Section IV: Year in Review and Achievements

Economic Year in Review

Hampered by a series of unexpected events, Canada's economic growth slowed in fiscal year 2003-2004 but labour markets stayed relatively healthy.

When Budget 2003 was tabled in February, the consensus view was that the Gross Domestic Product (GDP) would grow by 3.2 percent in 2003 and 3.5 percent in 2004. This was premised on the United States economic recovery gaining momentum in the second half of 2003 and into 2004.⁵

Over fiscal year 2003-2004, GDP growth was 1.6 percent in Canada.⁶ This slow growth reflected several factors. First, all regions of the country were affected by the rapid appreciation of the Canadian dollar. Consequently, while the Canadian business sector's unit labour costs stayed fairly constant over the year when expressed in Canadian currency, they increased by 15.4 percent when expressed in United States dollars.⁷

Second, during 2003, Canada was hit by a series of economic shocks that affected different regions of the country to varying extents. These included: the Severe Acute Respiratory Syndrome impact, especially in Ontario; the Ontario power failure; the Bovine Spongiform Encephalopathy outbreaks; the ongoing softwood lumber dispute with the United States; and forest fires in Western Canada. Although some of these shocks were of limited duration, they had impacts on local labour markets and also on the services provided by the department. Despite these difficulties, purchases of goods and demand for services by Canadian individuals and firms rose 3.7 percent, illustrating the underlying vigour in the economy.

In the 2003-2004 fiscal year, overall job growth slowed to 1.8 percent (276,000 jobs), down from 2.8 percent (416,000 jobs) in the previous fiscal year. That being said, with 2003 being a year of slow job growth internationally (Japan, Germany and France all had job losses) Canada's small advance still led all G7 nations in employment gains.⁸ Service-sector employment rose 2.3 percent in 2003-2004, while employment in the goods sector was little-changed. The majority of jobs created in 2003-2004 were full-time (229,000); nearly 80 percent of employment growth consisted of employees (rather than self-employed workers). While job creation took place in nearly all provinces, it was more pronounced in Ontario (128,000), Alberta (49,000), and British Columbia (46,000).

With population growth slowing, the average employment rate (the share of the population aged 15 and over with a job) rose to a record level in 2003-2004 of 62.4 percent. The 7.6 percent national unemployment rate was the same as in the previous fiscal year.

The pace of job creation varied during the course of 2003-2004. Most of the year's shocks curtailed employment in the first two quarters of the fiscal year, when annualized job growth was only 0.7 percent and 0.8 percent respectively. Employment growth in the third quarter was at a 3.6 percent rate, as the effects of the shocks waned and a spurt of growth in the United States economy boosted Canada's exports.

Policy Achievements

During the past year policy work focused on addressing the challenges identified in the former Human Resources Development Canada's Report on Plans and Priorities. With the creation of Human Resources and Skills Development Canada in December 2003 the focus of policy work shifted to the challenges linked to the mandate of the new department, including:

• Responding to Canadians' desire for governments to move from entitlement to empowerment - helping Canadians help themselves;
• Addressing the gaps in our learning systems;
• Responding to the dramatic changes in Canada's labour markets;
• Increasing collaboration with partners and stakeholders; and
• Tackling the diverse problems underlying homelessness.

Within this socio-economic context, the department had a number of major policy achievements over the past year. Key accomplishments include:

• Modernizing the department's approach to address labour market and workplace needs. HRSDC succeeded in renewing the Aboriginal Human Resources Development Strategy, securing $60 million for the Foreign Credential Recognition initiative in the 2004 Budget, and introducing the Employment Insurance Compassionate Care Benefit in January 2004.
• Major steps toward addressing gaps in learning systems. The department undertook significant policy work on the Canadian Learning Institute initiative, announced in Budget 2003. This work culminated in March 2004 with the provision of funding to the Canadian Council on Learning to promote evidence-based decision-making in all areas of lifelong learning. The work of the Council will help Canadians, employers and learning providers to make better decisions related to lifelong learning and skills development.
• Policy work with provinces and territories to improve the Government of Canada's support for learning. This work led to initiatives announced in the 2004 Budget to: increase support for families to plan and save early for their children's post-secondary education; and to help individuals with disabilities and from low- and modest-income families address their educational goals through new or improved grants, increased loan ceilings, reduced parental contribution requirements, and improved debt management measures.

Another policy accomplishment for 2003-2004 was the work undertaken to increase collaboration with partners and stakeholders to respond more effectively to the priorities of Canadians, such as:

• Addressing skills and learning priorities. Following the June 2003 agreement with provinces and territories (except Quebec, which requested observer status) on priority areas to strengthen skills and learning, work began on a labour market framework agreement that will better respond to the shifts occurring in the labour market since the mid 1990s. Work carried out by the Federal-Provincial-Territorial Committee on Financial Assistance to Students was also instrumental to the improvements to the Canada Student Loans Program announced in Budget 2004.
• Enhancing skills and improving the labour market outcomes of Aboriginal people. The department undertook consultations with Aboriginal Human Resources Development Agreement holders, other government departments, provinces and territories, and the private sector, on future Aboriginal skills and labour market programming.
• Tackling issues of poverty, homelessness, and dependency. As a result of a decision of the Government of Canada to tackle these issues in Budget 2003, the National Secretariat on Homelessness (NSH) consulted with other provinces and territories to identify early federal-provincial-territorial issues. The NSH was successful in obtaining agreement that the extended National Homelessness Initiative would focus on longer-term transitional and supportive housing support and services while preserving a community-based approach. The NSH is pursuing strategic linkages with complementary federal initiatives to assist in moving forward on this policy initiative.

• Enhancing Canada's role in the international arena.
  • The department worked with the Organisation for Economic Co-operation and Development (OECD) to pursue our policy objectives and showcase Canada's achievements in the international arena. For example, in September, the Minister and senior departmental officials represented Canada at the OECD Employment and Labour Ministerial Meeting in Paris. The meeting offered Canada an opportunity to: highlight its agenda; promote labour market participation of under-represented groups; and influence the OECD work program for the next five years.
  • In December, the department participated in the G8 Conference of Labour and Employment Ministers in Stuttgart, Germany where the issues of globalisation and structural change, the conditions for growth and employment, balancing flexibility and security, and international co-operation in employment policies were addressed. The meeting provided the Canadian delegation with an opportunity to promote the department's achievements and to demonstrate how HRSDC is linking learning strategy with employment strategy to generate a Human Capital Development Strategy.

Management Challenges

During 2003-2004, the department continued to strengthen comptrollership and oversight of its programs and services. For example, the accountability regime between senior management in National Headquarters and regional operations were clarified and strengthened, particularly for grants and contributions programs. These programs also saw the beginning of a major initiative to develop and implement a program delivery model that will increase standardization and efficiency of program delivery in all regions.

To support the changing business and demographics of the department and build the capacity of the workforce, an employability strategy was developed with a focus on learning. Progress was also made regarding the Employment Equity and Diversity programs to ensure that HRSDC's workforce is diversified and representative of the Canadian population. Over the 2003-2004 period, the combined workforces of HRSDC and Social Development Canada exceeded the labour market workforce availability for the four designated groups: visible minorities, Aboriginal people, persons with disabilities and women.

It should also be noted that the department was the subject of a chapter in the November 2003 report by the Auditor General of Canada that focused on the measuring and reporting of the performance of the Employment Insurance Income Benefits Program. The Auditor General recommended: the development of a more complete picture of service performance by adding new measures or improving existing ones; the development of measures that better capture service performance to meet the information needs of Parliamentarians and describe plans to meet performance targets; and the improvement of information to Parliament with respect to the impact of the 1996 changes to the Employment Insurance Act. In response to the report, the department and the Canada Employment Insurance Commission agreed with the recommendations and indicated that these issues would be addressed as a matter of priority (see Employment Insurance information in Section VI).

An important step in modernizing management practices was taken with the Treasury Board Secretariat's Management Accountability Framework assessment of the former HRDC. This assessment led to priorities and strategies that have been integrated into the departmental priorities for 2004-2005.

Finally, it should be noted that HRSDC addressed its challenges within the context of the new realities of budget reallocation and fiscal restraint. HRDC and successor organizations HRSDC and Social Development Canada contributed $105 million to the government's reallocation plan in 2003-2004.

Corporate Risks

As part of its ongoing management commitments in 2003-2004, HRDC identified three corporate risks and challenges. Strategies were implemented to address these risks, and were continued under the new department of HRSDC.

Challenge: Business continuity and service reliability
Risk: Service disruptions while pursuing business transformation

Of the roughly $70 billion in planned HRDC spending for 2003—2004, 95% was direct payments to Canadians. From the client's perspective, the department's ability to maintain service continuity for Canadians was absolutely critical. The department's risk mitigation strategies resulted in no major disruptions in benefits delivery during this period of transition and transformation. Continuity of service was also ensured through: the effective management and re-alignment of financial resources to support corporate priorities; the management of change and the engagement of managers and staff in departmental transformation; investment in supportive technology; and departmental reorganization and clearer accountabilities.

Challenge: Building public and stakeholder trust and confidence
Risk: Erosion of public trust during transformation

HRSDC worked to earn the trust and confidence of Canadians and partners by increasing managerial supervision of grants and contributions programming, building clear accountabilities into agreements, increasing financial reviews and audits, and establishing a focal point for integrity issues. The department also responded effectively to emergencies, as well as improved current programsand service delivery in the new organization.

Challenge: Mobilizing employees to be change advocates and reinvesting for the future
Risk: Failure to sufficiently engage employees in business transformation to motivate and support them in executing and adapting to change

The department ensured that its employees could execute, adapt to, and feel a part of the organizational changes entailed in the business transformation through investments in change leadership, improved internal communications, communicating the department's mandate, the sharing of departmental priorities, and the upgrading of employees' skills.