Thank you, Mr. Chair.
Thank you for inviting me to participate in today's discussion. It is my pleasure to be here on behalf of Canada's 90,000 manufacturers and exporters, and our association's 2,500 direct members to discuss COVID-19 in Canada's manufacturing sector.
Today, I will stress the importance of the existing wage subsidy program, the need for expanded programs to support the full restart of industry, and the requirement for a national manufacturing strategy that contains a skills component.
CME's membership covers all sizes of companies, all regions of the country, and all industrial sectors. From the early days of this crisis we've been working with our members and governments to increase the manufacture and supply of critical PPE and health care technologies needed in the response. We have also been educating and informing manufacturers on the latest developments in the crisis, including on how to access government supports and how to protect their employees and their supply chains. We have been working to understand the impact on our sector and have been advocating policy, regulatory and program supports for our sector from all levels of government.
Throughout this crisis the role and importance of Canada's manufacturing sector has never been clearer or as much discussed. Hundreds if not thousands of manufacturers have switched their production to support the making of critical PPE, such as masks, face shields and gowns, as well as ventilators. Many in our sector are aggressively working on developing better tests and a vaccine for COVID-19.
Despite the current challenging climate, unlike in other sectors, most segments of manufacturing have been able to continue to operate throughout, albeit at much lower production levels. Through the first six weeks of the crisis—through to the end of April roughly—output dropped by nearly 10 per cent and actual hours worked declined by 30%. Worse, roughly 300,000 Canadians of the 1.7 million directly employed by our sector lost their jobs.
Those job losses were heavily concentrated in sectors where consumer demand plummeted, namely automotive, aerospace and energy-related sectors. Were it not for the actions of the federal government, those numbers would have been much, much worse, and because of those actions the numbers are beginning to get better now.
The most important action taken has been the wage subsidy program. When CME first began calling for the CEWS, we had in mind that companies could maintain operations and their payrolls so they would be in a stronger position from which to recover coming out of this crisis. We believe it is achieving these results.
In a recent survey of our members, nearly 85 per cent fully supported government actions, with nearly 55 per cent stating that they were using the CEWS specifically—far and away the most used program—with tax deferrals coming in at a distant second with roughly 30 per cent use.
The heavy use of this program can be linked back to the reality that manufacturing can continue to operate, but with significantly reduced volumes and sales. Sustaining their workforce would have been impossible without the wage subsidy given the high overhead costs of maintaining manufacturing operations.
Today, we are hearing from our members who are rehiring thousands of Canadians as they look to restart their production. By our count, CEWS has been a massive success. This does not mean, however, that the program is without flaws. There are two big challenges that our members have noted, which I want to raise.
First, companies who sell to interrelated parties—such as a subsidiary selling to a parent company—and second, companies who acquired a second company are restricted from using the program. We are working with finance officials on these restrictions and hope a solution will come soon.
Outside of existing program challenges, it is important to note how eager companies are to get off the subsidy program and return to normal operations. Many companies are planning for an exit from the support as soon as the original June program elimination date is reached. Those companies should be applauded. Unfortunately, many other companies will be reliant on the program beyond this date due to depressed economic conditions.
The extension of the program to the end of August was welcome news, but more will need to be done. It is likely that the program will need to be extended beyond this date; however, this time there should be a timed and revenue-based phase-out plan included. More specifically, we believe that the program should be extended to January 2021; the amount of the subsidy should be reduced in lockstep with an expected improvement in company revenues; and the government should lower the revenue-loss threshold for qualification from the current 30% back toward the original 15% before it is eliminated altogether. This extended and smoother transition would allow companies time to adjust and would not push them off a revenue-support cliff thereby potentially causing them and their employees further harm.
There are two other areas I'll mention before closing: the need for additional support for industry in dealing with the new health and safety guidelines, and the importance of skills development as part of a manufacturing strategy.
First, as industry begins to fully ramp up production, there are significant additional costs that will be borne by companies, yet revenues and output will not match historical norms. Companies will be investing in training staff in operational requirements, providing PPE in much greater quantities to staff and installing protective barriers and other physical distancing tools. Government should introduce some direct support programs to offset these costs.
Second, as governments look to answer the call to create a national industrial strategy that focuses on growth, investment and innovation in manufacturing, a critical component of that strategy must be human capital. While people are among Canada’s greatest assets, the lack of the right skilled workers and labour in general has become a major obstacle to the growth of our sector in Canada. The shortages are widespread across the country, across all job types and across types and sizes of companies. If companies cannot get the right skills, they cannot leverage the latest technologies, they cannot innovate and they cannot invest and grow. As part of their industrial strategy, governments need to include a skills strategy that looks to get more youth into the sector, to help companies upskill their existing workforce and to allow companies to attract the best and brightest from around the world.
Thank you again for inviting me to participate today. I look forward to the discussion.