November 29, 2013
In March, the federal government announced a new approach to their investments in skills training.
As the Mowat Centre and other analysts have rightly pointed out, the federal government’s proposal raises a lot of concerns; namely, the new grant would be funded by cutting transfers to provinces and leave out many of the most vulnerable workers who receive training from programs funded through these transfers.
It’s not surprising that provinces are strongly opposed to a proposal that jeopardizes programs they know already work. But we should not ignore the evidence that employers in Canada are not investing enough in training when compared to our major competitors.
The federal government says the Canada Job Grant would provide an incentive for employers to invest in training that bridges the skills gap between workers and workplace needs. Given Canada’s persistent underinvestment in skills training that improve productivity, this is a worthy goal. The provinces have argued back that cutting money for existing programs to pay for a new one just creates another set of problems.
The programs funded through the Labour Market Agreements serve vulnerable people who have little connection to today’s labour market, giving them essential skills to find gainful employment. A recent provincial report showed that these programs have been quite successful in this goal: 87 per cent of clients in 2011-12 were employed following their programs compared to only 44 per cent at the start.
The outcomes for people who would normally have trouble finding work are impressive enough to merit keeping the provincial programs. We should not ignore the evidence that existing provincial programs funded through the Labour Market Agreements are working.
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If so what could that compromise look like? One idea would be for the federal government to create a Canada Job Training Tax Credit — a federal corporate income tax credit for verifiable investments in employer-sponsored skills training. The tax credit could be made refundable, to ensure its value to all employers.
A federal tax credit could increase productivity, labour market supply and workers’ incomes without hurting more vulnerable Canadians. Using tax credits to support training is hardly a novel idea. Tax credits are already used by federal and provincial governments to support apprenticeship training.
The tax credit would put decisions for job-related training in the hands of employers. Today, many employers say they don’t invest in training because they fear that workers will leave once they’ve completed training. A federal refundable tax credit would offset some of this potential cost. Designing and administering such a credit would not be without challenges, but options exist to ensure ease of use and to manage costs, such as capping the total value of the credit at a reasonable level per employee and per organization. To ensure it’s achieving the goal of encouraging applied skills training and better alignment between workers’ skills and employers’ needs, the performance of the new tax credit would need to be measured.
Provinces have a legitimate interest in maintaining successful programs that serve vulnerable clients. The federal government also has a valid point that overcoming the problem of inadequate employer investment in training is important. But so far it hasn’t found a way to make the Canada Job Grant serve both goals.
A new federal tax credit could encourage investments in productivity-enhancing training without creating new cracks for vulnerable people to fall through. Federal progress reports have consistently shown that Labour Market Agreements are relatively effective at delivering results.
These provincial efforts should be renewed, not cancelled. With a little practical goodwill, federal and provincial governments could find a way to achieve both legitimate policy goals.
Publication
The Toronto Star
Release Date
November 29, 2013
Authors
Matthew Mendelsohn
Noah Zon
