Competence. Innovation. Solutions in Mining.

Sudbury Mining Solutions

Commentary

No good deed unpunished

Good news can be bad news. For the mining supply sector, labour shortages in the mining industry promise good times. They signal that the market is growing, and they almost guarantee there will be growing demand for labour saving equipment and services. They also promise labour shortages for supply firms.

The signs of a labour shortage for mining are everywhere. In Western Australia, mining companies are advertising that they will take workers with no experience. Ads promise high-paying jobs and training for professionals with experience in other industries. The government recently ran a pilot program offering $5,000 to unemployed people to move to Western Australia to take up unskilled mining jobs. The mining industry expects it will need 50,000 to 70,000 people over the next 10 years.

In Canada, a 2010 study by the mining industry concluded that 100,000 new workers will be needed by 2020. With strong international demand, that number could be 40 per cent higher.

Labour shortages tend to drive technological change, so we could be facing the most intensive period of innovation the mining industry has seen in a century. Demand for innovation will come from the mining companies, but the supply of innovation will come from companies that produce goods and services for the industry. The most innovative companies are likely to be the biggest winners.

But taking advantage of the demand may be difficult. Labour shortages in mining also signal problems for the supply sector. Caterpillar, for example, is the world’s largest manufacturer of construction and mining equipment. The company’s network of distributors, including Finnings International with over 12,000 employees worldwide and Toromont Cat in eastern Canada, compete directly with the mining industry for talent. These companies are scooping up heavy equipment mechanics and technicians, fleet analysts, rebuilders, warehouse specialists and mining engineers.

For smaller suppliers, the shortages are magnified. They compete not only with mining companies that often offer higher wages, but also with the bigger suppliers that also offer benefits, training and mobility. And in a country like Canada that already suffers from a shortage of skilled tradespeople, when the larger companies cream off the most experienced employees from innovative smaller companies, they undermine the nation’s capacity to compete.

There is no short run solution. The supply of young people leaving farming with mechanical skills and an up-at-dawn work ethic has dried up. Young people aspire to the jobs they see around them, and urban schools steadily become less capable of training workers for the resource sector or the supply industries.

The apprenticeship system has also broken down. Apprentices once accepted low wages for a long time in exchange for training. They were cheap when they were low-skilled and they often stayed with their employers once they developed their skills. Now, young workers cost more and are more mobile. Investing in an apprentice while his or her productivity is low no longer makes sense. Employers can’t recover the investment by underpaying them when they become productive because other companies offer higher wages and steal the training investment. This “training externality” means employers increasingly rely on government to provide training.

But the public sector supply of training for manufacturing and resource industries has fallen short. Even though skill requirements are rising, parents, students, teachers and governments have all tended to ignore trades training. The resulting shortage undermines the capacity of firms to innovate.

Innovation and training are two important by-products of the mining supply and services sector. With the current boom in mining, both these by-products are more important than ever. And that means that attracting and holding talent has become one of the key challenges for our sector.

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