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Stokes Economics Occupation Outlook

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Overview

Name Stokes Economics Occupation Outlook
Author Stokes Economics, research and consulting company
Contact info@stokeseconomics.com
Timing 10-year forecast, updated twice a year
Outputs Example of provincial outputs:

New Brunswick Occupational Outlook

 

Stokes Economics is the main private-sector provider of occupational forecast models and outlooks in Canada. Their model estimates labour demand, supply and imbalances for the 500 occupations of the 4-digit National Occupation Classification (NOC) at the provincial level. It provides a complete outlook for Saskatchewan, Manitoba, New Brunswick, and Newfoundland and Labrador. It also provides results for Nova Scotia and Prince Edward Island, although not on a regular basis. Stokes also provides sub-provincial insights and services for British Columbia and Ontario.

Methodology

The Stokes Economics modelling approach is a "requirement" one where labour demand is forecast (i.e., workforce requirements) and sets supply to meet these requirements through changes in migration.

Projection of Job Openings

For each of the 500 occupations and each year of the 10-year forecasting period, expansion and replacement demand are forecast and summed as the number of job openings. Both estimations are primarily informed by a macroeconomic system of models. The system consists of 14 models, one for each province and territory, and one that links these models together to produce national results for Canada.

The individual modern macroeconomic models (known as KLEM models) use capital (K), labour (L), energy (E) and materials (M) as substitutable factors of production based on their relative prices. The provincial and territorial models also contain a detailed single year of age and gender population model that considers interprovincial and international migration. Labour force participation rates by gender and age group then determine the labour force. The migration flows are determined in the model as the result of relative labour market conditions in each province and policies set at the national level for determining international supply.

The system is solved in an iterative fashion several times until a stable, non-changing equilibrium is achieved. The underlying rationale for this is that provincial and territorial economies influence each other.

Solving the macroeconomic modelling system, the main outputs include variables from Statistics Canada’s National and Provincial Economic Accounts, the Labour Force Survey (LFS), population by age and sex, and industry GDP and investment:

  • Industry detail includes Gross Domestic Product (GDP) for up to 51 industries by province (combining mostly 3-digit North American Industry Classification System [NAICS] and some 2- and 4-digit NAICS; the number of industries varies across provinces due to relative industry sizes) (A).

Expansion Demand

Expansion demand for an occupation refers to the change in employment plus its normal unemployment rate from one year to the next - this value may be positive or negative.

To compute this demand, first, historic productivity is estimated for each of the 51 industries dividing the historic GDP data by employment information from Statistics Canada (LFS Table 14-10-0092-01 and a custom order of 3- and 4-digit NAICS). Then, productivity estimates are forecast considering technological change and substitution between factors of production. Multiplying the forecast productivity rates and GDP (A), an estimate of employment for the 51 industries is obtained. Ultimately, a secondary model is used to disaggregate the employment estimates for 77 industries of varying NAICS detail levels, covering the whole economy:

  • Number of employed for 77 industries (B).

The historical share of each of the 500 4-digit NOC within each of the 77 industries is calculated using census data on employment by occupation and industry for each province. The occupation/industry allocation is then forecast considering input from stakeholders and apparent drivers (e.g., the relative number of high school and elementary teachers changes with changes in the population age structure):

  • Number of job openings in new positions by occupation, by province, by year. This is also called the expansion demand (C).

Replacement Demand

Replacement demand refers the number of workers retiring from the labour force or dying each year. It is calculated using retirement and mortality rates. These rates represent the percentage of the labour force per occupation that retire or die each year.

Retirement: Historical retirement rates (% of employed workers leaving the labour force to retire in each given year) are estimated using the median ages of retirement provided by Employment and Social Development Canada (ESDC) adjusted using more recent information on participation rates by age groups from the LFS. Additional adjustments to the median rates are made based on consultation with provinces or other stakeholders. Multiplying the retirement rate and the forecast labour force provides the following:

  • Number of job openings in existing positions due to retirement by occupation, by province, by year (E).

Mortality: Historical death rates by age groups (% of employed workers deceased in service in each given year) are retrieved from Statistics Canada population estimates. Death rates are applied to the labour force by age groups:

  • Number of job openings in existing positions due to death by occupation, by province, by year (F).

Summing the job openings due to retirement and mortality provide the following:

  • Number of job openings in existing positions by occupation, by province, by year. This is also called "replacement demand" (G).

For each occupation and each year of the forecasting period, the total number of job openings is equal to the sum of net expansion demand (difference in expansion between two consecutive years) and replacement demand:

  • Total job openings by occupation, by province, by year (H).

Total employment is also estimated as the sum of the previous year’s employment and the total job openings for the current year:

  • Total employment by occupation, by province, by year (I).

Projection of Job Seekers

Three streams of labour supply (or job seekers) are estimated: 1) migration (international immigration and net interprovincial migration), 2) new entrants and 3) other net occupation in-mobility.

Supply from Migration

As mentioned above, a key part of the outlook is the adjustment of labour supply to demand through an "optimal" international immigration approach where the federal government adjusts immigration policy as the residual source of workforce supply. The optimal level of immigration is assumed to be one that facilitates economic growth and minimizes the costs - in terms of unemployment and inflation - of the excess demand for and supply of workers. Operationally, the level of immigration is chosen to keep the unemployment rate near that required to allow the labour market to function properly.

 

Non-economic immigration, such as humanitarian or family reunification, continues to play a role, but the overriding objective is to meet long-term labour market needs. Under this approach, no persistent large imbalances exist at the aggregate level of the economy across the country. An important underlying assumption in the use of optimal immigration is that Canada can either obtain immigrants with the required skills or train them as suitable workers.

Historical participation rates are applied to the immigration forecast to estimate the labour supply of immigrants. The total pool of immigration is then allocated across the provinces and territories based on historical trends and labour market demand. The provinces interact by adjusting immigration and interprovincial migration flows based on current labour market conditions and historical trends.

Once total migration is modelled, it is allocated by occupation, based on demand for workers in the occupation (I):

  • Number of migrants seeking jobs by occupation, by province, by year (K).

Supply from New Entrants

The number of new entrants is equal to the difference (from one year to the next) in the number of young people aged 15 to 30 years multiplied by their age-specific participation rate. This represents the stream of young people entering the workforce after receiving their education - from high school through to other forms of education and training.

The concept of new entrants is different than that of school leavers, often used in occupation modelling. New entrants include only those school leavers who enter the labour market immediately after graduation and are in the 15 to 30 age group.

New entrants are then allocated based on demand for occupations (I). In other words, new entrants will first fill those occupations where demand is large. Moreover, many occupations cannot hire new entrants since they require previous experience in the labour market. As a result, the model doesn’t allocate new entrants to several occupations, including managers, supervisors, judges and so on.

  • Number of new entrants seeking jobs by occupation, by province, by year (L).

Occupational Mobility

As a final step, the composition of occupational labour supply (i.e., job seekers, K+L) is adjusted to account for occupational mobility. Inter-occupational movement is due to changes in participation rates that evolve with changing preferences (e.g., older age groups working longer). The participation rate then reacts to wages and other cyclical factors that encourage/discourage workers.

For each occupational group and each year of the forecasting period, the number of job seekers is equal to the sum of job seekers from immigration (K) and new entrants (L) after adjustment for occupational mobility:

  • Number of total job seekers by occupation, by province, by year (M).

Identification of Imbalances

The model provides the outlook for the number of job openings and job seekers by occupation and year. Subtracting the two provides an estimate for the anticipated unemployment rate. Historical unemployment rates by occupation from the LFS are used to help create normal unemployment rates by occupation.

Anticipated and normal unemployment rates are then compared to assess imbalances. Moreover, a supply risk approach is employed that considers the fact that the supply requirements computed may not be achieved. It attempts to identify occupations that may be difficult for organizations to find in the future. Occupations with relatively strong demand growth, for example, may be more difficult to find than those where demand growth is weaker. Moreover, occupations where supply requirements are largely met through migration may be at risk if the number of newcomers is reduced or Canadian workers from other locations do not wish to or are not available to move. There may also be some labour market tightness issues over economic cycles and for specific occupations. The tightness assessment is then incorporated into a ranking scale for each occupation.

The final presentation of results depends on each client. Examples of outputs published by Canadian provinces using this model is shown in Table 1.

Table 1. Examples of Occupational Outlooks by Province

Provinces Assessment
Saskatchewan Occupational Outlook
  • List of high demand occupations (total forecasting period)
  • Outlook (good, fair, limited) by occupation (total forecasting period)
Manitoba Occupational Forecasts
  • Outlook (rank 1 to 3) by occupation, by year
New Brunswick Occupational Outlook
  • None; information on demand only is available.

Applications

The results developed by the provinces are distributed and used in many ways.

Saskatchewan

Individual Canadians

    • Results are available for individual Canadians to make education, training, career and immigration decisions through reports (available here). The reports are also used by education and training providers, career counsellors/practitioners, employers and industry associations, policy-makers and researchers/academics.

 

 

Employment Policies and Programs

  • The model results inform workforce development and planning, including labour market programs for employment and skills development funded by the Government of Saskatchewan.
  • Results are used by government Labour Market Service centres all across the province to provide career advice and counselling to residents of Saskatchewan.
  • Results are also used by government Employer Services to anticipate future sector needs and plan possible recruitment missions and supports.

Immigration Policies and Programs

Education

The model results inform business plan development (including needs assessments) and approval/validation of educational and training programs delivered by Saskatchewan’s public training institutions, including Saskatchewan Polytechnic, Gabriel Dumont Institute (GDI), Saskatchewan Indian Institute of Technologies (SIIT) and all seven regional colleges.

Economic Development

Results inform endeavours by the Government of Saskatchewan to attract new business investment to the province.

Manitoba

Results are available through reports (here).

New Brunswick

Individual Canadians

Results are available through reports (here) and infographics (here).

Immigration Policies and Programs

The model results are used for level planning purposes when providing rationale for immigration levels to Immigration, Refugees and Citizenship Canada.

Education

  • The model results form the basis of LMI presentations to grade 9/10 students as part of a career planning initiative.
  • Results are also used to determine targeted sectors for experiential education initiatives for high school students.

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