Thank you very much for inviting me to Ottawa. I do want to say that I am wearing a LEGO tie. I wanted that to be part of the official record because I promised my children that I would wear the LEGO tie, and my five-year-old insisted that you would be—and I'm quoting—“far more interested in hearing about the LEGO movie than that stuff you're going to talk about, Dad”.

8:45 a.m.

Voices

Oh, oh!

8:45 a.m.

Director, Mowat Centre

Matthew Mendelsohn

I have no idea, but you can make your own judgment at the end of my time.

First, by way of background, I was Ontario's deputy minister of intergovernmental affairs from 2004 to 2009 and participated in the negotiation of the labour market development agreement, but also the labour market partnership agreement, which existed as well for a short period of time as the labour market agreement, and which has now evolved into the Canada job grant. I have a great feeling personally about these agreements.

I'd like to highlight the three main points that I'm going to make for the committee today. First, the changing nature of the labour market requires changes to our policy responses in the EI system. Second, the approach for allocating funding in the LMDA discriminates against Ontario workers. Third, moving forward with good training programs, including those funded by the LMDA, requires a good partnership between the federal and provincial governments.

The first issue I would like to talk about is changes in the labour market. As I'm sure people here know, Madam Chair, the employment benefit support measures, or what we refer to as EI part II, were set up in their current form in 1996. In the almost 20 years since that occurred, eligibility for the training and employment services funded under this program has changed very little.

During that time, though, we have had enormous changes in the labour market. In Ontario we've seen dramatic declines in the manufacturing sector. Across the country, we have seen a rise in precarious work, part-time work, and multiple job-holders. We have also seen a restructuring of various sectors, which has created long-term unemployment for many middle-aged people who used to work in the manufacturing sector, particularly in central Canada.

What we know is that EI and the training programs that are funded by EI through the LMDAs have not kept pace with these changes. We know that fewer than half of unemployed Canadians are eligible for employment insurance. Also, in terms of the $1.95 billion nationally in federal funding for skills training and employment supports through the LMDA, which represents the largest program of its kind in the country and the largest expenditure of money by the federal government on training, we know that eligibility for this program has declined.

The result is that training programs funded through the LMDAs, the EI part II money, serve only about 37% of unemployed Canadians and, I should point out, only about 28% of unemployed Ontarians. Most unemployed people simply do not qualify for training available through the LMDA. One reason for that is the huge structural changes in the labour market and an EI system that has not kept pace.

The second point I would like to make is that these changes have been felt more strongly and significantly in Ontario, and this has left unemployed Ontario workers with less access to federal training programs than their fellow citizens across the country. Just to give you a couple of statistics, Ontario received only about 29% of the $1.95 billion in the LMDA funding. People would understand that this is much lower than its share of the Canadian population, at 39%, and much lower than its share of Canada's unemployed, at 42%.

The allocation of the LMDA is based on no fair or rational allocation formula, nor is the allocation formula well described publicly. One of the main reasons for the skewed distribution of LMDA funding, which discriminates against Ontario's unemployed who are seeking to get job training, is that $800 million, almost half of the LMDA funding, is allocated between provinces based on the relative impact on different provinces of the EI reforms in 1996.

So the allocation formula has built within it the impact of EI changes in 1996. That means that Ontario's share of the $800 million, because it was less affected by the changes in 1996, is fixed at 23%. So today's 18- or 20-year-olds who are entering the labour force are facing a policy environment explicitly designed to deal with the world from before they were born, just as NAFTA was being implemented. It is patently absurd that so much of the allocation of training dollars by the federal government through EI part II is tied to 1996 criteria.

To state it another way, as of 2012, Ontarians were paying 40% of EI premiums, receiving only 33% of income benefits, and only 28% of LMDA funding from the EI account, despite having above average national unemployment right now. It certainly makes sense that provinces and workers with low unemployment rates may contribute significantly more than they get back, but for Ontario right now the way the LMDA is funded represents an obstacle to the formation of human capital in the province.

Third, in my last two minutes, I'd just like to say that one of the successful features of the LMDA set up in 1996 was the good partnership between the federal and provincial governments. The federal government has an important role in the formation of human capital, but it devolves those programs to provinces and has negotiated agreements that have largely been successful. I know that the federal government right now is interested in looking for ways to improve the results achieved by training programs across the country, and that is to be commended. A focus on results, employer engagement, and transparent reporting are important elements of any renewal agenda, but I would say that—

8:50 a.m.

NDP

The Vice-Chair (Ms. Jinny Jogindera Sims) NDP Jinny Sims

Could you wrap up, please?

8:50 a.m.

Director, Mowat Centre

Matthew Mendelsohn

Sure, I thought I still had a minute. I will say there are four solutions to this.

One, make it easier for provinces to use the LMDA funding to help unemployed Canadians, regardless of whether they qualify for employment insurance.

Two, move more of the federal training dollars into labour market agreement-style transfers so workers other than those eligible for EI can access training.

Three, update the 1996 allocation formula so that Ontario's unemployed have as much opportunity to upgrade their skills for new jobs as Canadians in other provinces.

Four, work with provinces rather than against them in the rollout of employer-based training programs consistent with the Canada job grant.

8:50 a.m.

NDP

The Vice-Chair (Ms. Jinny Jogindera Sims) NDP Jinny Sims

Thank you very much.

I just want to say that witnesses have seven minutes, if we could all keep it really tight, because parliamentarians have a very short time to ask questions.

Thank you.

So we're over to Monsieur Brazeau.

8:50 a.m.

Marc Brazeau President and Chief Executive Officer, Automotive Industries Association of Canada

Good morning, Madam Chair.

Our chairman of the board, Robert Pitt, and I, are very pleased to be here this morning on behalf of the 4,000-member locations and branches that belong to the Automotive Industries Association of Canada, to discuss Canada's labour market development agreements.

For 72 years our association, also known as AIA, has been representing the interests of Canada's automotive service and repair industry, a $19.4-billion industry that employs 420,000 Canadians across the country, mostly in small and medium-sized enterprises. We represent almost 50% of all workers in Canada's combined automotive sector. Our industry is composed of companies like Canadian Tire, Kal Tire, Valvoline, Gates, and NAPA Auto Parts. Our members manufacture, distribute, retail, and install, automotive replacement parts, accessories, tools, and equipment.

There are over 22 million registered vehicles on our roads, with the average being over nine years old. Therefore, AIA members are delivering an important and valuable service in every community across the country, every day, year-round. We keep Canadians and their vehicles safe.

In that capacity, AIA is committed to promoting, educating, and representing all members in all areas that impact the growth and prosperity of our industry. This includes one of the most important challenges facing our industry today: the need to attract and retain more qualified and skilled workers and provide them with continuous, up-to-date training.

In 2013, AIA and the Canadian Automobile Dealers Association, the Canadian Vehicle Manufacturers' Association, and the Global Automakers of Canada, conducted a study entitled “Performance Driven: An Update on the Labour Market Opportunities and Challenges for Canada's Motive Power Repair and Service Sector”. The study focused on identifying the major human resources challenges faced by the Canadian automotive companies and what is restricting our growth and our prosperity. While the study identified a broad range of issues affecting the competitiveness of companies, it also found that one of the largest challenges is the supply of a qualified labour force. The study showed that there are just over 11,800 unfilled positions in our industry today, with over 25% of employers in Canada's automotive service and repair industry reporting having one or more unfilled positions.

The economic consequences for our industry, and for Canada as a whole, will be significant if these challenges are not addressed. Skill shortages will damage the productivity of the automotive repair and service industry and the Canadian economy as a whole. Vehicles are imperative to Canadian families and to the workforce. According to J.D. Power and Associates, 30% of Canadians rely on their vehicle to earn a living every day, making it essential that skilled technicians are available for the required maintenance and repairs of our growing and aging vehicle fleet.

A national skills shortage is dramatically impacting our industry and steps must be taken, both in the short term and the long term, to address the growing gap between supply and demand. Over the past five years, the number of workers entering the automotive industry as graduates of pre-apprentice or apprenticeship programs has dropped by over 2,500. The number of apprentices has also dropped from just over 13,000 in 2009 to just over 9,000 today; a loss of another 4,000 workers. Our study showed that this labour trend will continue, with demand significantly outpacing supply over the next five years.

Compounding the issue is that 20% of employers in the service and repair sector are telling us that they are preparing to fill vacancies due to retirement in the next five years. This will mean not only more unfilled positions but also a loss of long-term, experienced workers.

So, what can be done?

I'll now turn it over to our chairman, Mr. Robert Pitt.

8:55 a.m.

Robert Pitt Chairman, Board of Directors, Automotive Industries Association of Canada

Thank you, Marc.

Good morning everyone.

AIA and organizations like the Canadian Manufacturers and Exporters and the Association of Canadian Community Colleges are working closely together with governments to strengthen the domestic labour pool through improved training programs, including the Canada job grant, reforms to the EI system, and apprenticeship training, to name a few.

One of the ways we are connecting directly with the labour market and our community colleges is through the I-CAR collision repair training program. AIA has been managing the training program, I-CAR, for the past four years, delivering technical and process updating courses, which have been developed by the automotive manufacturers and suppliers, to the collision repair industry. AIA works with community colleges and technical institutes to deliver the program, and since 2010 more than 28,000 training seats have been delivered.

The success of this program has positively impacted employees, employers, students, trainers, community colleges, consumers, and insurers. We're also working to improve communication and information-sharing between our training institutions and the industry.

AIA is also working with the Association of Canadian Community Colleges to improve the quality of labour market information available to the industry leaders and policy-makers. Currently the automotive aftermarket is not being well served in this area. Specific information on industry skill requirements and labour supply and demand is critical to ensure that the sector continues to grow.

Labour market development agreements, LMDAs, are a strong tool in helping address the skills shortage. However, to promote the use of LMDAs to our members in industry, we need concrete data showing how they positively impact our economy as a whole and the automotive service and repair industry specifically.

One of the greatest challenges around the use of the current LMDAs remains awareness. Many employers don't know about the program or the eligibility requirements, and the application process can be both arduous and restrictive.

Further to that, the current LMDAs are not industry-specific. The development of LMDAs targeted to the automotive service and repair sector could be promoted to our members, with tools created to aid in the application and use of the programs, and thus directly impact their ability to fill vacant positions with skilled workers.

Initiatives such as these, along with the collection of more data, increased education around current available programs, and the creation of industry-specific LMDAs, would help address the severe labour shortage impacting the automotive service and repair industry in Canada today.

We thank you very much for the opportunity to speak to you, and we're happy to answer any questions you may have.

9 a.m.

NDP

The Vice-Chair (Ms. Jinny Jogindera Sims) NDP Jinny Sims

Thank you very much. Your timing was impeccable.

9 a.m.

Chairman, Board of Directors, Automotive Industries Association of Canada

Robert Pitt

Thank you.

9 a.m.

NDP

The Vice-Chair (Ms. Jinny Jogindera Sims) NDP Jinny Sims

We're now going to turn it over to Madame Groguhé.

9 a.m.

NDP

Sadia Groguhé NDP Saint-Lambert, QC

Thank you, Madam Chair.

Welcome to all our witnesses.

I am going to begin with you, Mr. Mendelsohn.

In an opinion piece that appeared in The Globe and Mail in February 2014, you said that a coordinated intergovernmental approach to human capital, with participation from employers, labour and the education sectors, was necessary but that we were still a long way from that.

Could you briefly describe the approach you were recommending? What role would the federal government have in such an approach?

9 a.m.

Director, Mowat Centre

Matthew Mendelsohn

Thank you for the question.

As I said in my opening statement, I believe it's very important for the federal government to put forward an approach that gives workers greater access to funding put into labour market development agreements for the formation of human capital.

Currently, workers in more traditional jobs benefit from the social contract and social programs, but an increasing number of part-time workers and those without job security do not derive those benefits. We advocate a human capital formation strategy that puts all those dollars on the table and addresses all workers in need of further training.

Clearly, this has to be done in cooperation with the provinces, since they are the ones in charge of education and delivery of these programs. I wholeheartedly agree that employers and unions have a role to play. The past 18 months have been somewhat of a waste of time because the federal government put forward the Canada Job Grant without consulting the provinces, who are responsible for delivering the program. That wasn't the best way to go about implementing a Canada-wide approach to the formation of human capital.

9 a.m.

NDP

Sadia Groguhé NDP Saint-Lambert, QC

In a nutshell, then, what you are recommending is to provide greater access, take into account the various changes you mentioned and ensure human capital factors into the process.

How can Canada put such an approach to the management of human capital in place? What should the main priorities be? Kindly keep your answer concise as we don't have much time.

9 a.m.

Director, Mowat Centre

Matthew Mendelsohn

It would be necessary to make more funding available under labour market agreements and less funding available through labour market development agreements. Labour market agreements offer much more flexibility and are more open to all Canadians and workers. That would be the first step.

As for priorities, I would say that a lot of immigrants need a bit more training in order to improve their labour market integration. They often find themselves on the sidelines and excluded from the employment insurance system. The same goes for people who have been unemployed for a long time. They aren't eligible for training dollars. It would be important to target all sorts of groups, and that isn't the case right now.

9:05 a.m.

NDP

Sadia Groguhé NDP Saint-Lambert, QC

Very good.

I assume that, in addition to your appearance before the committee today, you'll be sending us a brief.

9:05 a.m.

Director, Mowat Centre

Matthew Mendelsohn

Of course.

9:05 a.m.

NDP

Sadia Groguhé NDP Saint-Lambert, QC

Excellent.

Now I am going to turn to Mr. Brazeau.

You stressed that a skills shortage in the auto sector would hurt the industry, especially the lack of skilled technicians.

In your view, can employers do more in terms of identifying labour market needs and ensuring that LMDA funding goes to training programs that meet those needs? How do you see employers participating in the LMDA process?

9:05 a.m.

President and Chief Executive Officer, Automotive Industries Association of Canada

Marc Brazeau

Thank you for the question.

There is no doubt that training relies on a partnership between industry, government and workers. I'll give you an example that my board chairman mentioned earlier.

Five years ago, we took over a training program strictly for body shops, called I-CAR. Originally, it was an English-only American program that wasn't well-received in Canada, so our industry took responsibility of the program for Canada; we committed to working with the partners, be they insurers, training centres, community colleges and so forth.

9:05 a.m.

NDP

The Vice-Chair (Ms. Jinny Jogindera Sims) NDP Jinny Sims

Go ahead and finish your sentence, please.

9:05 a.m.

President and Chief Executive Officer, Automotive Industries Association of Canada

Marc Brazeau

We work with various partners to be able to deliver training tailored to the industry's specific needs.

9:05 a.m.

NDP

Sadia Groguhé NDP Saint-Lambert, QC

You were the mastermind of sorts—