Better Ways to Create Jobs

Mary Janigan May 15 2000

Better Ways to Create Jobs

Mary Janigan May 15 2000

Better Ways to Create Jobs


Mary Janigan

Off welfare, happily ensconced in an insurance agency job, Dennis Reimer now has the incredible luxury of dreaming. A former sales representative for a paint company, Reimer was living with his elderly parents last year, dispiritedly looking for just about any work, when he approached the nonprofit Opportunities for Employment Inc. The Winnipeg organization, founded in 1996 by three groups including the Mennonite Central Committee, enrolled him in its gruelling two-month computer training program. Then, after two weeks of coaching, they signed him up for Manitoba’s week-long insurance brokers’ course. They even found a dataentry job for him, which he has held since last August, at a downtown insurance agency. “I got in such a state, being on welfare, but OFE made me believe in myself again,” says Reimer, 44. “Now, I could go into a career in car insurance or become a broker and eventually own my own business. There are so many doors that could open.”

Reimer remains astonished that he was able to find a new career with only three months of expertly customized training. His mentor, OFE, receives funds from Manitoba’s family services department—and from its training department which, in turn, will get almost $50 million in 20002001 from scandal-plagued Human Resources Development Canada. Reimer is well aware of the federal department’s ongoing difficulties with poorly documented grants to projects of occasionally dubious quality. “But it didn’t really bother me too much,” he says, “because I knew at least one of their investments was a good one.”

Unfortunately, examples like Reimer are far too few. The problem is that HRDC devotes too many resources to outright grants and contributions to employers — straight giveaways—and too little to programs, like Reimers customized training, that ease Canadians into full-time jobs in the labour market of the 21st century. So far, public attention in the HRDC uproar has focused mainly on individual federal projects that lacked sufficient scrutiny, particularly those among the $ 110-million Canada Jobs Fund and its predecessor, the Transitional Jobs Fund.

But the controversy should also focus attention on a far more fundamental problem: the very concept of these programs—and the structure of the department itself.

Most experts believe that schemes such as the Canada Jobs Fund, which ladles out cash directly to employers in consultation with local MPs, represent one of the least effective ways to use public funds to create jobs. Nonetheless, Ottawa pours $ 1 billion into a hodgepodge of grants and contributions, including the CJF, funding everything from start-up grants for youth businesses to research on the needs of rural communities. Many programs are not even linked to job creation—because the department’s mandate is all aspects of “human resources.”

Despite the glowing claims of HRDC’s embattled minister Jane Stewart, the results are decidedly mixed. Some programs—which are given out at the discretion of23,000 civil servants and their political masters—promote admirable causes such as aboriginal literacy. Some fund social programs such as early childhood education or a $20,000 effort aimed at “integrating women in northern fisheries.” Others are flatout transfers to employers, including large corporations.

In many cases, such as the Canada Jobs Fund, politics played a pivotal role in project selection. And, because there are dozens of programs and hundreds of grants, HRDC officials privately admit that it is almost impossible to monitor them. “Many of those programs are simply slush funds to reward MPs because they have no power,” says Queen’s University economist Tom Courchene. “This is the economics of politics. We should be putting our resources into a bill of rights for kids that spells out their right to develop and enhance their knowledge for the 21st century.”

Part of the challenge lies in the structure of the federal de-

Critics say the real scandal in Ottawa’s employment program is the system itself

partment, which is a sprawling bureaucratic maze. HRDC handles everything from the old age pension to the National Child Benefit. The department’s obligations are so diverse that many Canadians do not realize that the $ 1 -billion grant programs are completely separate from the $2.2 billion that is devoted to job creation and training programs such as Reimers customized package. (Almost $900 million of that amount is simply transferred to the six provinces and territories, including Manitoba, that manage their own labour market programs.) True, some jobcreation projects have been a source of scandal: last week, a Job Creation Partnerships venture to clean up the waterfront in Windsor, Ont., attracted scorn because only onefifth of the $ 1.6-million grant was actually used for salaries.

But it is the separate pot of funds for grant programs, especially the CJF, that should trouble many taxpayers. Auditor General Denis Desautels is so concerned about HRDC’s grant system that he is performing an in-depth audit on four programs—including the CJF and its predecessor—which hand out a total of $227 million. He will release his report this October.

The results will probably be disturbing. More than 20 years ago, even before he was principal secretary to prime minister Pierre Trudeau in the early 1980s, Thomas Axworthy believed fervently in such regional development schemes as the CJF. Now, as a Harvard University public-policy professor, he says it would be far better to put the money into training programs that were selected by neighbourhood development corporations that, in turn, remain at arm’s length from their local MP’s meddling. Ottawa could also use the tax system to allow employees to set up their own tax-exempt training funds, similar to registered retirement savings plans, that could be used to fund lifelong learning.

The federal government should confine its role, Axworthy adds, to gathering information on future job requirements, researching better ways to upgrade skills—and making that data available to other governments and agencies. “We have totally failed in the way that we try to use public funds to change the economic circumstances of higher unemployment places,” he says bluntly. “I bet that we could have a 30-to-40-per-cent increase in effectiveness if we went about things differently. We should cut the MPs out from that old patronage role. And we should recognize that it is virtually impossible to micromanage at the federal level.”

Canada ranks last among six comparable nations in terms of private investment in training

But it is hard to change the grants program because MPs enjoy handing out the funds— and the government always takes refuge in pious rhetoric about job creation. Sometimes federal politicians cite training projects to defend HRDC—when the criticism has actually been directed at a grant program. And some CJF jobs, however temporary, are actually created. The five-day Wiarton Willie Festival revolves around the early February stirrings of an albino groundhog in an Ontario town of 2,300. The festival committee received a $30,000 CJF grant last July, which it used to pay for the $20,000 annual salary of festival co-ordinator Francesca Dobbyn-Nadjiwon, the salary of a temporary assistant, an interactive CD-ROM and several months of rent. “This is how we run things in rural Ontario—we are dependent on these grants,” says Dobbyn-Nadjiwon. “Ifs a big economic boost in the off-season.”

Still, direct grants are probably the worst possible instrument to create permanent jobs. In an upcoming study for the Toronto-based C. D. Howe Institute, Vancouver financial analyst Ben Cherniavsky, a former finance department analyst, examined past Canadian and U.S. experiments with direct grants or credits to employers: those studies indicate that roughly two-thirds of the jobs would have been created anyway—or that the worker would have found another job. “It’s so expensive to subsidize 100 per cent of a job,” Cherniavsky says. “And grants do not allow the market to determine where the money goes. That is left to some guy in Ottawa.”

Brian Lee Crowley, president of the Halifax-based Atlantic Institute for Market Studies, blames similar grants for decades of support for unviable industries—and two generations of economic dependency. “Those grant programs are a bit like teaching a potential gardener that you can make flowers grow by pulling on them,” he says. “Politicians take a few worthy things—and mix them in with a lot of things that are not genuine job creation. It’s a really destructive cycle.”

There are also many better targets for federal largesse. Groups such as the disabled and workers with poor literacy and few skills do require training to get them into the labour market—and to keep them there. A recent Conference Board of Canada study points out that Canada ranks last among six comparable nations—Japan, Germany, Sweden, Norway, Australia and the United States—in terms of private firms’ investment in training. Worse, employees with already-high literacy skills are five times more likely to re-

ceive employer-sponsored training than employees with low literacy skills. “Our focus leaves the bottom part of our labour force condemned to be perpetually there,” says the board’s vice-president, Prem Benimadhu.

So how could Ottawa better spend the $ 110 million in the CJF? Axworthy espouses a system of training vouchers that Canadians could use to attend the vocational school, community college or university of their choice. Crowley suggests that Ottawa concentrate on creating the right conditions for economic growth. The bridge to Prince Edward Island has attracted manufacturers and tourists, he notes, boosting the local economy. So why not improve the transportation system between Adantic Canada and its natural trading partner, the New England states?

Others favour shifting funds into that $2.2-billion pool that Ottawa already devotes to training and job creation. Sherri Torjman, vice-president of the Caledon Institute of Social Policy, would put more money into the kind of customized training that assisted Reimer. Such training usually requires relatively little time, which allows people of limited means to participate. And the providers keep close tabs on the needs of local labour markets. “So you don’t operate in a vacuum,” she says, “and train 100 hairdressers for a rural community in Newfoundland.” Economist John Richards at Simon Fraser University in Burnaby, B.C., supports transferring more funds to the provinces, and putting more money into topping up the salaries of the working poor to help them to stay in the job market.

In the end, Ottawa would probably do more for job creation if it simply improved the overall economic framework: lower taxes, better physical networks such as roads and rails, improved education and projects to connect more Canadians in cyberspace. “These grant programs seem to be fairly straightforward business subsidies that have been handed out with none of the normal cost-benefit analyses,” says Bill Robson, research director at the C. D. Howe Institute. “There is a rather 19th-century feel to them.” Canadians may want to consider that whenever their local MP boasts about the government’s latest largesse. E3