SME Adaptability

The Issue: Limited access to resources

In recent years, employers have been challenged by significant skills and labour shortages.  From hospitals desperate to hire more doctors and nurses, to factories looking for more workers, and understaffed restaurants, the impacts are felt across the Canadian economy.

As the world of work transforms, we know that investment in skills and training is critical to ensuring the right mix of skills and abilities to meet the demands of employers. Most investment in skills development in Canada is publicly funded, and employer investments tend to lag those of peer countries in Europe and the United States. Rapid technological change in the workplace has put a premium on finding workers with strong digital skills. Numerous opinion surveys with Canadian employers suggest they are having difficulty meeting their growing demand for workers with core and soft skills. In the face of more acute shortages, employers are realizing their workplaces have to be more welcoming to newcomers, racialized groups, Indigenous Peoples and persons with disabilities. And in the wake of the COVID-19 pandemic, employers recognize the need to address their employees’ mental health and well-being to ensure better work-life balance.

In 2021, SMEs were estimated to employ more than 88% of Canada’s private labour force. Any solutions to their skills issues must take into account the capacity constraints they face. They have limited resources to assess and recognize skills in the hiring process, limited time and money to invest in upskilling workers and difficulty in navigating the skills ecosystem to help keep employees’ skills up to date. 

Solutions should help employers better assess and recognize skills in the hiring process. When properly designed, microcredentials, work-integrated learning and tools to facilitate competency- or skills-based hiring can be effective. The time burden can be addressed through more rapid training targeted to specific needs. Addressing the cost barrier will depend on further experimentation with approaches to pooling employer demand and coordinating the supply and demand for training, for example through digital learning platforms. 

However challenging it may be to engage employers given their capacity constraints, their leadership and engagement in initiatives to develop solutions is essential. This includes efforts to coordinate actors in the skills ecosystem and to create partnerships, for example between employers and post-secondary institutions, in which employers guide development of solutions.

Why It Matters

If skills shortages are expected to grow because of an aging Canadian workforce, and the pace of technological change is expected to accelerate, skills and labour shortages represent an increasingly worrying obstacle to productivity and therefore growth. 

Private sector investment in skills appears to be sub-optimal, and the causes can be traced to capacity issues and barriers faced by SMEs in particular. The question of who pays for skills development is not clear, making it uncertain what proportion of the cost should be shouldered by employers, workers, governments and civil society.

It is clear, however, that increasing the scope and pace of skills development requires more coordination among all these actors, with employers playing a critical role in identifying their skills needs and participating in solutions that lower barriers to hiring and skills development.