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Debating the Canada Job Grant debate

John Geddes, Stephen Gordon and Erica Alini discuss the deep policy, big money and intriguing personalities at play


 

Aaron Lynett/CP

John Geddes (Ottawa bureau chief) and Econowatch bloggers Erica Alini and Stephen Gordon discuss the debate around the Canada Jobs Grant.

John Geddes: Among the innovations he’s introduced since winning power in 2006, Prime Minister Stephen Harper’s decision to almost never meet with the provincial premiers as a group has to rank as among the most simple and effective. Why put yourself through having to sit around regularly with a bunch of politicians who, pretty much inevitably, demand that you give them more money?

But simply erasing First Ministers Conferences from the annual calendar of Canadian political events hasn’t eliminated the underlying transfer-payments tension. And so, at last week’s meeting in Niagara-on-the-Lake, Ont., of the Council of the Federation (as we call the premiers’ club when they meet without the PM), the big unifying item was seething resentment over the Harper government’s planned “Canada Job Grant.”

In case you missed it, the grant was a surprisingly ambitious program unveiled by federal Finance Minister Jim Flaherty in his spring budget. It amounts to a unilateral overhaul of existing deals between Ottawa and the provinces to fund training. Here at Maclean’s, we find the resulting conflict engrossing—a tangle of deep policy, big money, and intriguing political personalities—and this post is meant to begin an exchange among some of our writers on the subject.

With the Canada Job Grant, the federal Conservatives  aim to accomplish two things: increase their own influence in shaping training policy, while forcing provinces (and businesses) to pony up more of the money. Here’s how this neat trick would work. When Ottawa’s labour market agreements with provinces expire next year, they are to be replaced with very different deals. Instead of just giving provinces $500 million a year to deliver training, fully $300 million of that federal contribution would be repurposed to fund a new program—the Canada Job Grant. Under it,  any businesses planning to train a worker for a new or better job could put up $5,000 toward the cost of that trainee attending an eligible training institution, and thus qualify for $5,000 from each of the federal and provincial governments.

The provinces still get $200 million a year from Ottawa to help support existing employment programs. But the premiers are, not surprisingly, fuming about losing $300 million in federal funding—unless they are willing to match that amount and able to find companies in their jurisdictions wiling to ante up, too. In their meeting last week in Niagara-on-the-Lake, Ont., they joined in a chorus of bitter complaint about the Harper government imposing the demanding new scheme with little consultation.

Several premiers went so far as to predict that no province would play along with the Canada Job Grant under the cost-sharing formula now on the table. They asked for a meeting between their jobs ministers and Jason Kenney, who took over the file as Harper’s new employment minister in the early summer cabinet shuffle.

Kenney quickly agreed to a fall meeting. But he declared that his purpose would be to “move forward with timely implementation of the Canada Job Grant,” not to go back to the drawing board. A key factor in determining whether he ends up having to bend, to some degree, to provincial pressure will be the business community’s stance. Immediately after the budget, the federal government compiled an impressive list of private-sector groups praising the job grant.  But provincial officials at Niagara-on-the-Lake said that in the four months since Flaherty’s budget business enthusiasm for the Canada Job Grant has waned considerably, as companies digest the details.

This is not a straightforward, old-school, fed-prov wrangle that can be boiled down to the provinces wanting more money than Ottawa cares to give. The sheer dollar figures matters, of course, but so does designing the training programs.

And the political dramatis personae here is top-tier. Several premiers just now rank among Canada more dynamic political actors, including Ontario’s Kathleen Wynne, Saskatchewan’s Brad Wall and B.C.’s Christy Clark. And, as it happens, the federal point man on the issue, Kenney, is arguably the most interesting minister in Harper’s cabinet. So we have all the elements: an important economic policy, big money, highly watchable players. It’s shaping up as the fall’s most unexpectedly lively political dossiers.

Erica Alini: The politics of the Canada Job Grant are certainly intriguing, but the policy side of it remains a big question mark. On the politics of why Ottawa might want to overhaul the jobs training system, we’ve found some convincing answers: Harper doesn’t want to give the money to the provinces because he wants more visibility and recognition for the federal government — or so one popular theory goes.

The policy questions, though, are still wide open. First of all: What exactly is the problem that the money Ottawa and the provinces are fighting over is supposed to resolve? Obvious, you might say, Canada has a skills shortage — skills mismatch, or whatever you want to call it — problem. On this, the provinces and the federal government agree. They also agree on the idea that government intervention is required in order to rectify the situation: Public funds should help dislocated Canadian workers acquire the skills that will allow them to fill all those vacant jobs.

Now, many economists believe that worker training programs can be desirable. They can help alleviate the social costs of big transformations in the economy, such as when entire industries become obsolete because of the effects, say, of globalization and technological change. Globalization and technological change are positive forces that make us better off as a society, but they often come with mass layoffs and plant closings that can leave individuals, families and entire communities reeling. The evidence indicates that economies absorb these shocks on their own: Technology kills some industries but creates new ones and free trade hits uncompetitive sectors but makes the competitive ones flourish. Governments can still intervene to help dislocated workers find jobs in growing industries faster. The aim is to facilitate and shorten the transition.

All of the above applies to Canada too, of course, but evidence that we are currently suffering from an severe skills shortage is thin. As Joe Castaldo reported on Canadian Business some time ago: “the percentage of businesses reporting difficulty hiring in the Bank of Canada’s business outlook survey is 25%, well below the 15-year average of 35%.” When labour shortages are serious, he noted, employers react by raising pay, but wages in Canada have been growing on par with inflation. There seem to be a genuine skills shortage problem in the Prairies (not the whole country), he writes, but increasing wages in labour-starved areas and industries might solve the problem. Another important question to ask then, is: What, if anything, is keeping certain employers from hiking up worker compensation enough to fill those vacant jobs?

Stephen Gordon, here on Econowatchzeroed in on that recently:

… when the wage is right, workers feel motivated to move from far-flung places or acquire extra-training to get the vacant jobs. This solution seems to have escaped Canadian employers, possibly because they had grown so used to paying the same wages for so long that it simply hadn’t occurred to them that paying higher wages was an option. Whining to the government, on the other hand, is a long-established and invariably successful Canadian business practice.

Long story short, Canada seems to have a localized labour shortage problem and subsidized training seems to be only part of the solution.

But let’s assume that the provinces and the federal government have correctly diagnosed the problem (nation-wide skills shortage) and the policy prescription (government-funded training programs). Then the questions would be: What’s the best to design and implement these training programs?

The provinces insist that they’ve done a good enough job. Ottawa seems to imply that they haven’t. It would be nice to see some studies and numbers to substantiate either claim.

There is also the issue of whether it’s better to give the money to employers or the displaced workers. Here’s Gordon’s take:

If workers had access to income supplements, firms could offer reduced-wage training positions. And since the money is tied to the worker and not the firm, competitive pressures — and not bureaucrats — would determine the best employer-trainee matches. To the extent that these grants would be portable across provincial boundaries, provincial governments would be unlikely to contribute, but then again, it’s the federal government’s responsibility to advance its own policy goals.

 

Responding to that, Employment and Social Development minister Jason Kenney tweeted last week that the government “seriously considered” that option but concluded it would end up subsidizing training in low-demand occupations.

Interesting. How did Ottawa reach that conclusion? What evidence did it look at? It would be nice to know.

Stephen Gordon: I must confess that I didn’t understand Minister Kenney’s distinction between ‘low-demand’ and ‘high demand’ occupations. It seems to me that these distinctions depend on the wage being offered: occupations that are in high or low demand at the prevailing wage. Labour demand curves slope down: demand falls as the wage goes up. Labour markets work pretty well: higher wages attract more and better workers. If the so-called shortage of skilled workers is the policy problem, it’s pretty easy to solve.

The questions of paying for training and defraying the costs of moving to another province are trickier. But as I noted earlier, these would be better dealt with by direct grants to workers who wanted to take advantage of those higher wages.

Of course, as John Geddes notes, the issue has gotten bogged down in the usual mire of interest-group politics. Provinces want free federal money, business groups want free federal money, and we have a federal government that wants to be seen doing something. But no-one seems to be interested in what would make workers’ lives easier.


 

Debating the Canada Job Grant debate

  1. Well maybe you lot see this as lively and intriguing and exciting and all that….but to the rest of us it’s just another Fed/Prov bun fight.

    Been there, done that.

  2. In a way it’s inevitable that the Federal government would eventually want to start taking credit for money it’s spending. I don’t see the provinces with much leverage in this scenario.

  3. Not only do the provinces lose the existing transfer but they will have to come up with twice as much money – e.g. $300m to match the federal and employer contributions and $300m to continue the current programming created under the LMA. There is no evidence that employers would spend $5,000 for an employee’s training except for large corporations which would have spent that money anyway. I can’t see small and medium sized businesses taking advantage of this unless it was made incredibly easy, i.e. no paperwork. While the program says it’s a ‘job’ grant, there does not seem to be an incentive to train people who do not already work for the employer – the training is to be of ‘short duration’ which will not necessarily meet any skills shortages. I fear this program will follow the fate of the municipal infrastructure program – the provinces and municipalities couldn’t come up with full match of funds and so the feds got to keep the money and lower the deficit. This is not just a fed/prov squabble, it’s a sleight of hand which will result in less training.

  4. First, as another comment points out, this article gets the money wrong: the provinces not only ‘lose’ the $300 million, they also have to pay another $300 million for their matching share. Second, this is no ordinary ‘federal-provincial’ squabble: this current federal government has stated many times that “Canada and Alberta agree that primary responsibility for the design and delivery of labour market programs for individuals to support the creation of a skilled, productive, mobile, inclusive and adaptable labour force in Alberta rests with Alberta” – cited from the Alberta-Canada Labour Market Agreement and the same in every provincial agreement and stated in the 2007 Budget and many times elsewhere- right up to the very moment when the Canada Job Grant was suddenly announced with no prior consultation or even any hint that the federal government had any problem with the current provincial programs. Third, the provinces do have the upper hand as they have to deliver this program which is not at all simple, but will have to be highly bureaucratic since it is difficult and risky to operate a grant program to many small organizations. Fourth, and most important, the Canada Job Grant was designed overnight on the back of an envelope by political staff, with no expert or knowledgeable input, no consultation with training organizations or provinces, no documentation at all (other than a one page news release), no evidence that this will be an efficient program which will supply needed skills (and a lot of evidence to the contrary) and altogether an idea whose main advantage is that it seems to take in gullible media who cannot recognize politically inspired fairy dust, such as Macleans. Do you actually think that it is a good idea to spend $600 million a year of public money on a political whim, with no evidence? (And by the way if the media would do any investigation at all – like picking up a phone – they would discover that despite the Budget’s having been 4 months ago, there has not been any meeting with the provinces called at the Ministers level or at the officials level. Can the federal government actually be serious about getting a program off the ground on April 1 2014?)

    • Interesting response on a number of levels. Just a couple of points.

      You state that my article “gets the money wrong,” suggesting that I missed the fact that provinces would have to match the feds’ $300 million. Take a look at what I actually wrote, though:

      “But the premiers are, not surprisingly, fuming about losing $300 million in federal funding—unless they are willing to match that amount and able to find companies in their jurisdictions wiling to ante up, too.”

      And you say that Maclean’s is part of a “gullible media who cannot recognize politically inspire fairy dust.” I don’t think my earlier reporting on this issue is gullible. For example, I wrote last week that “the Conservatives lumbered ahead with the job grant without bothering with serious consultations.”

      Still, good to have you engaged in this discussion.

      • That is a remarkably restrained reply, so thanks. I got a little carried away, I confess. In my defence, it does drive me crazy to see precious public funds spent so casually and until recently there appeared to be little recognition that this particular emperor has no clothes. I should not pick on Macleans: both Carol Goar in the Star and Andrew Coyne in the Post wrote pieces which treated the Canada Job Grant as if it were a carefully worked out and conscientious proposal based on some serious evidence. It seems to me that the media should hold government to a higher standard. When a proposal to spend serious amounts of public money is tabled, it should be expected as ordinary routine that there be back-up documentation supporting the need for the program and some evidence that the means (i.e. the proposed program) might actually accomplish the supposed ends (in this case, the acquisition of needed skills). The lack of any such material, the failure to call any meeting at all with provinces, the lack of a federal spokesperson to explain and defend the proposal, are all, in my view, giant red flags about this program. The odd thing about it is that the Labour Market Agreements, which this will largely replace, were one of the most successful social initiatives of the Harper government and also reflected their seemingly deeply held views on federal and provincial jurisdiction. The Harper government did insist that the provinces evaluate programs under the LMAs and provide some output data, and although what the provinces provide leaves a lot to be desired, there is consequently at least some of this under the LMAs and generally better than for most programs. Altogether a success which the Harper government ought to have been proud of…

      • John, what you’re saying isn’t correct and it isn’t semantic. The provinces lose the $300M, even if they come up with the $300M in new money. The federal $300M would go to the Canada Job Grant. So provinces would have to come up with $600 M in new money — unless they want to cut $300M worth of job training programs.

        And yes, I’m Matthew, not Michael, Mendelso(h)n. Very confusing I know. No relation.

  5. A point I was going to mention but forgot to: one of motivations for the government’s EI reforms was to encourage people to move from regions where jobs are scarce to where they are plentiful. Withdrawing benefits was a stick; it seems to me that the government could have used this funding as a carrot to advance the same goal.

  6. The best defense is a good offense. The premiers have been begging for a first ministers meeting so they can do their usual schtick and bash the current prime minister. It would be especially easy to do to Harper, since he has tended not to make demands of provinces, being one of the first prime ministers to try hard and respect the constitutional division of powers. The premiers might not be so anxious to meet if the PM will be asking them for things (like the job grant) instead of just writing cheques which don’t ask for any accountability.

    They wanted to engage Harper who wanted to leave the provinces alone. They might not be so eager to engage the Harper who is on the prowl, sounding like he wants to revisit his hands off policy towards the provinces.

    It also puts Trudeau and Muclair in a pickle about how exactly to respond to Harper provincial gambit. Are Trudeau and Mulclair going to stand with the provinces, and weaken their own interventionist credentials?

  7. It just occurred to me that there is another way to characterize this: Harper wants to raise the profile of the Conservatives and the federal government and have everybody else pay for it, since the feds don’t seem to be adding any funding and the only ones paying extra are the provinces ($300M) and employers ($5000 per trainee)…

  8. Another consideration might be that this government has no interest
    in seeing wages raised anywhere anytime for anything.

  9. During 2010, I was hired with a federal EI-sponsored worker-training subsidy paid directly to my employer that totalled 50% of my salary for 6 months; they were required to keep me employed for a year.

    A coffee room bulletin board contained notification of an internal program that shared savings with employees when their suggestions resulted in expense reductions for the company.

    The person who hired me used the shared savings program to obtain a bonus for herself of 1/2 of the subsidy amount (or 1/4 of my salary for 6 months) because of the savings benefit she had generated for the company. While employed, I was warned by an accounting department employee who knew about the subsidy arrangement that this long-term hiring person had, in the past, repeatedly looked for and hired federal EI or provincial John Howard Society subsidized people because she got a cut of the subsidy.

    As expected, when the year was up I was let go, just like every single one of the numerous other subsidized people hired by that firm before me.

    • Although this is just an anecdote, I`d be *very* surprised if that were the only company where firms (and/or firms`managers) simply pocketed the subsidy. This is why I’d rather see the workers get the money instead.

  10. The Provinces already have a service delivery network in place whereas Ottawa has emasculated Service Canada and could not administer the program. The cost of developing a Federal network would eat up all that money or new money would have to be found. There are already “strings attached” to the Federal transfer payments…Provinces must deliver programs “similar” to the old Federal ones like Skills Development, Self Employment Benefit and Job Creation Partnerships. The easy fix is for Ottawa to negotiate more defined measurement outcomes and program parameters but that would not have the desired political hammer. Harper is Putin in training…he keeps pushing until you blink. Disgusting.

  11. What is missing in this debate is attention put on the disruptive innovations occurring in the education sector. All levels of government have their minds firmly ensconced in generations past – where education was something government did primarily and that government must fund – or nothing gets done.
    As was and is the case with newspapers, publishing, broadcasting, film and other media content sectors, education service providers are becoming more numerous and diverse in response to forces of demand. This should be encouraged by law and policy.
    Provincial governments have the constitutional mandate to make laws in relation to education. They do not have the exclusive authority to provide it. Education regulators in this country must recognize that at the post secondary level (and often before that) education is commercial and contractual. Two parties (publicly funded or not) – an education provider and consumer – can enter a knowledge enhancement transaction and intend to be bound by a contract that sets the terms for that transaction. The key to skills shortages – if and where they exist – is to clearly identify the need and to meet it. By the way – the courts have affirmed (it always existed) this contractual relationship (See Gautier and other cases in the Ontario Court of Appeal).
    To date this skills shortage debate has been conceptual and abstract. Firms that lack the skilled workers or students/workers that report not having the skills demanded by industry should simply register their clearly articulated and respective needs so that targeted training can be assembled. If they cannot articulate it in the form of an application for a grant (I do not support tying it all to the public trough) or in a commercial negotiation for services offered or demanded then they should go quietly into the night and stop complaining.
    Traditional institutions can take years to have programs approved. Education regulators have fallen into the same trap and can take many months to approve a program for a private education provider – although it is not exactly clear what the criteria they use for “approval”. No government should (some have) have legislation that says they will only approve programs where they (government) determine there is an economic need.
    Education regulation should focus on ensuring that no student ever loses money and has a train out track if business failures occur and then government should step aside and let the market do what it does best – connect the forces of demand and supply. Now supply comes first and is excruciatingly slow to respond to demand.
    Everyone wants a strong public education sector, but they must focus their missions. Corporations and industry sectors that have needs would be better served to establish their own training systems instead of waiting around for government and publicly funded institutions to solve their problems. Students and workers must focus on being proactive consumers and not passive players dependent on what institutions and government do.
    John Boon J.D., HKMK Law Corp.
    Author
    Education Futures
    Commercial Reality, Law, Innovation and Opportunity
    Vancouver, Canada
    Check Out Amazon and Barnes and Noble for this Book

  12. The federal program seems to make sense to me.

    From the federal perspective, it allows them to analyze Foreign Worker Program numbers and target companies that want to bring in non-Canadians for theses jobs. Also, it puts a little pressure on the provinces to live up to what they are stating, which increasingly sounds like “We are focused on jobs and the economy” Do provinces want to put $300M into this program or other priorities such as teachers or other pet projects. Finally, it allows the federal government to question whether the provinces want to continue to invest in non practical university degrees such as many Arts programs or into direct training for young people. Finally, as Harper always does, he is forcing the provinces to put a little skin in the game, in the same way that a bank wants you to put up a downpayment before they give you a mortgage. Who cares if some provinces do not sign on. Others will, when the business community starts to ask.

    From the provincial perspective, since most are a financial mess, how can it be a bad thing to put money into training of young workers. When they are working, taxes will increase.

  13. I heard Minister Kenney interviewed on the CBC recently. I was not surprised to see the over simplification of an issue by a Conservative government not interested in reality only their own self-constructed fantasy land.

    Kenney talked about looking at what jobs are needed in a region and training the unemployed to match them.

    No consideration given to the hiring that goes on without job advertisements
    No consideration for the strengths or interests of the worker or unemployed, instead they are treated like a sack of potatoes to be thrown wherever they are needed

    The Canada Jobs Grant is a plan that won’t work and is designed to not work.

    It is simply another ideological cut in disguise.

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