Nova Scotia Labour Force GAP Analysis

How to Use This Tool

The Boxes

In the upper left hand of the tool, you will see three boxes marked Migration, Productivity and Participation Rate. You can change the values in these boxes from zero to the limits noted there. We put the limits on where things seemed to be getting wildly impractical. Changing a value and clicking on another value will produce a dotted blue line or a dotted red line, representing what your change to the values does to the intersection between them. If the dotted lines never intersect, or, if only one value is changed, that dotted line never intersects with the solid line of the other colour, then there is no problem as far out at least to 2026. You have solved Nova Scotia 's most pressing problem. Now, how do you implement it?

The Lines
The blue line represents the labour force available for work in Nova Scotia for any given year from 2006-2026. The participation rate for each year is figured into this line. This is expected to decline as the proportion grows of people in the labour force age group (15+) goes into retirement or generally cuts back on work time (see below).

The red line represents the historical relationship between Nova Scotia 's average growth rate and the number of employees needed to get this growth. Let's call it the job growth rate. This line includes average growth in productivity.

Where these lines cross represents the time when there is no additional labour to meet any new job openings that arise due to growth in the economy. Beyond this point lies a gap between the jobs available and the people available to fill them. This gap cannot exist in the real world. Either the number of people available will have to grow to meet this need or productivity will have to increase to reduce the need for people, to keep economic growth, (the red line) from tracking downwards, matching the blue line. So, the object of the exercise is to figure out which of these three factors, or which mix of them, can be changed to keep the gap from happening.

Closing the Gap
Not closing the gap has implications. Economic stagnation and decline can adversely affect nearly all sectors of our economy. It will affect the ability of the Provincial government to pay for existing social services, let alone provide new ones. Property values and, therefore house prices and construction, show no growth or decline, dragging down municipal revenues. Retail sales flatten out, as proportionately more people retire to live on lower pension incomes. Businesses' costs rise as they compete for labour in a declining pool of available people. The scene is not one of crisis or disaster, but of a gradually deteriorating economy and quality of life.

There are only 3 generic ways to close the gap, if this scene is to be changed:

•   More people are found. This has the effect of raising the blue line, pushing the gap farther into the future. These come through births, migration and immigration. The birth rate is unlikely to change without some serious incentives and even if it did so tomorrow, the results would not impact on the labour supply for at least 15 years, and longer if these kids stay in school. Migration from other Provinces may help, though it is a ‘beggar-thy-neighbor' tactic, as all Provinces will be going through the same thing at about the same time. Foreign immigration is a possible help, but it has to be remembered that most developed countries, not just Canada are experiencing or beginning to experience the same shortages.
•   Productivity goes up faster than the historical average. This has the effect of lowering the red line, since greater productivity while holding economic growth to its historical average would lower the demand for new labour. Productivity growth could come from closing low-productivity (largely low-wage) businesses, changing business practices and processes (automation) or attracting new businesses that pay very well.
•   Participation rate increases add workers to the economy. This has the effect of raising the blue line as Nova Scotians who would otherwise leave their jobs for retirement or child-raising might elect to stay on or return in some fashion. ‘Freedom 55', as per the old ad, would be replaced by ‘Freedom 75'. Disadvantaged groups, such as the disabled, could be attracted to particular jobs. Universal child care could attract some mothers back to work.

So, which way should the Province go? Once you have played around with the tool and found your preference, then the hard part begins of thinking how to make your solution workable in the real world, starting now. We set all the dotted line possibilities, not from 2016 when the lines cross, but from now. After all, waiting on something as obvious as this, in hopes it will go away, is a lot of wishful thinking. The only way we see that the gap can be delayed more than a few months is with another Great Depression. Not a very attractive prospect.

Some Considerations on the Alternatives
The numbers underlying the blue line relative to population have a bit of ‘squishiness' to them, in that there has been a persistent outmigration from NS of about 500 people per year. A while ago Statistics Canada began to think there was an in-migration of about 500 people per year from 2001 on, but they turn out to be mostly 50+ and probably retirees. Of course, the attraction to Alberta 's boom was not factored in, so we do not know where this tale will finally conclude. It does not change our scenario unless there is some way to get these people into the workforce. Our base case scenario compromises and assumes no net migration, a kind of ‘business as usual' approach.

Foreign immigration has a number of problems. If you change this box, you have to keep in mind that the number is an addition to the net labour force ,that is, without dependents and after the 61% participation rate is calculated on the rest. One estimate made in-house is that for every 100 new immigrant workers, there are 122 people accompanying that who are young or not participants. So, you will find that 6500 immigrant workers will put off the gap until at least 2026, but that means an intake of 14,300 immigrants per year. It also implies that all of them stay here, otherwise, were, say, half to leave, then the intake would have to be doubled to 28,600 per year, or 515,000 over 18 years. Reality is a pain.

Productivity can be roughly defined as the Provincial GDP divided by the employed work force. The productivity growth rate in Nova Scotia seems to have been consistently below the Canadian average (1.14%) for the past decade, at 0.9% per year. So, adding 0.1 to it in that box can help solve the problem, but it implies that it must increase 11% more per year. Putting the value up to 0.5 means the Provincial productivity number would jump over 50%, meaning everybody would produce that much more each year. How do we do that? At minimum, for instance, we'd need a major software business or a huge oil/gas find to juice these numbers.

Finally, the participation rate in the Province is around 61%, which means that of all the people 15 and over, 3/5 of them are engaged in working or trying to work (unemployed). This varies by age group, of course, with 15-19 year-olds and 70-99+ having very low participation rates, while those in their 30s are pretty well all on the job or looking. As more people get older and begin to retire, the participation rate will drop and by 2026, it will be in the 52% range, if nothing changes. Interestingly enough, raising the value in this box to 0.5 will just keep the participation rate out to 2026 at about where it is now. Female participation rates are close to males' now and we have simply made it equal in this tool, so other sources of workers will have to be found. We do not think working everybody until they die off is a viable policy option.

We hope that you have some fun with this tool. After all, your realization of the problem and the difficulties it presents is, in a way, a part of the solution. We at Canmac have been working on the problem for over 2 years now and this tool and the accompanying presentation slides are our way of contributing to what will be a growing public debate.