A key to economic recovery after the COVID-19 pandemic will be targeted measures to address the possible long-term effects of this crisis on the labour market.
Bouncing back to employment from lockdown layoffs is becoming more challenging for many unemployed people as there is no job to return to, at least in the short term, or they lack sufficient or relevant skills to find employment. This has led to exceptionally high long-term unemployment rates that will need to be mitigated with labour market and skills development strategies.
Long-term unemployment (the number of unemployed people for six months or more) increased by 207 per cent to 462,100 Canadians between March, 2020, and February, 2021. This has boosted the share of long-term unemployment by 9.7 percentage points during the period to 27.8 per cent in February.
This unprecedented increase in long-term unemployment far outpaces what we witnessed during the 2008 financial crisis and is quite concerning because of its long-lasting and scarring effects.
Evidence shows that work interruptions lead to skills depreciation, which negatively affect employment prospects. The probability of individuals getting a new job significantly decreases the longer they stay out of work. Employers are usually cautious to hire unemployed job seekers because their productivity is perceived to be lower than the productivity of employed workers. Furthermore, workers whose jobs are gone for good or those who have lost jobs owing to a lack of the right skills needed in light of automation, globalization and, recently, the pandemic have more difficulty finding employment.
In addition to the lack or loss of skills, long-term unemployed people can also experience limited employability because of their low level of educational attainment and the high costs of reskilling or upskilling. All these factors contribute to low participation in employment or training programs and can lead to labour force withdrawals.
Nonetheless, research shows that educational, training and employment programs help the transition to stable employment. Interestingly, their impact on reducing unemployment duration is the strongest for those with the least previous experience in the labour market and those that are the most vulnerable.
Our research has shown the quality and duration of training play essential roles in short-term and long-term outcomes. These suggest the need for government interventions, through employment and training policies, that particularly include long-term and structural unemployed people improving their motivation, skills and employability.
Currently, both the federal and provincial governments invest in adult education and training through various programs. However, more needs to be done to ensure the development of the right skills, reduce long-term unemployment and avoid structural unemployment.
In its 2019 budget, the federal government announced a plan to launch the Canada Training Benefit, or CTB, program to help workers reduce the cost of training that supports their career growth. Given the changes in the labour market owing to the pandemic, the government needs to roll out this program as soon as possible, but some adjustments and improvements are necessary to address the gaps and its shortcomings.
First, as proposed, the program can only help prevent unemployment, since the target population is workers between the ages of 25 and 64 with at least $10,000 in earnings. In contrast, Canada needs a training strategy and program that supports populations who need training the most, like the long-term unemployed and those who became structurally unemployed. Such a program would help improve the transition to employment and reduce the risk of withdrawal from the labour force.
Second, one of the most important barriers to participation in adult training and education is money. While the CTB tries to address these barriers by considering a tax credit at a rate of $250 a year that can be accumulated up to a lifetime limit of $5,000, it is unlikely to be sufficient to encourage people to participate in training.
To achieve efficient skills development, streamlined federal and provincial investment in training programs are also required. Evidence from international experiences and best practices, particularly in Singapore, shows that ensuring the provision of adult learning requires a strong partnership between all levels of government, businesses and education institutions to regularly gather, track and share data between stakeholders, identify the skill needs and relevant training, and provide sufficient support and necessary training.
To increase participation and improve effectiveness, governments should consider strategies that encourage workers and unemployed persons to participate in training and support the delivery of high-quality, short-term and flexible career training programs.
Such policy interventions to advance the long-term job market outlook may appear complicated and costly. However, they will have wider economic effects on the future economic growth path and provide Canadians with the resilience needed for the road to recovery ahead.
Parisa Mahboubi is a senior policy analyst and Momanyi Mokaya was the 2020-21 Max Bell Policy Scholar at the C.D. Howe Institute.