Employment Growth Abounds for a Robust and Expanding Industry
An old joke that often makes the rounds is that there are two seasons in Canada: winter and construction. Of course, there are many different forms of construction and preceding phrase relates directly to agitated motorists venting and showing disdain for what seemingly is never-ending road construction. Deep down, we all know it’s a necessary evil, lest we prefer to drive on continuously decaying surfaces while attempting to dodge Grand Canyon-sized potholes on what is nothing short of an obstacle course on some city streets.
But there’s much more to construction than just fixing axle-bending potholes. As of now, the entire construction industry as a whole accounts for about 7 per cent of entire national workforce and 6 per cent of the gross domestic product. There are close to 1.3 million people working within the sector, which is credited in producing about $90 billion in economic activity on an annual basis.
Over the next 10 years, the Canadian construction market is expected to become the fifth largest in the world according to the Canadian Construction Association (CCA). Growth will be driven primarily by global demand for natural resources and the need to modernize Canada’s aging infrastructure.
The Canadian Construction Association is a national, federally incorporated not-for profit organization created in 1918 and is the official voice representing the non-residential segment of the construction industry – so essentially members of the CCA build everything but single-family homes.
Within the first year of being created by about 100 members the association attained legal status in 1919.
“We have what we call partner associations,” says CCA CEO Michael Atkinson. “There are construction associations at the provincial and local levels and we have what we call an integrated structure that when a construction company joins, say the Calgary Construction Association for example, a small portion of the fee they pay to Calgary comes to the CCA and another portion goes to the Alberta Construction Association so with one stroke of the pen that firm becomes a member of the local, provincial and federal associations.”
Now in its 85th year, the CCA is widely regarded as being the national unifying voice for the industry with more than 17,000 members through a number of municipal and provincial integrated associations. The CCA keeps members apprised on the latest federal public policies and regulatory requirements. The Canadian Homebuilders Association is the sister organization to the CCA, representing companies that develop single-family residential dwellings. Total employment between residential and commercial construction usually tends to break down at about 50-50 when looking at the overall numbers from coast to coast although commercial seems to be taking a slight lead mainly due to industrial development and the burgeoning natural resources sector.
As the official national voice of the construction industry, there’s a lot of collaboration with each level of government, and especially Ottawa.
“We obviously deal in lobbying with the federal government,” Atkinson continues. The organization also deals with other stakeholder groups at the national level and also National Design Associations and international organizations and national standards including contract forms and the promotion of best practices.
Atkinson also clarifies that consultation would be a better word than lobbying when it comes to the CCA’s relationship with the federal government.
“The federal government is a major user of our services,” Atkinson points out. “So we’re not just talking to the federal government about what everyone else wants to talk to them about in terms of taxes and regulation. But we also do get involved in making sure when government is formulating new policy that they understand how it will impact or play on our particular industry, which is somewhat unique.”
Impacts of the Recession
The size of the construction industry is also an important factor to consider given that about one in every 16 Canadians drives their living from the construction industry.
“We contribute between 6 and 7 per cent of Canada’s GDP,” Atkinson reveals. “We’re an industry that’s growing. There was a report out by an international forecasting group in March of 2011 that says by the year 2020 Canada will have the fifth-largest construction market in the world behind only China, U.S., India and Japan and some economists think we’re going to surpass Japan.”
Much of the cause for such demand is our national natural resources sector; not just oil and gas but mining, energy generation including hydroelectric projects and also a lot of public infrastructure projects particularly in mass public transit to the point where it’s noticed around the world.
“We have a number of large foreign construction firms here from Europe right now because the European markets are somewhat flat and they all see Canada as a growing, burgeoning marketplace for them,” Atkinson reveals.
“We have a very strong outlook,” he continues. “In fact in many parts of the country our members saw no recession and there are a couple of reasons for that. Heading into the recession in September 2008 we had just come off something like six or seven straight years of unprecedented demand so we were going from an all-time high into a recession.”
When a recession hits, the construction industry is often the last to be impacted by the downturn because investment decisions and commitments had already been made for a project months, if not years, in advance. It’s hard to just turn off the tap, so the industry won’t typically see the impact of decline until the time comes for new project decisions to be made.
“We had a lot of hangover work,” Atkinson explains. “Going into 2009 a number of our firms were still busy dealing with the hangover if you will from the pre-recession. Also, just as we were going into the recession the federal government’s current Building Canada Plan, which was first introduced in 2007 as a seven-year, $33 billion federal investment, was just coming online.”
It was announced in 2007, but by the time all the framework had been entered into with the provincial governments and the projects were actually tendered and the money began flowing, it was 2009. Additionally, when the federal government introduced its economic stimulus measures a good portion of that was added investment in construction because it was felt the best way to stimulate the national economy, especially to create jobs in the short-term, was to invest in construction.
“We had a perfect storm from a positive perspective,” Atkinson states. “Heading into the recession we had a hangover of work from an all-time high volume; we had the Building Canada Plan coming online and then we had the stimulus measures coming very quickly, so much so that despite the fact our employment numbers went down by July 2010, we were back to pre-recession employment numbers.”
Some of the CCA membership felt little effects of the recession, but make no mistake, others felt it quite hard as Atkinson admits.
“If you were in southwestern Ontario and your clients were primarily in the automobile, manufacturing or export sectors you got hurt,” Atkinson confirms. Oil and gas development and investment also felt the pinch.
“People forget that we you talk about a $12 billion stimulus injection, $11 billion of which was new federal money invested infrastructure, you then multiply that by two or three times because it’s being matched by other levels of government.”
Atkinson also notes there has been recognition at all levels of government that during the 1970s, 1980s and the 1990s, public infrastructure was largely neglected including highways and water distribution and water treatment plants and sewer lines to the point that it was becoming an albatross in terms of impeding productivity and by extension the ability to compete on a level playing field.
“Governments to their credit have started to realize fiscal pressures are important and it’s essential not to spend more than you have,” Atkinson relays. “At the same time, you have to invest in infrastructure that’s key to your economy.”
While it’s essential for governments to balance their fiscal budgets Atkinson believes bureaucrats have begun to see the light that simply turning a blind eye to infrastructure and its associated costs will only make the problem that much more dire the longer its ignored. It’s penny wise, pound foolish or cutting off your nose to spite your face.
“We haven’t seen the typical cutback in capital spending that you would normally see when governments go into fiscal restraint phase,” Atkinson replies. Proof of that to some extent is the federal government’s continuing commitment to long-term infrastructure programs and they’re committed by the federal budget of next year to have a successor program announced for the current Building Canada Plan which expires in March 2014.”
Federal Minister of Public Infrastructure Denis Lebel has publicly made the commitment to ensure the new successor program will be in place by April 2014 so there will be no gaps in funding.
This past year the federal government followed-up on its promise to make the $2 billion annual Gas Tax contribution to municipal infrastructure a permanent program.
“We’d like to see it indexed now so it doesn’t get eroded,” Atkinson adds.
There’s also the Canadian Parliamentary Review of the Canadian Environmental Assessment Act and the legislation received Royal Ascent at the end of June and the particulars of the project lists are being worked upon at this time.
“We are delighted with the direction that’s being taken,” Atkinson enthusiastically states. “I think it’s important to understand that most of the reforms that we and other groups called for are not trying to circumvent or subvert the environmental review and assessment process, we’re trying to make it more effective because there were too many triggers in it. Every time you turned around the federal government had to do their own assessment despite the same thing having already been done by a province.”
The duplication, redundancies and inefficiencies had to come to an end if for no other reason than to put an end to the waste of financial and human resources needed to expedite such a misguided procedural setup. Another serious concern was the potential to turn off investors, who would become impatient with the bureaucracy and terminate a lucrative project.
The necessity for seeking out qualified labour personnel and the ability to train them in order to carry out unique project requirements is an aspect of the industry that is at the very core of how successful the industry can be as a whole. It’s without a doubt the biggest challenge, as Atkinson confirms.
A shortage of available workers is definitely a concern, much the way it is for industries as forestry, especially out west, primarily due to the expanding oil and gas sector that is able to pay exceptionally well. According to Construction Sector Council’s (CSC) 2011 Labour Market Information (LMI) assessment, the construction industry in Canada will need to find about 335,000 new entrants by 2019 to replace retiring workers and to keep pace with increasing demand.
Domestic sources can only provide some 163,000 leaving a net total of 172,000 that will need to come from foreign sources. Canada’s Temporary Foreign Worker Program and immigration system generally, however, need to become much more “construction-friendly”. CCA is lobbying for a number of changes in this regard to ensure that these programs work more effectively for their industry.
“The government has been very responsive,” Atkinson says. “There have been a number of announced changes to the Skilled Worker Program to cut some of the red tape and make those programs more responsive to the needs of employers in our industry and other industries as well.”
As the CSC’s report also concludes, it’s not just field on-site personnel, it’s supervisory and managerial personnel that’s needed every bit as much. The fact the Canadian construction industry offers good-paying jobs is another reason for Atkinson’s optimism that the positions can and will be filled as needed.
“One of the things that we always promote with youth and others is that the skills you learn are completely portable,” Atkinson notes. “That’s not like me; I’m a trained lawyer licenced to practice in Ontario only and if I wanted to practice anywhere else I’d probably have to be re-schooled. But if you’re an electrician, plumber, welder or carpenter you can go anywhere in the world.”
A lot of foreign firms are in Canada not just because of P3s. When attracting money from such sources as The Bank of Scotland and Bank of Ireland it made the landscape much more competitive and brought foreign design and build teams familiar with P3s, which was the initial attraction.
“I now think it’s the size of the Canadian marketplace and the opportunities here in Canada that’s causing those firms to want to stay or want to set up a Canadian subsidiary or buy a Canadian concern because now they see there are other opportunities here that may or may not be P3s,” Atkinson says.
The size of the individual projects currently being built in Canada that are at least $1 billion in scope now surpasses 30, so it should come as no surprise companies from around the world are looking to obtain a foothold in Canada. It’s also a much closer hop to the United States, which will eventually bounce back and be in need of infrastructure upgrades.
On January 1, 2013 a new amendment takes effect to the WSIB Act requiring WSIB coverage for Ontario’s independent contractors, proprietors, partnerships and some executive officers within the construction industry. Until now, exemptions have provided coverage for about two-thirds of Ontario’s construction industry.
Finally, the National Infrastructure Conference, sponsored by CCA, is taking place in Regina from September 10 to 12. The CCA’s 95th annual conference is scheduled for La Malbaie, Quebec next March 3-8.