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3.1  Expenditure on Job Creation Programs

Precise amounts spent on direct job creation programs are hard to come by and are difficult to construct. However, some recent OECD reports have filled this gap somewhat.

Recent information shows that public expenditure on labour market programs is low in Canada in comparison with other OECD countries (see Table 2). Canada spends only 19 currency units (dollars) out of every 1000 units (dollars) of GDP on labour market programs. By comparison, Sweden spends 43 currency units per 1000 currency units of GDP.

The amount spent in Canada on active measures, as a proportion of expenditure on all labour market programs, is closer to other OECD countries. For example, Canada spends 30 percent on active measures, in comparison with 34 percent and 33 percent respectively in Denmark and Belgium. However, spending on active measures in Sweden and the U.S. is 49 percent and 40 percent respectively.

Source: Compiled from OECD, Employment Outlook, July 1997, and July 1998, Tables K and J respectively.

¹ For example, $19 out of $1,000 of GDP is spent on labour market programs in Canada.

² Active labour market measures are defined to include public employment services and administration, labour market training, youth measures, subsidized employment, and measures for the disabled. By comparison, passive or inactive labour market measures consist mainly of unemployment insurance/compensation.

Table 3 presents public expenditure on direct job creation programs as a percent of public expenditure on all labour market programs. The amount spent on direct job creation programs is the lowest in Canada (only 1.6 percent) as compared with 2.3 percent in the U.S., 4.3 percent in Denmark, and 13.5 percent in Belgium. These results are also illustrated in Figure 2. A similar conclusion emerges from Table 4 and Figure 3, which present data on participation inflows in direct job creation as a ratio of the labour force.

Sources: Compiled from OECD, Employment Outlook, July 1997, and July 1998, Tables K and J respectively.

¹ See note under Table 2. Direct job creation measures refer to programs targeted at public and non-profit sector.

View Figure 2

View Figure 3

For Canada, the amounts spent on direct job creation programs were slightly higher in previous years: 2.3 percent and 1.8 percent in 1993-94 and 1994- 95 respectively, as compared with 1.6 percent in 1996-97. This downward trend in Canada probably reflects a shift in recent years from direct job creation programs towards developmental uses of UI as a means of job creation (see Sub-section 4.10 – Developmental Uses of UI). Canadian experience with direct job creation programs is compared with that of other countries at the end of this report (see Section 6 – Experience of Other Countries).

In Canada, direct job creation activity by the federal government passed through distinct phases. It is possible to divide the last twenty five-year period into three phases:

1. Pre-CJS (Canadian Jobs Strategy) Regime covering the period from 1971 to the first half of the eighties;

2. Canadian Jobs Strategy Regime extending roughly from 1985 to 1990; and

3. Labour Force Development Strategy/Employment Insurance Regime extending roughly from 1991 to the present time.

3.2 Pre-CJS (Canadian Jobs Strategy) Regime

During the 1970’s, thousands of young baby boomers were flooding the Canadian labour market to look for full-time jobs and particularly summer jobs. The youth unemployment rate was increasing (Figure 4). The government was anxious to avoid the social unrest caused by unemployed youth that was being experienced in other countries. Thus the early 1970’s witnessed a surge of new programs designed for students and youth.

View Figure 4

Some of the major job creation programs during this decade were: Opportunities For Youth (OFY), Local Initiatives Program (LIP), Local Employment Assistance Program (LEAP), Community Employment Strategy (CES), Canada Works (CW), Young Canada Works (YCW), Summer Job Corps (SJC), Co-Operative Education Program (COOP), and Employment Tax Credit Program (ETCP). In retrospect, the seventies can be described as the golden age of direct job creation. A brief description of the individual programs and their components is provided in Section 4.

During the eighties, although there were some important job creation initiatives, the most innovative ones were in the area of work sharing, which had the main objective of preserving existing jobs and assisting workers to adjust to major layoffs due to the recession of 1981-82.

During the first half of the eighties, in response to the recession, the Canada Works program was revived and experiments were conducted on the use of UI funds in support of job creation under Section 38 of the UI Act. In addition, several other new job creation programs were introduced: Canada Community Development Projects (CCDP), Canada Community Services Projects (CCSP), Local Economic Development Assistance (LEDA), Summer Youth Employment Program (SYEP), and Local Employment Assistance and Development (LEAD). Details on these programs are presented in Section 4.

3.3 Canadian Jobs Strategy (CJS) Regime

As the effects of the recession eased, Employment and Immigration Canada (EIC) began to implement the Dodge and Allmand reports and formulated a new philosophical framework for job creation and employment programming⁴. The new umbrella labour market policy, called Canadian Jobs Strategy (CJS) was announced in June, 1985. The basic principle was “the Canadian Jobs Strategy aims at ensuring that federal resources are used effectively to bring direct assistance to those most in need”⁵.

The notion of “most in need” recognized that there would never be enough resources to do everything worth doing. It implied that EIC would try to direct aid to workers with the most severe employment problems, areas with highest unemployment, and industrial sectors with the worst skill shortages. In calling for an effective use of federal resources, the principle also argued that the “the most in need” approach should be combined with “what works best” and with an increased emphasis on the market principle. The CJS regime witnessed a reduced emphasis on direct job creation programs and the introduction of indirect employment programs such as Job Entry, Job Development, Skill Investment, and Skill Shortages. The Community Futures program was also introduced. A major component was the Self-Employment Incentive (SEI), which was not aimed at direct job creation but at assisting workers to become self-employed.

3.4 Labour Force Development Strategy/Employment Insurance Regime

From about 1991, the traditional types of direct job creation programs (Canada Works, LIP, LEAP, CEP) were gradually phased out in favour of job creation under Developmental Uses of UI (see Section 4). The period can be described as the Labour Force Development Strategy/Employment Insurance Regime (LFDS/EI Regime).

Footnotes

4

On direct job creation programs, the Dodge report concluded that direct short-term job creation programs that could fund local projects had a significant benefit in periods of cyclical downturn. Projects could be mounted quickly, accurately targeted and easily terminated. The Allmand report agreed on the usefulness of direct job creation projects but recommended that all job creation projects include a training element.

5

EIC Annual Report, 1985-86, p.18.