Thank you very much, Ian. Good morning to everybody.
We only have about 10 minutes to go through the deck. So why don't we go straight to page 3. I hope this deck will be helpful in terms of really understanding labour market development agreements. I think it might take a couple of go-throughs, in terms of when you take this home. But I think you'll find it very useful.
There is a bit of history here on page 3. Until 1995 we had a federal system running the unemployment insurance system. We had the income support, of course. There was some recognition that additional counselling and training support was also needed. So those were provided by the federal government, both the income support and the employment programs. But there was a growing consensus that it wasn't enough, that more had to be done to make sure the support systems were in place to get those who were on unemployment insurance back to work.
Along came 1996 and significant reforms, and with them came a renaming of the system as “employment insurance” and a formal recognition that there were two roles there: one, to support the unemployed as far as providing income support while they were searching for work is concerned; and two, that there should be a tailored suite of employment programs to prepare clients to return to work. So the objective is actually set out in the legislation for the part 2, to get clients back to work quickly.
It also allowed, in this legislation, the ability for provinces and territories to deliver this part 2 training. With that legislative framework, along came a process of devolving that responsibility of the delivery part to the provinces and territories.
So it came in two waves. First, from 1997 to 2000 New Brunswick, Alberta, Manitoba, Quebec, the Northwest Territories, Saskatchewan, Nunavut—these provinces and territories—took over the delivery of this training. Then the second wave was from 2007 to 2010, when the rest of the provinces and territories started delivering. So by 2010 we had all provinces and territories delivering this training.
If we turn to slide 4, we can look at the size of this program. It is roughly $2 billion are transferred to provinces and territories. To be specific, it's $1.95 billion for program funds, plus an additional $190 million for the administration of this part 2 programming. So this funding provides for a fairly extensive network across the country. We've talked to the provinces and territories and asked them how many points of service there are. We estimate, from their information, that there a thousand points of contact across Canada.
At the last committee meeting, the question was asked as to where that authority for them to deliver it comes from, and the framework. It is in the EI Act. There are employment benefits and support measures and the part 2 part is the description in the legislation of what is to be provided. So this is generally set out in the legislative framework. Then provinces and territories are required to provide services that are similar to this EBSM framework.
So let's look at what that is on page 5. What are the employment benefits? There are two elements here. The first part, the employment benefits, are there to help maintain a sustainable EI system through the establishment of benefits of insured participants. So the employment benefits here are for insured participants. What we mean is that those who are currently claiming EI, or who were in receipt of EI in the last 36 months or, when it comes to maternity and parental, in the last 60 months.
These are the employment benefits. They're set out in legislation. What are they? They're skills development. You can see targeted wage subsidies, self-employment, job-creation partnerships, and targeted-earning supplements. Each of these is fairly self-explanatory. Those are the employment benefits set out in legislation.
If we turn to slide 6, the second part of the LMDAs is the maintenance of a national employment service. This national employment service is to "provide information on employment opportunities across Canada to help workers find suitable employment and help employers find suitable workers". The key here is that the service is broadly available to Canadians whether they receive EI or not. Those are more of the general services they are provided.
What does it consist of? You can see in the right-hand column, employment assistance services, such as providing labour market information to individuals, counselling, job search assistance, as well as two other things, those being labour market partnerships and research and innovation, which allow for flexibility if the province or territory wants to try something new in delivering these services.
We've got the two parts. We've got the employment benefits, which are available to those collecting EI essentially, and we've got the support measures, which are broadly available to all.
If we turn to slide 7, you can get a sense of where the money is spent, what provinces and territories do with the roughly $2 billion. The top line here says that 647,127 LMDA clients accessed this in a recent year and over one million interventions or services were provided.
If you look on the left-hand side, you can see the employment benefits and the services provided to those that were exclusively for EI clients. You can see the bulk of the money, the bulk of the total $2 billion, is spent on skills development. You can see that just under 120,000 people received skills development. That is basically the training. Roughly half of the $2 billion was spent on the training. That's where a good part of the bulk of the money goes. It's a smaller share of the total of the one million interventions because these are quite expensive.
If you go to the right-hand side, the support measures, 31% of the total $2 billion was spent on employment assistance services. That is providing those basic services. It's having those offices where individuals come in and get the counselling, the labour market information, the help with their CVs, the ideas on where they can find work.
Between the training and the employment assistance services they make up 80% of the money, and the rest is spent on some of these smaller measures such as self-employment benefit and targeted wage subsidies.
If we move on to slide 8, you get a bit of a sense of some of the trends. There haven't been massive shifts in the trends, but you can see some shifting going on here.
First of all, the number of people getting employment benefits fell from 20% to 14%. You've got less people out of the total taking training and more people getting employment assistance services. So there's a bit of a trend there.
The share of expenditures in turn also fell. It was a little bit less on the employment benefits and more on the support measures. Active measures fell to some degree. There is a smaller share of people collecting EI benefits from these measures. A large share of former EI claimants benefited and a large share of non-insured clients benefited from these services.
There was some regional variation. I don't think they are terribly interesting. Of course, there are national trends and some provincial trends.
If we move to slide 9, it is quite interesting and quite germane to the discussion here. How effective are LMDAs?
Overall the results are pretty good by international standards, if we compare how we are doing with the U.S. and how we compare to some of the European countries. They are good, but of course, we think they could be significantly better.
On the left-hand side of the chart here, you'll see the type of programming. The first one is skills development. Skills development, again, is training. How much does training cost typically? It costs $7,200. It's not cheap to send somebody for training; it's a $7,200 intervention.
What do we get in return? We have these studies that look at each year. We look at their tax data and see what's happening to their income. What we see is that over the course of five years—and we have tracked it for five years—their total income has gone up by $13,000, not per year but cumulatively over five years. We have reason to believe that this continues, because when we look at year-five data, their income is up about $3,000 a year compared to somebody who didn't take this training. But we don't have data beyond five years.
What do we see? We see the incidence of EI has gone down, and it's saving the account about $976 over that five years. That's skills development. Again, that's where the bulk of the money goes.
We look at wage subsidies. They cost less. The employment earnings go up by only $7,000, but you need to recognize that the targeted wage subsidy costs only two-thirds of what the skills development costs.
I'll take you to the last one, the employment assistance services. Again, you can imagine it's quite a bit cheaper there, because you're coming and getting help with the CV, getting labour market information. It's only $700 per intervention. The employment earnings go up somewhat, by $358 over those five years, and the use of EI goes down significantly. So you get positive results out of these interventions to some degree roughly commensurate with the type of investment you make.
Let me turn to slide 10 then. As I said, the evaluations are showing some positive results, but we've never looked fully at the system to see what kinds of changes we really need to make. A good time to take stock is when we've finished the devolution of the actual delivery, so now it's time to take stock. The labour market has changed. Provinces and territories are delivering this. Is this the best we can do? What we want to do here is look at ways to improve it.
If you look at the list on slide 10, you'll see we want to better prepare Canadians for the labour market for the future. We want to increase return on investment in employment training so that we get better outcomes for real jobs. We want to enhance performance measurement, and report on meaningful employment outcomes. We want to do a better job than we're doing right now. We want to address the skills gaps where they exist in particular occupations and sectors and regions, and make sure the right kind of training is going to the right people. We want to ensure employer involvement in training decisions so that individuals receive the needed specific training for specific jobs. Again, you've heard this before, about making sure employers are involved in that process. Not only do we want to get employers involved in the decision, but we'd like to get employers involved in the investment of training so that they have an interest in making sure we have the best possible outcomes.
Finally, for my part I'll speak to slide 11 briefly. The Minister did, I think, a very good job of setting out what we see as the main areas of transformation, after we had a look at it as the officials responsible for this system. I want to stress that this is our perspective; this is one set of ideas. That's precisely why you and others are going to be looking at this in terms of what other ideas there are. When we look at this, we have the five areas of transformation. The Minister has gone over them, so I'll just go over them briefly.
One is better connecting training directly to employer demand. As I said, we want to increase employer involvement in training—the Minister really stressed that—but we also want to support individuals in identifying demand-driven training opportunities. What does that mean? We want to be sure that the individual has a bit more control and a bit more choice when it comes to the training decisions. I'll point to two aspects of that. One is about encouraging mobility. We want an individual to be able to go to a provincial office and say they'd like to take this training that will help them get a job that could be in a region far away or in a province far away. I think that's one of the challenges right now, the way the incentive structure is built. Maybe a province would be reluctant to train somebody for an out-of-province job. We want to be sure an individual has that choice. We also want to be sure the individual has a choice. For example, sometimes an individual might come to an office and say, “You know what? I know what I want to take. I'm willing to pay for the training, but I want to be sure that I continue to get EI while I'm on training.”
We want to be sure that those systems are in place, that there's a co-decision there, and that if an individual wants to make an investment in training with the government, those systems are in place.
Second, we want to support more effective returns to work. Here we're talking about earlier targeting and referral of EI clients. In the way it happens right now, it's a “first come, first service” basis at the door. Many times, individuals are reluctant to go to their provincial or territorial office. They don't do it until late in the process.
What we find is that about 25% of the clients actually aren't getting any kind of support until six months into their claim. Then their EI benefits have almost run out, and you think that maybe there should have been an earlier intervention; maybe they should have received a phone call to ask them how they could be helped with finding a job. Is it that they're lacking the labour market information? Is it that they need training? With earlier interventions, is there a way to target clients to figure out whether, since there are obviously employers looking for people there, we can do a match? That's an important part.
Third, we want to ensure that eligibility is responsive to evolving labour market needs. On the one side, we define who is eligible for the part 1, the income support, and we also say who's eligible for part 2. Well, there may be situations in which, even if individuals aren't eligible for EI, they should perhaps be eligible for training.
We're thinking in particular of youth or older workers who may not have sufficient hours, or others who are in under-represented groups or long-term unemployment. They don't have sufficient hours to collect EI, and that makes them ineligible for the training, but maybe we should make them eligible for training. We need to look at who is eligible for training.
Fourth is to provide that the LMDA program generates EI savings. Here we want to look at pay for performance. Pay for performance is a process used throughout many governments to try to increase effectiveness. It's used in the private sector.
Is there a way to set up an incentive structure with the provinces and territories to tell them that if they can get people back to work more quickly and we save on employment insurance—on the income supports—then maybe we can flow back some of those savings to them for providing the part 2 benefits?
Finally, we want to enhance performance measures. Right now, we collect some good data, but I think we can collect better data on outcomes and investments, so that we can make sure that over time the system continues to evolve to be as effective as possible.
Ian, do you want to move on to the next steps and other—?
