Canada – The gap in adult skills development system

Canada urgently needs a third pillar that focuses on supporting working adults. The Council anticipates that managing the expected labour market changes will require an additional $15 billion of annual investmentsin adult skills development. The magnitude of the coming changes also necessitates the development of a Skills Plan for Working Canadians that will guide Canada’s approach to assisting working-age adults in capturing new occupational opportunities. We recommend that the government1 create the Canada Lifelong Learning Fund, which would support and provide incentives for both individuals and employers to significantly increase their investments in skills development. At the same time, we urge the federal and provincial governments to transform Canada’s network of employment centres so they provide hands-on guidance to Canadians as they navigate the labour market changes brought about by technological change.

In the short and medium term, it is working adults who will bear the brunt of the disruption’s impact. Over time, inaction would seriously damage Canada’s economic stability and social cohesion. Given current trends, the labour-market changes may lead to roughly two million Canadian workers—more than 10 percent of today’s workforce23—losing their jobs by 2030, and lacking the prospect of finding alternative employment unless they move to a new field requiring new skills. Government policy (including tax exemptions and transfers) could help protect many citizens from the effects of job loss and flat or falling incomes. That said, job quality and income earned from employment have a strong effect on individuals’ sense of self-esteem. What is more, growing income inequality can undermine social trust and be a harbinger of intolerant attitudes. Therefore, relying solely on taxes, transfers, and the social safety net to absorb the impact of the labour-market shifts could not only place a major strain on government budgets but also undermine Canada’s social fabric.

The Gap in Canada’s Adult Skills Development System

Canada’s current workforce training infrastructure rests on two main pillars. First, the education system gives a foundation of broad knowledge and specialized skills before individuals begin careers. The total public expenditure on education (K-12 and post-secondary) amounts to more than five percent of Canada’s gross domestic product, or approximately $100 billion annually.

The system’s second pillar—partially funded through Employment Insurance (EI)—provides Canadians who have lost their jobs with income support, as well as career guidance and training to help them find new opportunities. It is reactive and exists largely to support individuals’ re-entry into the labour market following unemployment. Federal funding for Labour Market Development Agreements (LMDAs), which cover training and guidance programs for unemployed individuals eligible for EI, is increasing from $2.2 billion to $2.5 billion annually. The government is also broadening eligibility for LMDA-funded employment assistance services beyond EI-eligible unemployed individuals to also support employed workers. It is also increasing support for employers who need to upskill their workers to maintain their current employment.

While each of these two pillars plays an essential role in the skills development system, they leave a big gap in institutional support for working Canadians. At a time of rapid labour-market change, our system does not sufficiently enable working adults to continually upgrade their skills.

To fill that gap, Canada must erect a third pillar. We estimate that the annual expenditure on training and post- secondary education for working Canadians will need to increase by approximately $15 billion (Exhibit 3). Individuals, employers, and governments have to share in this critically important investment. Failing to make the necessary investments in the third pillar will prevent Canadians from taking advantage of new opportunities, leading to severe consequences for their families’ wellbeing and the overall growth prospects of the country’s economy.

The funding increase is needed to address some severe shortcomings in the current system. The average working-age Canadian receives the equivalent of just one week of job-related training annually, or 41 hours.
That figure exceeds the OECD average of 36 hours, but significantly trails some leading peers such as Denmark, New Zealand, and Norway. What is more, this training is not evenly distributed among the population. Only 46 percent of working-age Canadians participate in job-related training at all. Additionally, 31 percent say they want to participate in training but are facing barriers, most significantly insufficient time due to work or family commitments, high training cost, or lack of employer support.
The additional investment will allow broader access to job-related training, and increase the share of working- age Canadians who participate in training each year from fewer than half to more than three-quarters. Thus, it would accommodate the 31 percent of Canadians who have the desire to upgrade their skills but face barriers. Expanding training access is critical given the expectation that nearly a quarter of typical work activities will be automated by 2030 across most occupations. Additionally, the boost in investment would cover the cost of raising the number of working-age adults enrolled in post-secondary institutions from about 660,000 a year to about 860,000—a 30 percent increase. This would meet the needs of the approximately two million working adults who will have to acquire new qualifications and seek employment in new fields after their jobs are displaced by technological change.

With its recent reforms, the federal government has taken some initial steps toward providing the necessary support to working Canadians . However, while these changes are undoubtedly important and headed in the right direction, they will not be sufficient to address the march of technological change and its rapidly growing impact on the labour market. A growing rate of job turnover means that a much wider group of adults will need to continuously upgrade their skills and acquire new qualifications throughout their working lives. While the government has to lead the way with a national strategy, employers and individuals both have important roles to play.

The role of employers. For some time, Canadian employers have been significantly underinvesting in worker training. Between 1990 and 2010, the average amount an organization spent per employee fell by more than 40 percent. In the past five years, that trend has reversed direction, with spending growing from a low of $688 per worker in 2010 to $800 in 2014-15, but Canadian companies still lag behind their US peers. Mid-career employer-sponsored training has proven returns though. Carleton University economists have demonstrated that enrolment in such programs in Canada tends to boost employees’ wages by five
to nine percent and that this positive effect on wages is even stronger among low-skilled workers (up to 15 percent).

However, when employers invest in skills development, they prioritize the professional development of their higher-skilled and more senior staff. Managers, supervisors, and professional, technical, and scientific personnel account for about 70 percent of the average training budget, and receive much more intensive training than employees with lower qualifications. This is concerning, as it is the lower ranks of the workforce who are most in need of skill upgrades and could benefit the most from training.

SMEs, which employ about 70 percent of all private-sector workers in Canada, often lack the resources to develop internal training programs. They also face relatively high employee turnover, which discourages them from investing in staff training.

As labour market pressures mount, it will become increasingly clear to organizations that they have a deep interest in developing their workers’ skills. Business leaders must view training not simply as a cost, but
as an investment in their organizations’ human capital. In the knowledge economy, such investments are at least as important as those in equipment, physical structures, or intellectual property, as it is human
talent that will underpin companies’ future competitiveness.

The role of individuals. A significant number of Canadians, representing about 4 percent of the working-age population, are enrolled in educational institutions each year—a relatively high percentage given that most individuals pursue post-secondary degrees before the age of 25. However, the rapid changes in the nature of work may require many more Canadians to seek new formal qualifications. This is a difficult adjustment for most adults, especially when they have pursued a single career path so far. Therefore, helping people make informed choices about further education and training is critical for their future success in the workforce.

Provincial governments run employment centres (funded in part by LMDAs) that have traditionally offered job-counselling services to unemployed Canadians. These services can also benefit employed individuals whose jobs are at risk and who need to prepare themselves for a career change. Under recent reforms, employment centres will be able to extend their assistance to people who are not EI recipients. However, to serve working Canadians effectively, these counselling services must be redesigned to focus not only on helping someone find employment but also advise a wide range of citizens on high-impact training and new career options.

An additional obstacle for individuals who decide to pursue education or training is that most programs are not tailored to the needs of working adults. The programs often require students to take more time
off than their circumstances permit, or do not provide sufficient opportunities to develop immediately marketable skills.

It is critically important to raise awareness among Canadians that they will need to continuously upgrade their skills if they are to remain competitive in a changing labour market. While government and employer assistance is necessary, this is a challenge individuals ultimately must take into their own hands.

Our Recommendation: Skills Plan for Working Canadians

In light of the pace, magnitude, and breadth of the coming labour-market shifts, Canada’s leaders— representing governments, employers, workers, and educational institutions—need to engage in an urgent national dialogue on the best ways to prepare the country for the future of work. The objective of this process should be the development a comprehensive Skills Plan for Working Canadians that will fundamentally transform the system for upgrading the skills of working adults.

To provide a starting point for this national discussion, the Council offers two ideas that could compose the central elements of the strategic response the country needs:
1. New, federally governed Canada Lifelong Learning Fund (CLLF) that helps reduce the financial barriers to continuing training for adults by co-funding investments both employers and individuals make in skills development;
2. Transformation of the government’s employment centres into hubs of hands-on career and training guidance not only for the unemployed but also for working adults and employers.

Chosen excerpts by Job Market Monitor. Read the whole story at Learning Nation: Equipping Canada’s Workforce with Skills for the Future