Conservative jobs plan is coherent, relevant, bold — naturally the provinces hate it

Posted on in Policy Context – Full Comment
February 14, 2014.   Andrew Coyne

Amid all the blather and inanity of Budget 2014 — Search and Rescue Volunteers Tax Credit, anyone? — one chapter stands out for its coherence, relevance, I might even say boldness. I’m speaking of the section on labour markets. With its accompanying background paper, it presents a compelling — and distinctly conservative — case for a new approach to jobs: one that focuses less on tossing billions of dollars at public works projects of dubious merit and more on directly addressing imperfections in the labour market. It is thoughtful, it is sound, and it is naturally the section that has come in for the fiercest attack.

From the opposition came howls of “where is the jobs program,” in the perennial opposition politician’s belief that jobs are a sort of commodity that can be stamped out at will. To the government’s point, that unemployment today is less a matter of any supposed deficiency in aggregate demand — unemployment, at 7%, is less than a percentage point off its pre-recession low, and falling — and more a mismatch of the skills for which employers are prepared to pay and the skills unemployed workers are ready to supply, the opposition responded with the same mindless mantra of “stimulus,” of a kind that is not only not needed at this stage of the business cycle but that fiscal policy could not provide if it were.

But that was only the federal opposition. Harsher by far were the attacks from the provinces, all occasioned by a single page in the budget, wherein it was revealed that the policy unveiled in last year’s budget, the Canada Job Grant, was indeed still the policy this year. For those just joining us: the Canada Job Grant would cover the costs of training workers for specific job openings, to a maximum of $15,000. Originally it was proposed that the costs would be split three ways between Ottawa, the provinces and employers; when the provinces balked, the federal government offered to pick up their share as well. That was unlikely to mollify them, however, as the federal money would come not on top of existing transfers to the provinces, but in place of them.


The two sides have made a show of negotiating, though it was clear the provinces have been bent on killing the program from the start. The budget makes equally clear that the feds are determined to go ahead with it. In provinces where no agreement is reached, it reads, “the Government of Canada will deliver the Canada Job Grant starting April 1, 2014, directly through Service Canada, engaging employer networks through the Regional Development Agencies.” In provincial parlance, this unexceptional bit of news is referred to as an “ultimatum”: that is, a proposal to spend federal money on a federal program for the benefit of unemployed Canadians, but without the consent of the provinces, who, remember, are contributing nothing to the costs of the program. But what are the needs of the unemployed compared to the provincial interest in money, turf, and credit?

Why are the feds so exercised about this? Let’s return to that background paper. Unemployment in Canada is less a phenomenon of the population at large than it is concentrated in particular demographic groups: the young, the unskilled, new immigrants, aboriginal people. At the same time, shortages of labour have been emerging — again, not overall, but in particular provinces (Alberta and Saskatchewan) and occupations, notably in the sciences and skilled trades. The contradiction is expressed in a single graph: while unemployment has fallen to 7%, job vacancies have already climbed to more than 4%, a level previously associated with lower rates of unemployment.

The skills mismatch is partly a problem of educational emphasis — we put a lot of  people through university by international standards, but comparatively fewer of them study science, and we lag in apprenticeships and other forms of on-the-job training. But it’s also a problem of geography, or rather jurisdiction: though many Canadians do travel long distances in search of work every year, we have lower internal migration rates than in the U.S. Provincial accreditation policies are partly to blame, but so, it would seem, are provincial training policies. It’s not hard to see why: why would it be in a province’s interest to train people to take jobs elsewhere?

Which might explain why a government that early on made a great show of transferring control over training to the provinces has run out of patience. An integrated national labour market, it has evidently concluded, requires a national approach — especially as the population ages, participation rates fall, and labour shortages grow more acute. Provincial parochialism, so charming a feature of Canadian life for so long, is no longer something we can afford.

But, say the provinces, the reduction in federal transfers will force them to cut back on priority programs for literacy and at-risk youth. Will it? The amounts involved, about $300-million, are a tiny sliver out of total provincial revenues (in excess of $300-billion) or even federal transfers (at roughly $63-billion, they are up more than 50% since the Tories took power and nearly three times what they were at the start of the last decade). If the needs of street youth are the priority they claim, they can shift funds out of other, shall we say “lower priority” uses, such as subsidies to business. Or are they only a priority so long as someone else is paying for them?

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