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I. Background

In 1996, significant reforms were introduced to the Employment Insurance (EI) system in Canada. The reforms affected eligibility for benefits and the amount and length of claim. To assist high unemployment areas in Canada most affected by the changes, the Transitional Jobs Fund (TJF) was established by Human Resources Development Canada (HRDC) in July 1996. It is designed to provide support to affected communities by encouraging sustainable economic development through the creation of partnership initiatives and a favourable investment climate. To qualify for TJF funding, projects must meet certain criteria and receive approval from several partners at a variety of levels. In total, $300 million will be distributed over the life of the program to communities to create new, sustainable jobs.

II. Evaluation Issues

The main goal of this study is to provide preliminary evidence on the degree of success of the Transitional Jobs Fund in meeting its objectives. The information collected and presented in this report seeks to provide answers to four questions identified by HRDC:

1. What is the nature of projects that have been approved?
2. How many jobs have been created, and of what type?
3. Was TJF funding necessary?
4. To what extent are projects financially self-sufficient?

III. Methodology

The methodological approach for Phase I of the evaluation of the Transitional Jobs Fund included three components:

• a review of program documentation and administrative data which served to develop a thorough understanding of the program, estimate program activity and develop a sampling frame for the survey of project sponsors;
• key informant interviews which numbered 30 and which included representatives from HRDC staff at headquarters; regional TJF consultants; local Human Resource Centres of Canada (HRCC) officers; provincial/territorial representatives involved in the review of project proposals; and other partner organizations, including regional economic development agencies (e.g., the Atlantic Canada Opportunities Agency [ACOA]); and
• a survey of project sponsors that involved telephone surveys with 301 sponsors drawn from the program administrative database. Of the 301 project sponsors interviewed, in 116 cases the projects were completed and in 185 cases the projects were in progress.

Two caveats about the study should be noted. First, many projects are still in the early stages of delivery; less than 40 percent of projects included in this evaluation were completed at the time of the interview. Second, even completed projects have relatively short post-program periods (the majority of completed programs ended between January and March 1998). Therefore, issues of impacts and effects, particularly with respect to the sustainability of jobs, and lessons learned could not be fully assessed.

IV. Key Findings

What is the nature of projects that have been approved?

The profile of projects sponsored by TJF confirm the expected concentration of program activity in high unemployment regions, particularly Atlantic Canada and Quebec. The majority of projects are led by private sector sponsors from small and medium sized organizations. Projects emphasize industries such as manufacturing, tourism/hospitality and primary industries such as silviculture and aquaculture. Most projects focus on new job creation through expansion or new business creation.

Project financing typically involves several sources of funding from government and private sector sponsors. Overall, TJF represents about 14 percent of total project costs. This proportion is higher for lower cost projects. TJF is often used to cover labour expenses while other programs or private sector investment are used to cover capital expenses.

The program features a significant emphasis on partnerships with other government and community organizations and this is viewed as a key strength of TJF. While promotion of TJF was an underdeveloped aspect of the program, there have not been difficulties in soliciting client interest. Equity of access, however, may be a weakness. Project sponsors and delivery partners are generally satisfied with the program, with some concerns noted regarding the approval process in terms of its length and, in some cases, the presence of political factors. The need for enhanced monitoring for project sustainability, improving accountability by tying TJF funds to payroll reports and avoiding duplication with other economic development programs were also noted.

How many jobs have been created, and of what type?

The total jobs created on a per (completed) project basis was 25 which translated into a cost per-job of about $7,500. Adjusting for full-time equivalents and incrementality¹, these figures are modified to 15.54 jobs per project and $12,000 per-job. The findings on job creation are based on the approximately 100 TJF projects that had been completed at the time of the survey. Given the relatively short post-program period, the extent to which the jobs created are sustainable could not be adequately measured at this point in time.

A comparison of the survey data from the initially completed cases and the program administrative data for these projects indicated that the level of job creation is largely consistent with projected figures contained in the initial project contract. Extrapolating from the survey data to total TJF program expenditures, the predicted actual job creation would be 29,500 jobs, or 22,000 incremental jobs, or 18,500 full-time incremental jobs.

The majority of jobs created are permanent, year-round positions. Jobs are concentrated in the semi-skilled/labourer and skilled trades categories and feature wages that are above the minimum.

Was TJF funding necessary for the projects to proceed?

The incrementality of TJF funds was addressed based on the assessment of project sponsors themselves. In about one-quarter of cases, the incrementality of the program is questionable. Projects which feature a higher level of incrementality are those with public sector sponsors, projects in the tourism/hospitality industry, projects with a higher proportion of TJF funding and those in smaller communities.

To what extent are projects financially self-sufficient?

Financial self-sufficiency and the extent to which the jobs created under TJF will be sustainable over time are the most difficult questions to answer at this time. As mentioned previously, the proportion of projects that are completed at this time is modest and the post- program period for completed projects is quite short. Findings pertaining to sustainability, therefore, are largely speculative. Early results are positive with respect to sustainability of jobs. Among completed projects, sponsors expected that the majority of jobs created (84 percent) would be in place in 18 months. On the other hand, one in five expected that additional financing would be required to sustain and/or expand the project. Private sector investors were expected to be the largest contributors in terms of future financing.

V. Overall Conclusions

The results of this evaluation of TJF are mostly positive. Project sponsors and those that deliver TJF are satisfied with the program and impressed with its flexibility, rigour and partnership approach. The length of the approval process and the extent to which access to the program is equitable were the most important concerns raised around program delivery. Many favour more authority delegated to the local level to ease this process.

The level of job creation fostered by the program is largely consistent with initial targets provided by sponsors in their contracts with HRDC. The jobs that are created are of a moderate to high quality. Most of these jobs are expected to be in place in 18 months time. Enhanced monitoring of the program will be necessary, however, in order to verify longer-term sustainability of jobs.

The evaluation suggests that the issue of incrementality should be given attention in future. In a small portion of projects (about one-quarter), TJF funding did not have any impacts on job creation. This research shows that the program should continue its emphasis on small and medium sized operations, while improving the efficiency of the program with more careful targeting to those projects without access to other financing options. Issues around potential overlap with other repayable loans programs would also be resolved by ensuring TJF is the "last payer" program.