Commentary on the 2016 Federal Budget |

There is much in the recently released 2016 federal budget to laud. Significant new spending has been allocated to helping groups in the population who bear the brunt of social and economic disadvantage, including Aboriginal adults, the unemployed, seniors, low income students and parents.‎ Collectively, these expenditures should simultaneously improve their economic lot and reduce the size of the gap between them and their more advantaged peers.

As laudable as these measures are, the 2016 budget fails to invest in measures that will ensure sufficient productivity growth to pay these expenditures back. Productivity growth depends on our collective ability to compete on global markets. Our analysis suggests a need for two sets of linked measures to release our productivity potential:

  • Measures that encourage Canada’s employers to create enough ‎high wage/high skill jobs to replace the jobs being lost to automation and offshoring, and,
  • Measures that ensure that Canadian workers have the cognitive skills needed to take full advantage of their enormous pool of technical skills and knowledge.

Many of Canada’s employers are obsessed with wringing productivity growth out of cost savings from production efficiencies and reductions in wages and benefits. Firms adopting these strategies may win a temporary reprieve from competition, but the associated dumbing down of jobs results in massive loss of the very skills that will allow us to compete in the future.

A smaller number of firms are adopting an alternative strategy that is focused on increasing the value of their products and services, something that requires higher levels of key cognitive skills.

The federal government needs to act swiftly and decisively to reward firms adopting this latter high wage/high skill/high value approach.

Having done this, the federal government will also need to act swiftly and decisively to ensure that Canadian workers have the skills needed to fill the growing proportion of high skill/high wage/high value added jobs. ‎

In the first instance, this would involve working with the provinces and territories to reduce the proportion of youth leaving the secondary system with literacy and numeracy skills below level 3, the minimum level demanded by high skill/high wage jobs. This proportion currently sits at 50%.

The federal government also needs to work with the provinces and territories to reduce the proportion of youth entering and leaving the post secondary system with literacy and numeracy skills below level 3. These proportions currently sit at 40% and 30% respectively.

It will take some time for these measures to have an impact on the distribution of key cognitive skills. Thus, the federal government needs to introduce incentives for firms to assess and upgrade the literacy and numeracy skills of the current workforce.

A failure to act practically guarantees that Canada’s standard of living will fall.

T. Scott Murray is a retired senior manager from Statistics Canada and President, DataAngel Policy Research Incorporated, a global specialist in education, skills and productivity.

T. Scott Murray
DataAngel Policy Research Inc.

Further reading:

Budget 2016