17 minute read
Labor shortage in Canada: An interview with top drilling professionals
Labor shortage in Canada
An interview with top drilling professionals
As projects reopened and the prices of commodities skyrocketed, rumors of a labor shortage in Canada spread. Over the past six months, professional groups on social media became littered with job postings, as opposed to people looking for work. What is the state of the industry? Is there indeed a labor shortage in Canada and how does it affect driller wages, projects and competition? Coring Magazine presents not only answers to these questions, but an exclusive deep look of the industry in Canada. We have explored the labor shortage in details by interviewing five representatives of the hottest diamond drilling contractors in Canada. Each response is presented without editorial changes in order to reach the core of the issue.
Every story has two sides and Coring aims to reveal both of them. To reach the core of the Labor shortage issue, our magazine not only interviewed industry professionals but also conducted an online survey on the opinions of drillers.
The results, while not statistical, still paint a picture of the situation in Canada. Most of the respondents were indeed from Canada, close to 60% of all, with the US being second with 15%. Almost all have confirmed that there is an ongoing labor shortage (there was just one respondent to answer ‘No’). Furthermore, the reasons for this situation also match: not enough young people enter into the industry. This sentiment does echo the ongoing generational clash, particularly since most of the North American respondents have over 10 years of experience in the industry.
According to Deloitte Global 2021 survey, the Millennials (born between 1981 and 1996) and Gen-Z (1997 to 2012) value job stability, healthy work-life balance and the state of the environment much more than previous generations. These views are in collision with the nature of mineral exploration drilling and the unfair reputation that the industry gets.
Another reason, touched upon by several respondents and corroborated by Coring sources, could be the ongoing COVID-19 pandemic. Closures have forced many experienced drillers to exit the industry and with the restrictions to travel, there are less people available. The work meanwhile seems to be even more, as projects struggle to make up for lost time and new opportunities sprout thanks to the record increases of prices of most of the commodities. In consequence, 50% of all responders have noted that the labor shortage has affected their work negatively, while another 10% are not certain. ‘Yes’ is a prevailing answer amongst experienced and/or senior drillers, while ‘No’ and ‘Maybe’ have been chosen primarily by people from other regions or with less years in the industry.
Likely, the answer is somewhere in between these two reasons. But the ongoing labor shortage also raises the question of wages. There appears to be an even split amongst the responders; half had seen an increase. Amongst Canadians, the distribution is vastly different - approximately 80% of respondents report increases. Most of them, however, seem to be driven by a change in the company they work for.
There is indeed a growing competition between contractors and money is the driving force. Seventy-five percent of all responders and almost everyone from Canada have reported that they or their colleagues have been approached by other companies within the past year. Alongside the bump in salary, the offers include better travel pay and improved conditions.
It is difficult to estimate and exact the percentage of wage increase that would compel drillers to change jobs. According to 85% of all responses, it would take more than 10%. This answer is prevalent in people with more experience and/ or from industry-leading companies. In another 10% of the answers, 4% - 8% would be sufficient and only several responders have chosen 1% - 3% (none are Canadian).
There appear to be other challenges. Drill rigs seem to also be in demand, with some predicting a full-blown shortage in the upcoming months. Additionally, the labor shortage may not be limited just to Canada. More information is needed, but the responses and other information Coring has obtained, suggest it could be spread across the developed regions of the world (US, Australia and Europe). Considering the attitude towards the industry and the lack of proper funding in Geology education (see the conversation with Dr Brett Davis on p. 43), this shortage could remain, and quick, effective solutions seem to be in even shorter supply than drillers themselves.
TB
Tim Bremner
Senior Vice President North America
Foraco International
KS
Kevin Slemko
Corporate Business Development Manager Major Drilling
What is your opinion on the ongoing labor shortage and drillers’ daily wages? What are the main reasons?
How does it affect your company? Were you forced to increase driller/staff salaries? What do you do to retain your current staff?
Do you expect potential production/project delays caused by the ongoing labor shortage?
‘The market for skilled drillers, helpers, supervisors and mechanics has never been tighter. It has limited the number of rigs our company can put to work and has impacted those that are currently in operation. This shortage has spurred in significant increase in wages and benefits as various contractors pitch lofty offers to attract crews. The situation is unsustainable and overall not very healthy for the industry.
The main reason is the prolonged downturn in the industry lasting almost 9 years. Many who worked as drillers have retrained and left the industry. Others have found new careers that have a better work/life balance and in some cases even pay more than drilling.’
‘As I mentioned, we are short on crews on about 50% of our projects. In addition, we cannot respond to new tenders and field the remaining drills. We’ve been forced to increase wages at least twice in the past twelve months.
In order to retain the crews we have, we use long term contracts, wages and benefits within the top 80 percentile, safe work sites with good equipment, visible management, fair labor practices and predictable rotations.’
‘Yes, and we are experiencing them now. This is having a significant impact on the financial performance of the company – and you simply can’t pass on the costs to the customer.’ ‘With the current exploration demand in North America, we are experiencing a strain on our labor pool. We are facing this challenge along with our competitors. Wages are sometimes being dictated by the demand.
The main reasons we are experiencing the labor shortages is due to the 6-year industry downturn, a lot of experienced people have left the industry. Also, fallout from the COVID-19 pandemic has led to a slower influx of the unemployed getting back into the work force. Plus, we have seen reluctance from newer generations wanting to adopt the driller lifestyle and schedule.’
‘Costs have been affected and we anticipate they will continue to increase. This is mainly due to wage increases and higher investment costs of recruiting, training/trainers, retention/signing and referral bonuses.’
‘We are already seeing certain project delays and have been declining some bids because of the lack of labor availability in certain areas. Some of our current customers are adding rigs and/or extending drilling programs which we need to prioritize.’
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Ryan Sunderland
Shareholder and Supervisor Bryson Drilling
DS
Devin Smith
Business Manager More Core Diamond Drilling Services
‘My opinion would be that there does not appear to be enough of a pay increase incentive for people to work at a career like this, where you need to be away from your family for extended periods of time. The best example I can think of is a basic machinery operator for this area gets almost the same hourly as a driller and is home every night.
The other major factor is how seasonal the work can be. In previous years for us, retention of a full crew has been difficult due to lack of work. Because of this, in some instances workers only work 4-6 months of actual work on-site. This also causes the lack of ability for promotion, so workers find jobs in other fields that are steadier. These workers that have been leaving the industry over the past 5 years are the workforce that is currently needed with market conditions, but it will take 3-4 years for the proper training to take place.
This has also created a problem with being able to promote workers to get the needed experience to become drillers.’
‘For retention of experienced workers, we did significantly increase pay scale. This affected us in that our tenders needed rate increases, becoming more costly for clients and increasing chance of non-awardal. We attempt to make working conditions better and appease individual schedules.’
‘For us it does not seem to be an issue, as we turn down work that we do not have sufficient existing crew to accommodate. But I do expect this is an issue for the industry as a whole. I see it as very possible that companies are potentially having difficulty finding contractors to drill within their timelines, even if they are receiving less experienced workers.’ ‘The price of gold and other market forces are incentivizing mining investments and activities placing a high demand on labor. I wouldn’t characterize it as a shortage relative to other years, only relative to the high demand.’
‘I wouldn’t say we were ‘forced’. We did increase salaries and benefits as a business choice to help us maintain a quality work force.’
‘We have turned work away this year but not strictly due to lack of labor. We’re pretty busy as it is. To take on any more work would have stretched our capacity in other ways such as equipment and administration.’
Are the daily wages the main factor for drillers to change jobs?
Tim Bremner
Senior Vice President North America Foraco International
‘No. Work/life balance and security are the most important. Some, however, are tempted by the higher wages only to find out that 6 weeks later they are looking for new assignments. Many crews prefer a 2 week on, 2 week off rotation in favor of higher wages.’ ‘I think getting the wage right is a factor in the decision but what makes great people want to come and stay at the right company will be how they are treated. Are they paid fair, provided with the right benefits, given a schedule that works for them and their families, and do they have the right equipment to do their job safely and efficiently?’
Kevin Slemko
Corporate Business Development Manager Major Drilling
Does the labor shortage affect the competition between drilling contractors and how?
‘Not really, but I don’t understand how a company can increase labor costs so significantly without serious impact to the bottom line. We have not seen rates for drilling services increase at the same rate as wages – far from it. This situation may result in some companies failing.’ ‘It does affect the competition between drilling contractors but instead of the competition to be awarded work, we are in competition to find labor for our current and future projects.’
How much of a difference in wages can make a driller go on a job with less attractive working conditions?
‘Twenty per cent more.’
Ryan Sunderland
Shareholder and Supervisor Bryson Drilling
‘I would not say the daily wages as much as the lifestyle comparison. Most previous workers of ours that have gotten out of the industry, mention mostly being at home more and a steady paycheck making life significantly easier for budgeting. It is reassuring for people to know when their next paycheck is coming and build their life around that, other than seasonal work.’
Devin Smith
Business Manager More Core Diamond Drilling Services
‘I would say there appears to be less competition between contractors in terms of contract awardals, but more competition in terms of labor retention.’ ‘Of course, it does. That’s true in every industry. In this market, workers have options, and they know it, so the contractors who try to get by being the lowest bidder might find themselves with a handful of contracts and nobody to work them. It’s a balancing act that really favors contractors with a solid reputation and repeat customers who are willing to pay what it takes to keep getting core out of the ground and do it safely.’
‘When the industry was not as busy, anyone sticking with it did not appear to need a significant wage bump to go into spots with less attractive working conditions, but with current labor shortages, I would estimate most drillers would expect a significant wage bump to go to such places because there are nicer jobs needing workers the same.’ ‘It’s hard to quantify an answer to this question but it’s a good one. The changes from job site to job site and from month to month create a moving target of working conditions. On the other hand, there are some constants regarding working conditions on certain long-term projects that employees do become familiar with that cause a few of them to either beg for the opportunity to return or refuse to go back regardless of the incentives. But I believe the firsthand knowledge and on the ground experience of our management team has created an empathetic response in our employees that make this company different than some. We’ve been able to use monetary incentives and investments in improving working conditions that have to lead to a relatively stable work force, in spite of the competitive environment we’re in that makes it difficult to do so. Higher wages can help where working conditions are tough. But our employees are generally willing to push through less than favorable working conditions in order to stay with us but it’s not just about the wage.’
Are companies poaching staff from their competitors, if so, how?
Is the labor shortage impacting the industry negatively and how?
Tim Bremner
Senior Vice President North America Foraco International
‘Yes. Mostly using social media and direct solicitation. This is totally unacceptable.’
Kevin Slemko
Corporate Business Development Manager Major Drilling
‘As a company it is our responsibility to build the right set of conditions instead of worrying about someone trying to hire the people away from us. When we do it right, people want to stay. We are a small industry overall and understand our employees are exposed to other offers but we are confident that when you take care of your employees, they stay and help make the company a success.’
‘There will be a correction in the market. Drilling services will not be required to the extent they are now. Rates will fall and competitive bidding will mean labor rates will get reduced significantly. This uncertainty makes our industry even less attractive than it is today – given the new generation workers, who are not necessarily that much in love with the lifestyle of a diamond driller.’ ‘The shortage is a negative impact because keeping up with the demand is a constant challenge. Exploration and mining companies are being challenged to find a drilling contractor that has availability. We as a contractor are working hard to promote, attract and retain crews to take on additional requests from partners, but we always commit only to projects we can complete and have a positive outcome for both parties.’
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Ryan Sunderland
Shareholder and Supervisor Bryson Drilling
‘Yes, that is definitely happening. Although, in most cases I find it is the individual using their skill as a personal marketing tool to try and achieve a higher pay rate for themselves. There also does seem to be the occasional where company hiring representatives will contact workers who had previously worked for them or been referred by a current employee of theirs. They typically go straight to job offers and in some cases wage incentives to exceed where they are currently working.
It is always difficult to explain, but most drillers have worked for one or numerous companies in previous years for various reasons (typically work shortages with any specific company). I have even seen where a worker quits one jobsite for company X after secretly attaining a new position with company Y drilling a neighboring property and has company Y pick him up from company X’s worksite.’
Devin Smith
Business Manager More Core Diamond Drilling Services
‘Every business has to make choices in an effort to stay ahead of their competitors. That’s why they’re called competitors. Human resources are the number one requirement of almost every business in existence so to exclude them out of the ‘competition’ all together would be unrealistic. However, drilling companies have one of the most daunting challenges of any business and as such, there’s a bond there amongst many of them that can’t be ignored in the name of ‘fair competition’. The logistical challenges and stress involved in delivering several tons of steel and crews of young men and women to some of the most extreme environments on Earth, then successfully complete the project in a way that brings everyone home safely provides endless opportunities for ‘competitors’ to become ‘great friends’. We’re way more likely to share resources, including workers than we are to poach anyone.’
‘I believe the labor shortage will impact the industry negatively in quality of work, typically costing more $/meter for companies to drill. Any sub-standard labor (everyone’s opinion varies on what is considered sub-standard) causes less production, or in difficult drilling locations, lower hole completion percentages, or need to use various drilling methods that may be unnecessary (such as need to reduce drill string size, sometimes referred to as telescoping) because they lack the proper experience to correctly utilize specific drill muds, understand what to do when grounds are caving, how to avoid being stuck in the hole, etc.’ ‘No. If anything, the incentives are helping to bring more people in. Like I said, it’s only a shortage relative to the high demand. High demand is good. I should add; this year for the first time we’re actually importing workers from the US and Mexico by sponsoring them to obtain workers permits. It’s an expensive strategy to combat the labor shortage but we believe in doing what it takes to keep the drills turning especially for our repeat good paying customers. This market won’t last forever, it never does. You have to take advantage of it while it’s hot. The labor shortage is just the other side of the coin of a very hot market so having an affective strategy to deal with it is a must. We’re not complaining. We survived through times where the phone was ringing off the wall with workers looking to land anything they could get, but we couldn’t land enough work for them. We’ll take the hot market with the labor shortage any day.’ C
Coring Magazine will continue following the developments of the situation. Thank you to all respondents for their time!
