Canada’s Federal Budget 2016: Labour market issues

5 minute read
01 April 2016

Canadian Finance Minister Bill Morneau tabled the new Liberal Government’s first Budget on March 22, 2016.  Entitled “Growing the Middle Class” the Budget aims to increase the real median household income and reverse what the Government perceives as widening economic inequality.

The Budget charts a four year program of increased infrastructure, program and entitlement spending, with a hoped-for stimulative effect. Much is promised in the areas of transit and “clean growth”, a hint perhaps that the Government does not intend to encourage or depend upon oil, gas or other commodities for growth or revenue.

Spending will rise from $280 billion in 2014-15 to almost $360 billion by 2020-21 – a 28 percent real increase. With that, the Government hopes, will come economic growth and a resulting richer tax yield.

To help fund expenditures, the Budget “delays” military equipment purchases, eliminates or limits some tax credits and raises some tax rates (a detailed Gowling WLG analysis of tax measures can be found in this report.) However, a revenue shortfall means the Government expects to accrue a $120 billion deficit between now and 2021.   

With respect to the existing framework of labour and employment laws under federal jurisdiction, the Budget proposes few changes. However, its many stimulus and more specific provisions which will have a wider impact on the labour market nation-wide.

Themes from this year’s Budget include:

  • Heavy emphasis on stimulus spending measures totalling $47 billion over the next five years, particularly in infrastructure.
  • Greater support for employees’ and retirees’ personal economic security through changes to employment insurance (EI) benefits, the Guaranteed Income Supplement and Old Age Security.
  • Emphasis on the labour market, to ensure employers have a pool of qualified employees to draw upon.
  • Focus on enhancing skills and employment training for Aboriginal peoples and youth.

Funded Job Opportunities and Worker Skill Development

  • The “Youth Employment Strategy”, which provides job opportunities for young Canadians, is to gain a further $165.4 million funding in the next year.
  • The Budget promises to extend the maximum duration of Work-Sharing agreements, where income is provided to an employee who works a temporary reduced work schedule while an employer recovers from financial hardship, from 38 weeks to 76 weeks.
  • Parts of the Budget proposes to support worker skills and training, by increasing federal contributions to the provinces through the Labour Market Development Agreements, supporting unemployed individuals eligible for EI and the Canada Job Fund Agreements, for those who are not eligible for EI.
  • The Budget also proposes to provide $85.4 million over five years, to develop a new framework to support union-based apprenticeship training.
  • Approximately $15 million is budgeted, over the next two years, to launch a pilot project enhancing Aboriginal Skills and Employment Training.

Individual Entitlement Programs

The availability and generosity of benefits to individuals has an effect on the choices workers make. The larger programs pay more to low wage earners or people who are not working:

  • The new “Canada Child Benefit” will pay families up to $6,400 per child, annually. Eligibility for that program gradually declines as family income climbs, stopping below a household income of $200,000. This is a very significant income redistribution program.
  • Changes to Employment Insurance will extend the duration of benefits in regions that have been impacted by increases in unemployment and shorten wait times for receiving these benefits from two weeks to one.
  • Furthermore, the “Working While on Claim” pilot project will be extended.
  • The previous Government attempted to slow cost increases in federal retirement plans. The new Liberal Budget reverses that, cancelling the provisions in the Old Age Security Act that increased the age of eligibility for Old Age Security and Guaranteed Income Supplement benefits from 65 to 67 and Allowance benefits from 60 to 62 over the 2023 to 2029 period.
  • Further, the Guaranteed Income Supplement top-up benefit will rise by up to $947 annually.

Substantial child support subsidies, longer funded unemployment and a better paying retirement which is not delayed, may affect worker availability and consequently, wage rates.

Federally Regulated Employees

  • The Government promises to support flexible work arrangements by exploring ways to ensure that federally regulated employees are better able to manage the demands of paid work and their personal and family responsibilities outside of work.

The Federal Government

  • The previous Government had imposed or planned significant unilateral changes to entitlements negotiated in the past by public sector contracts. The new Budget mentions bargaining in good faith with federal government unions to reach agreements that are fair for to both public service employees and taxpayers. Details are scant as yet.

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