy aren’t interested in full-time work. The supply of talent is eroding as new models of work gain traction, although many traditional employers continue to ignore the emerging models. As hybrid work continues to redefine where and how work is done, global competition for talent intensifies. And workers in the gig economy, impacted by the ongoing shifts in the skills landscape, face the dual challenge of adapting to evolving skill requirements and navigating the transformative forces of technological advancement.

Intense global competition for skilled labour requires governments to drive greater alignment and integration between supply and demand. By facilitating collaboration within and across government levels and sectors, innovative analysis and skills intelligence tools can be harnessed to translate megatrends into effective labour market strategies and skill requirements. This can also help with the revitalization of skills training programs and federal strategies, and boost collaboration with industries to pioneer responsive workforce development initiatives.

Recommendations

To help governments in Canada establish people-focused, forward-thinking strategies to strengthen the labour market, we’ve developed a range of targeted recommendations. They are organized under four levers: people and leadership; policy and processes; technology; and collaboration.

People and leadership

How can governments cultivate an ecosystem of coordination and cooperation?

Expand intergovernmental engagement

Canadian jurisdictions currently operate with independent labour, reskilling, and right-sourcing strategies. This often involves a complex network of players, including government entities, the private sector, non-profits, and education and training providers, that are not always in sync.¹³ This has led to Canada falling behind when it comes to cohesive coordination, structured cooperation, and intergovernmental collaboration. Pan-Canadian coordination, which focuses on negotiating funding and its accompanying conditions, could be a significant boost to strengthening the country’s standing.

There are two courses of action government can take. First, to support workforce development and cross-jurisdictional learning, Canada can draw inspiration from the European network of Public Employment Services.¹⁴  The provinces and territories should consider establishing a similar forum for leading practice dissemination and the exchange of lessons learned across organizations tackling workforce development challenges.

Second, data-sharing among all governments in Canada could be advanced. For example, many provinces deploy outcomes-based funding to employment service providers. That is, employers are remunerated, in part, on their ability to connect unemployed workers to jobs. To validate employment outcomes, government entities and providers track down workers and employers via questionnaires, surveys, and direct outreach, which adds significant administrative burdens to what could be a more seamless process. To streamline verification, the United Kingdom has automated employment outcomes by linking the centrally tracked tax data and employment records that are held within its ecosystem.¹⁵ Canada’s federal and provincial/territorial governments are encouraged to do the same to enable greater capacity across the value chains of services.

Policy and processes

How can governments support and secure domestic and global jobseekers to meet demand?

Facilitate multi-faceted support platforms

There is an urgent need to better support employer-worker connectivity in several areas. Many of them are summarized in our global survey of workforce and employment service transformation.¹⁶

First, governments need a single source of truth for labour market and workforce support programs. There are currently a myriad of programs and services that are funded separately or jointly by the federal and provincial/territorial governments. Finding right-fit programs for workers and employers is often more a matter of chance than deliberate consideration. More and more governments are creating central navigation supports, such as France and its Pole Emploi portal, to reduce the search costs for workers, employers, and employment counsellors.¹⁷

Second, governments can design digital employment services with end-to-end support for jobseekers, including resume writing, career coaching, job searches, upskilling and training, and access to adjacent supports, such as soft skills development and mental health support. These services can also provide opportunities for employers to blind search a pool of candidates according to their needs. The most advanced platforms being used today provide automated matching of workers and employers—and automated suggestions for upskilling based on information about vacancies and projected salaries. These types of services are not intended to replace in-person support, but to provide highly convenient and intelligent assistance for workers and employers. This will allow governments and providers to focus more of their in-person resources on priority clients.

Ease employment pathways for foreign workers

To streamline acceptance of international credentials, the federal government should continue to work with professional licensing and regulatory bodies in each province/territory to create unified policies and regulations that make them more easily transferrable to Canada. This can increase labour market mobility both interprovincially and internationally.

Although it has long been recognized that changes are necessary, critical labour shortages and onward migration trends create urgency for leadership from government to provide the right incentives, resources, and guidance to accelerate change. Beyond helping achieve greater productivity and growth in the economy, easing employment pathways will help ensure that newcomers to Canada have access to employment opportunities, can continue toward their career ambitions in their chosen fields, and are able to settle and integrate more smoothly. It will also help improve Canada’s productivity and its competitiveness on the global stage, as well as bridge labour market gaps in critical areas.

For example, Germany built a nationwide online service to support recognition of international credentials.¹⁸ The authority evaluates how a foreign professional qualification compares against its German counterpart. Following this review, individuals receive notice that their qualification is recognized and transferrable, that substantial differences were identified, or that it is not transferrable. In many cases, substantial differences can be addressed through prescribed training.

Modernize the safety net

The major pillars of Canada’s safety net were built in the immediate post-World War II era. They were designed, in part, to mitigate the ups and downs of the business cycle and ensure workers were protected if they retired or were laid off. Many of these pillars are no longer fit for purpose. Gig employees and the self-employed are often excluded from traditional programs, such as Employment Insurance, Canada Pension Plan, and employer-sponsored benefits programs. Some governments are working on strategies to close these gaps, but it should also be a top pan-Canadian priority.

As mentioned above, underemployment has a disproportionate impact on equity-deserving groups in Canada; however, it is not broadly tracked, limiting the understanding of its true impacts and input for potential solutions. It is imperative to gain a solid understanding of the rates of underemployment across the country and to implement mechanisms for continual monitoring. Policy innovation task forces can be established to develop approaches for tackling underemployment from a human-centred perspective to address the needs of those most impacted.

Canada needs to boost the return on investment of settlement programs for newcomers, given the role they play in supporting the integration of these workers into communities and the broader economy. Many prospective immigrants face challenges accessing settlement services, and a significant number of permanent residents do not utilize them at all. Alternative programs, such as the Canoo Access Pass, can be embraced to meet the needs that are often overlooked by traditional settlement services. They can also help make the immigrant experience in Canada more enjoyable and attractive.

Together, these multi-faceted reforms aim to create an inclusive and supportive environment for all Canadians, irrespective of their employment status or immigration journey.

Technology

How can governments leverage technology to optimize workforce development and attract global talent?

Governments can play a pivotal role in supporting all Canadians to not only navigate but also thrive in a dynamic landscape of rapid technological advancements and an evolving job market. Leveraging emerging technologies is an imperative for future-proofing the workforce and attracting top global talent. Acting as catalysts for change, governments can modernize service delivery models using digital channels, AI, machine learning, and data-driven approaches to support both jobseekers and employers.

Establish data-driven workforce development strategies

Traditionally, labour market information has not been disseminated in a way that is accessible and easy to digest. One needed to be a statistician to understand local labour market conditions and trends. However, new tools are emerging that are democratizing labour market intelligence and improving decision-making for workers, employers, and other critical players. Governments can launch tools that analyze occupational and geographical information to show jobseekers where relevant jobs are located and assess whether they are good fit based on their skill set. Other tools give employers insights on available pools of talent at a localized level to inform their investment, workforce, and talent-attraction strategies. The technology is improving by the day and should be promoted and made readily available to all relevant stakeholders. Immigrants can use these types of modern tools to guide their decisions on where to settle. The net impact will be improved labour market efficiency as jobseekers can more easily navigate in-demand roles in the labour market.

Create human-centred digital immigration tools

The current immigration process can be cumbersome and challenging, with finite government administration and case management resources. There are a lot of innovations that can help Canada establish an omnichannel, human-centred, digital immigration experience that is secure, equitable, inclusive, and transparent. Once they land, newcomers and refugees would benefit from a digital platform that connects them to the necessary support systems and resources to create a seamless end-to-end experience as they integrate into the labour market and Canadian society.

Collaboration

How can governments work together to construct a resilient and dynamic labour market?

Enhance talent attraction through global collaboration

In the global race for skilled labour, governments can deploy targeted strategies to enhance Canada’s overall attractiveness for talent. Using labour market insights to understand critical skills gaps, Canada can then identify target countries and develop international cooperation agreements, such as mutual recognition agreements (MRAs), skills mobility partnerships, and bilateral labour mobility agreements (BLMAs). MRAs enable the seamless transfer of skills and qualifications across the participating countries. Canada can look to international examples of this being effectively implemented, such as in Europe with the European Qualifications Framework and across the member states of the Association of Southeast Asian Nations (ASEAN) with the ASEAN Qualifications Reference Framework.¹⁹ Skills mobility partnerships are bilateral agreements to promote skills development and recognition for migrant workers.²⁰ BLMAs can also support qualifications and skills recognition. For example, Quebec and France have an agreement to support the occupational mobility and integration of migrants.²¹ Having a clear strategy for developing new international labour market agreements will boost Canada’s ability to meet its labour needs and attract skilled talent.

Conclusion

If governments across the country act now on these recommendations, Canada can reap the benefits of an equitable, accessible, and inclusive labour market with a highly coordinated ecosystem of partners, a strong upskilling environment for the underemployed, and a future-oriented strategy to prepare the workforce for the jobs of tomorrow.

In our ideal of its future state, Canada will have:

• Unified upskilling and training strategies that can swiftly respond to shifting labour market gaps and structural challenges, including a single-source-of-truth hub with expansive digital reach that gives Canadian workers the tools they need to adapt to the skills required for the jobs of tomorrow.
• A dynamic and diverse international workforce that bolsters economic growth. Facilitated through innovative policy frameworks and systems, effective resettlement services, and accelerated pathways to employment for newcomers and immigrants, Canada is globally recognized as an attractive collaboration partner and a strong place for skilled talent to build their futures.
  
• An inclusive workforce that breaks structural barriers, with robust social safety nets and other supports that enable all citizens to participate. Governments play a pivotal role in supporting citizens to digitally upskill and removing barriers to employment through policy reform.
• Reliable, comprehensive labour market insights and people-focused strategies that promote alignment between supply and demand. Jobseekers are able to readily identify the evolving needs of the workforce and emerging sectors and to access tailored upskilling initiatives.

Endnotes

Thank you to our key contributors, Natasha Crombie and Amy Janes.