Insights & Analysis

July 14, 2021

The long-term unemployment monster hiding in the closet

“High unemployment.”

It’s a phrase that hasn’t historically applied to Alberta relative to the rest of Canada for many decades. From 2005 to 2015, Alberta was creating jobs at more than double the rate of the national average. This trend of massive job creation helped Alberta’s unemployment rate reach just 68% of the national rate. Except for a brief period in the mid- to late-1980s, Alberta’s jobless rate has been lower than the national average.

But much has changed in the world since the mid-2010s.

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Fast-forwarding to 2020, the double-whammy of geopolitical forces and a global pandemic drove oil prices way down (briefly negative), surrounding economic activity slowed, and many other businesses were curtailed to help protect public health.

Aspects of this backdrop have improved in 2021, but we’re still feeling the impacts in the labour market. While the impacts of COVID continue to be felt across the entire country—particularly for food and accommodation sector workers—Alberta’s unemployment rate has been disproportionately impacted by these compounding events.

Alberta has had a higher unemployment rate than the national average, and the gap between the two is widening. Even more concerning, the underlying employment data indicates the situation is worse than even these headline-grabbing numbers suggest.

The long-term unemployment monster hiding in the closet

Historically, and despite the fluctuations in Alberta’s unemployment rate during booms and busts, Albertans could count on a perennially hot job market to ensure unemployed workers could find work again in short order.

That all changed with the 2014 oil price collapse. The long-term unemployment rate—those unemployed for a year or more—has spiked well above the national average. By the first half of 2017, the average Albertan was nearly twice as likely to have been out of work for at least a year compared to their friends and family in other provinces. What’s more, that spike has persisted.

In April 2021, Alberta’s long-term unemployment rate spiked to 3% and has hovered above 2.2% for the last four months. At first glance this rate seems small, but not only is this 3% figure a record high for Alberta, but it is also a higher rate than the national average rate has ever been since data collection began. A 3% rate means that nearly 73,000 Albertans haven’t been able to find work for at least one year—more than triple the amount since 2010 and approximately equivalent to the populations of Medicine Hat and Drumheller combined.

Why is this so problematic?

A high long-term unemployment rate is not only a “now” problem; it is a challenge that gets more difficult to address if the problem persists. The longer Albertans are out of the labour force, the harder it is to get back in and the greater the social and economic challenges that Albertans will face.

Extended time out of the workforce generally leads to skills becoming less sharp and important on-the-job learning is missed. These challenges harm older unemployed workers particularly acutely as new and younger workers bring different, competing skillsets to the labour force. Moreover, resume gaps themselves make finding work more challenging.

Time out of the workforce also leads to Albertans falling further behind in their lifelong earnings and building a life for themselves. Older workers who find themselves out of a job for an extended period are likely missing out on some of their highest years of earnings, while younger workers will miss critical years of experience that will likely lead to them playing wage catch-up for many more years in the future.

When, as in Alberta, these challenges are faced by a sizeable number of people, they can create broader social and economic strife. As poverty increases, crime rates, substance abuse, physical and mental health challenges, and social unrest likewise increase.

While we must work collectively now to ensure that this does not happen, distinct changes to the nature of work in the future—and the skills needed to participate in it—must be taken into consideration.

What does the future of work have in store?

Any policy solutions we adopt now must have an eye for the impacts that these trends in future work will have on Albertans. While it is impossible to be certain about what the future of work will look like, certain trends have emerged in recent years, exacerbated by the pandemic, that we know will shape the future of work in Alberta and around the world.

COVID will accelerate the pace of technological change.

The combined impacts of the shift to working-from-home arrangements; and the economic pressures on businesses to adapt to lower revenues are expected to accelerate digital automation and create more flexible remote working options.

Education will be key to finding good jobs.

A trend already well underway is that most net new jobs being created in Alberta are held by people with at least one university degree. Labour market outcomes are considerably better for Albertans with a post-secondary certificate, diploma, or degree(s): their employment rate is higher; their unemployment rate is lower; and they tend to earn considerably higher wages.

Jobs are not going away, but they are changing.

While some fear technology could replace human labour, history suggests this will not be the case. That said, while the technology does not reduce the number of jobs available, it will likely transform the types of skills that are in high demand in the workforce. “Soft” skills such as analytical and critical thinking, active learning, and complex problem-solving will become more valuable.

Occupational demand is shifting.

While existing jobs will require new skillsets, the types of new jobs available are changing as well. A recent World Economic Forum report suggests that jobs integrating, and related to, digital technology are expected to be in ascendance, such as AI and Machine Learning Specialists; Data Scientists; and Software Developers. On the other hand, white-collar jobs with discrete, easy-to-automate tasks are likely to decline, as well as a range of goods-sector jobs important to Alberta related to the oil and gas industry and manufacturing and repair/maintenance activity.

Opportunities are polarizing.

The dual impacts of automation/digitization on the one hand, and a transitioning energy sector on the other hand, are leading to a phenomenon sometimes described as a “hollowing out” of jobs. Generally speaking, this term reflects the trend of relatively strong growth in high-skill jobs, flat or modest increases in low-skill and hard-to-automate jobs, and a decline for those in the middle. This leads to a polarization between the growing number of higher paying, high-skill jobs and the remaining lower paying, non-routine, lower skill jobs.

Energy sector transition will magnify long-term unemployment challenges in Alberta.

On top of the digital transformation taking place, Alberta will also have to contend with the energy transition towards a low-carbon economy. Long-term unemployment has in no small part been impacted by major energy project cancellations, capital flight, business consolidation, and climate policy. Looking forward, this transition, and the climate policy driving it forward, are expected to continue.

The challenges will be greater in rural areas.

Recent work by the Public Policy Forum suggests that the impacts of long-term unemployment will be felt more acutely in rural areas in the future. The presence of fewer employers and lower education attainment levels in rural areas make the workforce at higher risk from the impacts of automation and energy transitions.

Addressing the monster in the closet

Long-term unemployment challenges are here already, and shifts in the nature of work could exacerbate the problem in the near future. While the total number of jobs aren’t declining, they are changing. This will require government and industry to work collaboratively to ensure there is a “just transition” for the many workers impacted the changes taking place around them.

To minimize the negative impact and capitalize on the opportunity, we need to equip Albertans with the right skills for the jobs of the future. That means targeting post-secondary education to provide not just relevant, but adaptable skills. It means training, upskilling, and reskilling displaced workers. Most importantly, it means understanding the strengths of Alberta’s workforce and identifying opportunities to adapt and transfer those strengths into other occupations.  

The Business Council of Alberta is committed to working with the provincial and federal governments to develop the education, reskilling, and workforce transition programs needed make these changes happen.

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