Skills crunch

The demand for IT workers is tight in Canada – a good news story that, nonetheless, may have serious repercussions for the economy.

IT World Canada’s annual salary survey for 2007 found that 70 per cent of respondents had a salary increase over last year, and that the average increase was six per cent. Only three per cent of respondents reported a decrease.

Wage inflation is, of course, an essential barometer of supply and demand in the labour market, and the shortage has alarm bells ringing within industry and among some professional organizations.

There is also significant buzz at the provincial level. A bigger problem is that the feds may be asleep at the switch.

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Paul Swinwood, President of the Information and Communications Technology Council (ICTC), says that having provinces compete against each other is frustrating and counter-productive.

“The federal-provincial conflict results in the balkanizations of education in Canada,” says Swinwood. “The resources are there, but in Canada we have, in effect, 13 individual countries approaching education in 13 different ways. We need a national, pan-Canadian approach.”

Without a national strategy for skills development Swinwood worries we’ll fall far behind. In his opinion industry is pulling its weight – the information and communications technology (ICT) sector spends five times the national average on training, with 10 days of informal and 10 days of formal training a year. But the country is in trouble: our Organization of Economic Cooperation and Development (OECD) rank for competitiveness has dropped from 11 to 16, and Swinwood is forecasting that we’re headed for 25.

“You want to know how bad it is?” he asks, then refers to a recent issue of the Ottawa Citizen, where the Province on New Brunswick was advertising a job fair in the nation’s capital. Swinwood counts off the 25 companies participating, then names the areas. “This is for e-government, software, gaming, technical help desk, you name it. And it’s not an Ottawa problem, or the GTA, or the oil patch, it’s national. Nova Scotia alone is forecasting a need for 4,500 IT workers.”

Certainly the IT World survey data bears witness to this. Among respondent firms 61 per cent said they were hiring new staff, with demand for IT workers growing 12 per cent in 2007. The poaching may get worse, because the relative stability of the employment scene – Canadian IT workers average 10 years at their place of employment, and six in their current position – conflicts with the fact that 68 per cent of new hires are expected to come from other companies. As well, the combined “fresh grad” hiring intention of 33 per cent from colleges, universities, and technical programs doesn’t square with the numbers showing up on the job scene.

“We sat around with deans, asked them what was going on,” says Swinwood. “This is face to face. They’re seeing a 50 per cent to 70 per cent decline in enrolment for IT-related faculties.”

Not surprisingly, the stresses are being experienced within industry. Terry Power, president of IT staffing firm CNC Global (soon to be called Sapphire Technologies), is on the same page as Swinwood. “We are not even close to being happy with what is going on in Canada on the educational front,” says Power.

From an employee perspective, the IT World survey found that the bigger the company, the higher the total compensation, and the more responsibility, the greater the job satisfaction. By sector, the highest satisfaction was found in energy/utilities, with the lowest in manufacturing, perhaps reflecting stresses due to the high dollar.

“Although we are losing jobs in some areas, the net job growth is outstripping the loss,” says CNC’s Power. “The tell-tale story is Ontario: if we saw a reverse in Ontario, given the high dollar and the manufacturing base, then we’d be in for a slide. But Ontario’s job growth has outpaced losses, replacing manufacturing positions with services and some commodities-based jobs.”

Power adds that wage inflation will be felt most strongly at the higher end of the skill-set area, confirming the IT World survey findings that the hardest-to-find IT workers will be business analysts, project managers, and applications developers. However, even with a strong dollar, Power does not see a dramatic rise in outsourcing.

“As you get closer to the customer, outsourcing becomes increasingly more difficult,” he says. “We will not see a significant increase in the number of jobs moving out of the country.”

Recent data for October from Statistics Canada supports the observations from Power and Swinwood, as well as the IT World findings. The national unemployment rate fell to a 33-year low of 5.8 per cent, with older workers picking up much of the slack. In fact, Canada has pumped out 346,000 jobs so far in 2007, representing the most robust January-to-October growth in the past five years. And recently Ontario has been a big part of this story – for August and for September more than half of the national employment growth was in Ontario. That said, the strength is national: Quebec’s unemployment rate (6.9 per cent) is at a 33-year low, the West is still strong, and in October Nova Scotia created 5,300 mostly full-time jobs, many of them in ICT.

The regional data coming out of the IT World survey may be surprising to some. When looking at total compensation for IT workers, Montreal comes out on top, at $96,197, followed by the GTA at $95,293, and Alberta at $92,903. Although these numbers include bonuses, they confirm overall Statscan data showing a growth in wage pressure, with hourly rates up 4.1 per cent, well above the Consumer Price Index (CPI) increase of 2.5 per cent.

As a result, when 44 per cent of respondents to the IT World survey say they are “actively looking” for work – even though 59 per cent are satisfied, and 58 per cent feel secure – it suggests that companies should revisit their retention policies.

For improved retention, bonuses are a good place to start. Half of survey respondents expect to receive a bonus in 2007. However, bonus systems can also backfire. Those employees on a performance bonus system who aren’t expecting to receive one are more likely to be looking for another job than those with no bonus system at all.

For benefits packages, Canadian companies are somewhat out of synch with their workers; it helps to take a more specific look at what IT employees value. Flexible scheduling, for example, ranked as No. 3 in preference (after health benefits and pension/RRSP contribution) but was offered by only 44 per cent of companies.

Interestingly, women put flexibility higher on their list of benefits that drive satisfaction than did men, suggesting that they are carrying more of the weight for responsibilities on the home front. As well, women are still getting clipped on compensation: average compensation across the sample is almost five per cent more for men. Canada could also do more to understand and integrate different business cultures.

“We need more education on business languages,” says Swinwood. “In some parts of the world making eye contact with a superior is an insult, whereas in Canada looking d

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Jim Love, Chief Content Officer, IT World Canada

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