Following the recent trilateral leadership summit between Canada, the United States, and Mexico, the news media focused on the failure of Prime Minister Justin Trudeau to secure exceptions from Buy American policies. In the run-up to the summit, much of the discussion in Canada focused on a proposed electric-vehicle (EV) tax credit for U.S. citizens that threatens the Canadian auto sector’s ability to attract EV investments, which is why post-summit headlines announced, “Canada’s Trudeau comes up short.” As Global News noted, U.S. President Joe Biden offered no hints that he would “budge on the controversial $12,500 tax credit for American-made electric vehicles, a proposed measure the Canadian industry has described as a potential body blow.”

This negative focus is understandable. After all, the proposed tax credit clearly appears to go against the spirit of integrated automaking that was enshrined in the United States-Mexico-Canada Agreement that replaced NAFTA during the Trump Administration. But it is also a focus on something that remains largely beyond our control. And if truth be told, what happens in the United States is also largely beyond President Biden’s control. As he noted when asked if there was room for compromise on the tax credit issue: “The answer is: I don’t know, and I don’t know what we’re going to be dealing with, quite frankly, when it comes out of the legislation, so we’ll talk about it then.”

The discussion in Canada has now turned to how best to retaliate when faced with American protectionism. But it is time to get serious about taking positive steps to support the Canadian auto sector. When campaigning for re-election, the Trudeau government promised to:

• Invest an additional $1.5 billion in the iZEV rebate program and broaden eligibility to a wider range of vehicle types, including used vehicles, to help over 500,000 Canadians get into a zero-emission vehicle.
• Invest an additional $700 million to add 50,000 new EV chargers and hydrogen stations to Canada’s network.
• Work with industry, labour, and other stakeholders to develop a regulated sales requirement that at least 50 per cent of all new light-duty vehicle sales be zero-emission vehicles in 2030.
• Provide $100 million to make sure existing buildings can install charging stations, removing a barrier to adopting a clean car.
• Double down to attract investments and jobs in manufacturing zero-emission vehicles in Canada through the $8 billion Net Zero Accelerator.
• Accelerate our Greening Government commitments to electrify the entire federal fleet of light-duty vehicles by 2030, up from our existing target of 80 per cent by 2030.
• Require 100 per cent of medium- and heavy-duty vehicle sales to be zero emission by 2040, where feasible.
• Invest $200 million to retrofit large trucks currently on the road to cut pollution now.

These initiatives can help Canada transition to an electric-vehicle ecosystem, which has the possibility to greatly reduce Canada’s greenhouse gas (GHG) emissions. This is an important priority. After all, as things stand, nearly 25 per cent of our nation’s GHG emissions come from the transportation sector, where nearly half of the emissions generated come directly from passenger vehicles and light trucks.

But as noted in a recent paper by Philip Couto, an analyst with the Ivey Management and Policy Forum (IMPF), a think tank that applies management science research and concepts to Canadian and global policy issues, moving to a low-carbon transportation sector requires a skilled labour force with the technical knowhow that can support the related emerging technologies that enable the transition. And unfortunately, Canada is currently facing a skilled labour shortage driven in part by demographic factors and the global pandemic.

That’s the bad news.

The good news is that moving to address these factors via short, medium, and long-term measures—including financial incentives, reskilling, and academic, educational, and vocational training—isn’t something that Canadian politicians need their counterparts in Washington to support. In other words, proactively moving to attract and develop the blue- and white-collar talent required to drive the transition to an EV ecosystem is something within Canada’s control and it can help support our auto sector while contributing significantly toward a reduction in our GHG emissions.

The following is an edited excerpt from the IMPF policy paper (which can be accessed in full  here) that outlines the labour challenges we face when trying to build a world-leading EV ecosystem along with IMPF recommendations for overcoming them.

Labour Dilemma

Canada is facing a shortage of skilled labour in many sectors—transportation is no exception— which limits our ability to meet the country’s GHG reduction targets. The current federal government objectives call for all new light-duty cars and passenger trucks to be zero-emission by 2035.[1] Some provinces have similarly ambitious targets, although the question remains: can the skilled labour needed to support this rapid growth and changing technology be supplied quickly enough?[2] [3]

The trends in blue-collar roles needed to support the electrification of the transportation system are unfavourable (see Figure 1). Since 2014, many of the key Red Seal trades occupations—including electricians, automotive service technicians, and machinists—have seen a downward trend in new registrations. This pattern is concerning, given that certifications in these trade groups are often requirements for the blue-collar roles needed to support the transition and growth of an EV ecosystem.

Figure 1: Number of Certifications & Registrations by Year for Selected Trade Groups

Source: Statistics Canada. Table 37-10-0089-01 Number of certificates granted to registered apprentices and trade qualifiers. Note: Trade groups in the figure are those most closely linked to the electrification of the transportation sector, which are: Automotive Service, Electricians, Electronics and Instrumentation, and Machinists. When including all other trade groups, the curve follows a similar trend with the exception of the dip in 2009 trade registration data.

The skilled labour headwinds are equally present in white-collar occupations such as the many engineering roles involved in the EV transition. For example, in July 2021, Global News reported that recruiters for white-collar positions have been adding additional perks to entice candidates, including salary increases and more paid time off, as they grapple with labour shortages.[4] Additionally, according to the Quebec Employers Council, a survey from April 2021 revealed that 94 per cent of Quebec firms reported difficulties filling vacant positions.[5] As a result, nearly half of the 430 firms surveyed, which spanned all regions and industries under the North American Industry Classification System, reported having to decline contracts, while 39 per cent had to delay investments.[6] The migration impacts from fossil fuels to the EV ecosystem for some occupations (i.e. accountants) should prove transient rather than structural, nevertheless the evidence is clear on the negative economic impacts produced by labour shortages.

Several factors are behind these trends. As revealed in past editions of the National Apprenticeship Survey, Canadian workers mention not having enough work or income as being a key factor for discontinuing their trade completion, along with essential skills deficits.[7] Another central reason reported by discontinuers for not completing their apprenticeship was financial constraints.[8] Since apprenticeships are largely industry driven, apprentices may not have the ability to support

themselves financially throughout the duration of the program.[9] More awareness and use need to be made of several existing supports such as grants, loans, tax credits, and the Employment Insurance program.

Current demographics also have adverse effects on the skilled labour shortage. The NAS highlights varying participation rates and underrepresentation among women and immigrants, while other groups such as Indigenous and youth experience different challenges.[10] For example, “The majority of apprentices were male (86.3%), Canadian-born (91.3%), and non-Aboriginal (93.7%), and did not belong to a visible minority group (91.8%).”[11] At the same time, the aging population dilemma (see Figure 2) is equally worsened by pandemic job losses, with provinces like Quebec set to lose 850,000 members of the labour force leading up to 2025.[12] The anticipated lift in retirements will need to be tempered by an increase in qualified workers from underrepresented groups joining the workforce to unlock economic growth.

Figure 2: Demographic Dependency Ratio, 1971 to 2020, Canada

Source: Statistics Canada, accessed November 23, 2021, https://www150.statcan.gc.ca/n1/pub/91-215-x/2020001/sec2-eng.htm.

The global pandemic has brought psychological challenges to labour-market participants, leading to frictional unemployment. According to Elisabeth Starenkyj, president of Montreal-based executive search firm La Tête Chercheuse, the pandemic encouraged many to take their retirement early, to rethink their career aspirations, or to change occupations.[13] While the impact may correct itself over the medium to long term, it has adversely impacted many industries, contributing to the ~9.3% rise in job vacancies from the first quarter up until the last quarter of 2020.[14]

International Perspectives

JAPAN: The Japanese have faced a demographic crisis for many years, with over 27 per cent of the population being over the age of 65, compared to 18 per cent for Canada.[15] [16] In response to the rapidly aging population and shrinking labour force, the country has seen a higher labour-force participation rate among the 65-year-old-and-up segment of the population at 25.3 per cent in 2019, compared to 14.9 per cent for Canada.[17] According to the 2018 OECD report Working Better with Age: Japan, the aging workforce dilemma hampers improvements in living standards and the financial sustainability of Japan’s spending on social programs.[18] Japan’s high participation rate is also tied to social factors that differ relative to Canada, such as low immigration and reverence for elders. Nevertheless, encouraging a higher participation rate among older age segments in Canada could help temporarily offset impacts in the short term and is worth considering given the time it takes to educate and train new employees in the skilled trades that are encompassed in the electrification of the transportation system.

CHINA: The importance of a highly skilled workforce that can support the electrification of the transportation sector has been a priority for the Chinese government since at least 1995.[19] Since then, several strategic plans have emerged, with the most recent being Made in China (MIC) 2025. In response to the technological changes that are promoted in MIC 2025, the Chinese government places an emphasis on expanding and developing academic and vocational education.[20] Due to jobseekers’ frequent lack of credentials and students’ lack of practical experience, employers have been complaining to the government for some time. This has prompted the central government to release the Guidance for the Development of Manufacturing Talent plan, which aims to reform the education and training system to better meet the skill requirements for MIC 2025.[21] The Chinese government plans on expanding vocational training at both the secondary and tertiary levels, but challenges such as shortages of students, teachers, and teaching facilities are limiting progress.[22] As a result, the government has encouraged enterprises to play a larger role in the supply of vocational education and training, as well as moved to promote the participation of vulnerable groups and boost compensation for skilled workers.[23] Canada should follow suit in having larger private-sector contributions to vocational education and training, given that many of the skilled trades require knowledge built up through practical experience. Additionally, targeted programs to increase the participation of minorities and underrepresented groups in the skilled trades required to support the EV ecosystem should also be ramped up in Canada. The newly unveiled Canada-wide $10 a day child-care policy, encouraging higher labour-force participation rates from women, is already a step in the right direction with significant positive social and economic benefits in the years to come.

UNITED STATES: The United States recently addressed the skilled labour shortage through the American Jobs Plan. The stimulus package places emphasis on job creation in the EV ecosystem by spurring domestic supply chains, retooling factories to compete globally, and supporting workers to produce EV batteries domestically.[24] Furthermore, the government intends on “promoting strong labour, installation, and training standards” for the national network of 500,000 EV charging stations that will be built through partnerships between state and local governments and the private sector by 2030.[25] The Biden administration also proposes filling the skilled labour gap by pairing job creation with next-generation training programs, specifically by calling for US$40 billion in a Dislocated Workers Program and sector-based training. The funding will be used to help workers who have lost their jobs due to industry changes to gain new skills and receive career services for in-demand jobs.[26] In response to many technological innovations produced through the electrification of the transportation sector, the United States has seen tight collaboration between unions, automakers, utilities companies, and educational institutions to form the curriculum for the U.S. Electric Vehicle Infrastructure Training Program (EVITP).[27] As with other skilled trades, the program has high standards and requires all participants to pass a certification exam demonstrating proof of knowledge and skill, while the jointly developed up-to-date curriculum provides real-time perspectives on the opportunities and challenges presented by technology.  To date, the EVITP has trained 4,000 electricians across the United States to install and maintain charging stations. Canada should also develop a cross-sectoral program that sees a curriculum developed by key stakeholders according to job-market needs—one targeted towards population segments most likely to be disrupted by the electrification of the transportation sector.

Implications and Recommendations

The electrification of the transportation sector brings a tremendous opportunity to cut Canada’s greenhouse gases and position the country as a leader in the adoption of innovative technologies. To address the broad skilled labour shortage that threatens to impact the transition to the electrification of the transportation system, Canada can incorporate learnings from other countries facing similar issues.

In the short term:

1. Encourage older workers to prolong their participation in the labour force, similar to the situation in Japan—who does it out of necessity. Although this will be difficult in practice, since any hours worked would eat into retirees’ pension incomes, one way it can be accomplished is by offering adjustments to pension plans and income tax credits for employees in high-demand sectors. This policy has the benefit of delaying the impact of there being too many near retirement age exiting the labour force and furthering the effects of the labour shortage. Extending the duration of participation would permit a non-trivial volume of workers to join the labour force and obtain the required training to close part of the gap. Despite the short-term financial cost, the alternative would be productivity losses from economic stagnation. Given the rise in workers rethinking career aspirations and advancing their retirement decisions due to the pandemic, encouraging employees that still have several years of work available before retiring to remain in the labour force would help meet labour needs in the short term. Communication of such an option would be required on behalf of employers to their employees.
2. Job instability was the most common reason reported by discontinuers for not completing their apprenticeship, according to the NAS. By expanding employment insurance benefits for new apprentices, which have been on the decline in Canada, the government can encourage more registrations and certifications. This would also help any current apprentices continue their training even if they are between jobs, which would strengthen a needed layer of stability to help counter fluctuations in employment that are largely industry driven.
3. Like the U.S. Dislocated Workers Program, Canada must reskill existing workers to equip them for the technological changes taking place in the EV ecosystem. In particular, this entails reskilling those who are in industries most likely to be adversely impacted by the electrification of the transportation sector, such as oil & gas. For example, this type of program should target geographical areas such as Alberta and Saskatchewan, which experienced drops in new trade registrations—which are largely demand based—due to declines in resource-sector investments caused by collapses in oil & other commodity prices.[28] Similar to Ontario’s Second Career program, such an initiative would have to be adopted and managed on a provincial level, but recognized and administered across Canada. The Red Seal program is run in a similar fashion, with Employment and Social Development Canada (a federal agency) working with each of the provinces and territories to deliver the program. Typically, such a program involves funding provided by the provincial government (up to a pre-determined amount set by the government) to cover the costs of tuition, books, instruction transportation, and a basic living allowance, if candidates successfully enrol in an apprenticeship or trade in an in-demand sector.[29]

In the medium term:

1. Improving Canada’s credential recognition approach for immigrants who are already qualified for many occupations. According to Statistics Canada, immigrants with a university degree (bachelor’s degree or higher) were twice as likely to hold roles that only required a high school diploma, relative to people born in Canada. The talent pool available should occupy roles that better align with their qualifications obtained outside of Canada. This begins with a more robust credentialling system for quicker integration into highly skilled occupations, which the electrification of the transportation system demands.

In the long term:

1. Building up the country’s next-generation workforce through academic, educational, and vocational training programs that meet the needs of employers without requiring additional on-the-job training due to underqualification. With respect to trade and vocational institutions like the EVITP, this could involve having partnerships between employers, labour unions, and educational institutions to develop curricula and provide training in line with industry expectations to improve labour mobility. Additionally, there could be bilateral collaboration in curriculum development to keep standards consistent across geographies for emerging technologies.To name a few, partnerships should include:
   • Automakers in the EV space such as Tesla, Rivian, Fisker, and Faraday
   • Canadian original equipment manufacturers (OEMs) that supply materials used to assemble EVs and are worked on during maintenance such as Linamar, and Magna International
   • Labour unions from the aforementioned automakers as well as The International Brotherhood of Electrical Workers (IBEW)
   • Federal government innovation hubs such as the Automotive, Transportation and Digital Technologies Branch at Innovation, Science and Economic Development Canada

Varying degrees of such collaboration have existed in the past and continue to exist today. For example, clusters of academic and commercial R&D have been used in key technologies such as alternative powertrains. Tesla Motors has an exclusive research partnership with Jeffrey Dahn for his research on lithium-ion energy density.[30]

The transition to an EV ecosystem has the potential to greatly reduce Canada’s GHG emissions and position the country as a leader in the adoption of new technologies. But to achieve this, Canada will need to leverage a wide set of policies aimed at addressing broad and skilled-trade labour-market challenges with varied time horizons.

[1] “Zero Emission Vehicle Infrastructure Program,” Government of Canada, last modified October 2021, https://www.nrcan.gc.ca/energy-efficiency/transportation-alternative-fuels/zero-emission-vehicle-infrastructure-program/21876.

[2] “Le Québec franchit le cap des 100 000 véhicules électriques et hybrides rechargeables,” Québec Ministry of Energy and Natural Resources, May 19, 2021, accessed November 23, 2021, https://www.quebec.ca/nouvelles/actualites/details/le-quebec-franchit-le-cap-des-100-000-vehicules-electriques-et-hybrides-rechargeables-31556.

[3] “Zero Emission Vehicle Infrastructure Program,” Government of Canada, op. cit.

[4] Erica Alini, “Some Salaries up ‘Drastically’ as Canada Feels Impact of Labour Shortages,” Global News, July 9, 2021, accessed November 23, 2021, https://globalnews.ca/news/8008835/salaries-labour-shortages-canada.

[5] “La pénurie de main-d’oeuvre, une catastrophe annoncée,” Conseil du Patronat du Québec, April 12, 2021, accessed November 23, 2021, https://www.cpq.qc.ca/fr/publications/communiques-de-presse/la-penurie-de-main-d-oeuvre-une-catastrophe-annoncee.

[6] Emmanuel Martinez, “S.O.S. on recrute ici… et à l’étranger,” Les Affaires, May 26, 2021, accessed November 23, 2021, https://www.lesaffaires.com/dossier/special-grandes-entreprises/sos-on-recrute-ici-et-a-l-etranger/625096.

[7] Benoit Cadieux, National Apprenticeship Survey, 2007: Factors Influencing Completion of Apprenticeship, Human Resources and Skill Development Canada, 2007, http://www.sceau-rouge.ca/docms/nas_completion_eng.pdf.

[8] “Section 3 Experiences in Apprenticeship Program,” National Apprenticeship Survey: Canada Overview Report 2015, Statistics Canada, last modified March 29, 2017, accessed November 23, 2021, https://www150.statcan.gc.ca/n1/pub/81-598-x/2017001/sect03-eng.htm.

[9] “Section 4 Financial Supports for Apprentices,” National Apprenticeship Survey: Canada Overview Report 2015, Statistics Canada, last modified March 29, 2017, accessed November 23, 2021, https://www150.statcan.gc.ca/n1/pub/81-598-x/2017001/sect04-eng.htm.

[10] “Section 1 Introduction,” National Apprenticeship Survey: Canada Overview Report 2015, Statistics Canada, last modified March 29, 2017, accessed November 23, 2021, https://www150.statcan.gc.ca/n1/pub/81-598-x/2017001/sect01-eng.htm.

[11] “Section 2 Profile of Apprentices,” National Apprenticeship Survey: Canada Overview Report 2015, Statistics Canada, last modified March 29, 2017, accessed November 23, 2021, https://www150.statcan.gc.ca/n1/pub/81-598-x/2017001/sect02-eng.htm.

[12] Emmanuel Martinez, “S.O.S. on recrute ici… et à l’étranger,” op. cit.

[13] Kévin Deniau, “Connecter, peu importe le médium,” Les Affaires, April 14, 2021, accessed November 23, 2021, https://www.lesaffaires.com/dossier/chasseurs-de-tete/connecter-peu-importe-le-medium/624186.

[14] “Job Vacancies, Payroll Employees, Job Vacancy Rate, and Average Offered Hourly Wage by Provinces and Territories, Quarterly, Unadjusted for Seasonality,” Statistics Canada, last modified November 2021, https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1410032501&cubeTimeFrame.startMonth=01&cubeTimeFrame.startYear=2019&cubeTimeFrame.endMonth=10&cubeTimeFrame.endYear=2020&referencePeriods=20190101%2C20201001.

[15] Makiko Eda, “How Japan Can Take the Lead with an Ageing Workforce,” World Economic Forum, May 8, 2019, accessed November 23, 2021, https://www.weforum.org/agenda/2019/05/japan-reskilling-aging-workforce.

[16] “Analysis: Population by Age and Sex,” Annual Demographic Estimates: Canada, Provinces and Territories, 2020, Statistics Canada, last modified September 29, 2020, accessed November 23, 2021, https://www150.statcan.gc.ca/n1/pub/91-215-x/2020001/sec2-eng.htm.

[17] “Labour Force Participation Rate,” OECD, 2021, accessed September 16, 2021, doi: 10.1787/8a801325-en.

[18] OECD, Working Better with Age: Japan, 2018, accessed November 23, 2021,  https://www.oecd.org/els/emp/Working-better-with-age-Japan-EN.pdf.

[19] Shaoguang Wang, “Changing Models of China’s Policy Agenda Setting,” Modern China 34, no. 1 (2008): 56–87, doi: 10.2307/20062689.

[20] “Made In China 2025 Explained,” Harvard University, accessed September 16, 2021, https://projects.iq.harvard.edu/innovation/made-china-2025-explained.

[21] Xiaojun Feng, The Labour Implications of Technological Upgrading in China, International Labour Organization, 2020, https://www.ilo.org/wcmsp5/groups/public/—ed_emp/documents/publication/wcms_764445.pdf.

[22] Ibid.

[23] Ibid.

[24] “FACT SHEET: The American Jobs Plan,” The White House, March 31, 2021, accessed November 23, 2021,  https://www.whitehouse.gov/briefing-room/statements-releases/2021/03/31/fact-sheet-the-american-jobs-plan.

[25] Ibid.

[26] Ibid.

[27] “EVITP,” Electric Vehicle Infrastructure Training Program, accessed September 16, 2021, https://evitp.org.

[28] Prism Economics and Analysis, Apprentice Demand in the Top Ten Red Seal Trades: A 2019 National Labour Market Information Report, Canadian Apprenticeship Forum, May 2019, https://caf-fca.org/wp-content/uploads/2019/05/2019-National-LMI-Report.pdf.

[29] “Second Career,” Government of Ontario, last modified August 24, 2021, accessed November 23, 2021, https://www.ontario.ca/page/second-career.

[30] “Canadian Automotive Industry,” Government of Canada, last modified July 7, 2021, accessed November 23, 2021, https://www.ic.gc.ca/eic/site/auto-auto.nsf/eng/home.