Thank you very much, Madam Chair.
Good morning, members. Thank you for having me here today.
I'm pleased to be here on behalf of Canadian Manufacturers and Exporters and our 10,000 members to discuss Canada's labour market development agreements.
By way of background, more than 85% of CME members are small and medium-sized enterprises, representing every industrial sector, every export sector, and from all regions of the country. Our mandate is to promote the competitiveness of Canadian manufacturers and the success of goods and services exporters in markets around the world. CME is also chair of the Canadian Manufacturing Coalition, a collection of 55 business associations who speak together about the critical issues that affect the competitiveness of Canada's manufacturing economy.
Manufacturing remains the single-largest business sector in Canada. Canadian manufacturing sales reached nearly $600 billion last year, accounting for 13% of Canada's total economic output. Manufacturers also employ 1.8 million Canadians in highly productive, value-added, high-paying jobs. Their contribution is critical for the wealth generation that sustains the living standard of each and every Canadian.
In 2002, CME and our colleagues in the Canadian Manufacturing Coalition conducted a biannual management issue survey. This survey was focused on identifying the major challenges faced by companies and what was restricting their growth in Canada and abroad. While a broad range of issues affect competitiveness of companies, it was clear that the largest overall challenge faced by Canadian industry today is the strength of their labour force. The survey showed that nearly 50% of Canadian companies are facing skills shortages, and due to these shortages almost one-third of companies are considering moving operations to jurisdictions outside of Canada.
The economic consequences for Canada will be significant if these challenges are not addressed. Already today we know that labour shortages are causing billions of lost sales for manufacturers in Alberta and Saskatchewan. This is why CME and our members have been working closely with governments to strengthen the domestic labour pool to improve training programs, including the Canada job grant, reforms to the EI system, and apprenticeship training, to name just a few areas. We have also been working closely to help strengthen the quality and skill level of international labour to ensure it is matched with the needs of companies through reforms to the immigration system and to the temporary foreign worker program.
We are also closely working with ESDC on the delivery of a range of programs aimed at supporting the growth in advanced manufacturing, including creating national occupational standards for manufacturers, improving labour market information through regional consortia and linking foreign-trained engineers to Canadian manufacturers. In addition, we have partnered to create a skills lab, an online forum to discuss and exchange ideas and possible solutions to the skills challenges faced by industry today, including training and skills development.
While these reforms and actions are important, there is still so much Canada can and should do to address our labour shortages and we believe a major focus of attention needs to be on training and skills development of existing and new employees. LMDAs can and should play a much more important role in this regard.
Recently, I had an employer tell me that they reject nearly 80% of applicants to jobs because they don't have the basic comprehension skills to be employable. Basically, they would have been a danger to themselves and their co-workers in the workplace. I also routinely hear that new hires are only about 20% trained and companies must take the first year of employment to complete their training and bring them to basic industry standards before they are productive. While employers will and do support training of their employees, there's a significant amount of frustration with the current system, as well as concern the system is undermining their economic competitiveness.
We understand LMDAs will not address all the training and labour problems faced by industry across Canada; however, given the amount of funding contributed into the funds and spent on training, we believe it should be a far more important and effective tool in addressing industry training needs and closing some of the existing skills gaps. As a starting point, it is important to note that portions of the LMDA funding is being applied and used effectively by industry today. Despite what is often reported in the media, manufacturers and their related supply chains invest heavily in the training of their current and future employees. It is critical to their economic survival and success.
Companies are investing in on-the-job training to teach the advanced manufacturing skills necessary for a modern global industry, such as lean manufacturing, exporting, energy conservation, supply-chain efficiencies, workplace safety, and various apprenticeships. In some cases this training is being completed with the support of regional training programs delivered as part of the LMDA funding. This type of training is directly aligned to the needs of the employers and has direct economic benefits for Canada.
Some of the specific examples of benefits from our member companies from LMDA programs include doubling production output, 15% reduction in production costs, reducing lead time by up to 70%, and improved labour productivity by over 20%. However, while these are some positive results, it is nearly impossible to know the true impacts of the nearly $2 billion in annual LMDA training expenditures. The data available for the amount of money invested through LMDA is currently and has always been very vague.
This means it is nearly impossible to confirm positive economic and social outcomes associated with investing that nearly $2 billion a year.
Furthermore, it is equally uncertain as to the direct returns in EI funds that companies and their employees are heavily contributing to. Manufacturers and their employees pay roughly $2.1 billion in EI premiums annually with only $1.2 billion paid back in benefits, the majority of which are parental leave and other social supports. This leaves a gap of roughly $900 million in the manufacturing sector alone, which we believe should be available for training in the manufacturing sector through LMDAs or similar tools.
However, we actually do not know how much money is being returned to the sector in the form of training funds through LMDAs. With this level of funding available, we believe that more LMDA training funding should be available for new hires as well as upscaling existing employees to support industrial competitiveness and growth in Canada's manufacturing sector.
Finally, we believe that LMDA training funds should be leveraged and focused on the specific needs of industry and on closing the most-needed skills gaps to help them compete, grow, and employ Canadians. Specifically, LMDA funds should be invested into areas that are employer-driven and have specific economic outcomes like the examples outlined earlier, and similar to the way the Canada job grant is being established.
By focusing a significant portion of the LMDA investment on the skills and training that are most in demand by industry, we believe the money invested will have the benefit of leveraging significantly more private sector resources and creating better economic returns for Canada.
As an example, a program like this that used to be run under the old LMDA system in the 1990s was called On-Site. The program placed EI recipients at manufacturer facilities for up to 26 weeks, focusing on training and particular skill sets, including occupational health and safety, production, or environmental management. While on placement, the recipients continued to receive their EI benefits, but they got actual work experience while receiving it.
The companies got to see how these workers fit in, many of which were hired at the end of the project. Each participating employer paid $2,600—or $100 per week—to cover administrative costs and about 80% of the participants had full-time jobs at the of 26 weeks. This program was cancelled in the early 2000s with the switch to the LMDA. To us, this is a great example of using the funds that are focused on employer needs, and producing real and demonstrable results for the economy.
In conclusion, while CME supports elements of the existing LMDA program, where investments are economically measurable and beneficial to the individuals and companies involved, we believe that significant improvement can and should be made during this program review. We believe better data and transparency is essential as a starting point, given the money being invested through LMDAs is the money from the corporations and their employees themselves.