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Archived - Chapter 4 - A Productive, Growing and Sustainable Economy
Investing in People

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Building on investments made by the Government of Canada in recent budgets, Budget 2005 makes significant strategic investments in building a highly skilled and adaptable workforce.


Improved living standards have two main sources—growth in the share of the population working and increases in productivity. Although productivity growth has historically been an important factor, employment growth has also been a key driver of Canada’s recent economic success. With the aging of Canada’s population, however, and a consequent fall in the proportion of the population working, the key driver for future improvements in living standards will be productivity growth. In that context, continuing investment in human capital, including ensuring the full labour market participation of skilled Canadians, will be fundamental to creating the productivity growth needed for continued improvements in living standards.

Building on a Strong Base

Between 1997 and 2004, Canada experienced the strongest growth in employment among the Group of Seven (G-7) countries. The labour market participation rate is now at historically high levels, while Canada’s unemployment rate of 7 per cent is close to the lowest it has been in 25 years. Most unemployment is short-term, illustrating Canada’s dynamic labour market. At 43 per cent, Canada has the highest level of post-secondary attainment among OECD countries and Canada’s youth rank very high on international performance measures. Simply put, Canada is a prosperous country because of the collective efforts of Canadians.

These achievements are remarkable and have benefited many Canadians. However, in an increasingly integrated global economy, continued efforts must be made to ensure that all Canadians have the opportunity to contribute to and share in this prosperity.

Recent Initiatives

In recognition of the central role of human capital development, the Government of Canada has invested heavily in learning and skills development in recent years to support the development of a skilled, adaptable and innovative workforce. Recent budgets have provided direct support for human capital development through:

Two key initiatives introduced in Budget 2004—the Canada Learning Bond and changes to the Canada Student Loans Program—will begin to have an impact this year, as planned. There have been extensive preparations, including consultations with provinces and territories and other stakeholders, and necessary legislative changes, to ensure that Canadians realize the full benefits of these initiatives.

Building on the Foundations

Significant progress has been made in building a prosperous and inclusive society, where all Canadians have opportunities to develop the skills and knowledge that enable them to contribute to society and the economy. However, Canadians cannot be complacent. Canada needs to have a highly skilled, adaptable labour force that can respond to and drive the economy of tomorrow, and to be able to make the best use of the skills of those already in the labour market. To this end, the development of human capital is a cornerstone of the Government of Canada’s economic and social policy. For Canada to reach its potential in a dynamic environment, new approaches that will strengthen opportunities for learning and skills development over the life cycle are required. The new initiatives announced in Budget 2005 focus on key gaps in human capital development policies—early learning and child care; special education for First Nations children; workplace skills; literacy; and the integration of immigrants into the labour market.

Early Learning and Child Care Initiative

To secure a vibrant and productive Canadian society, Canada must continue to invest in its children. Research in Canada and around the world demonstrates that high quality child care and early learning opportunities are essential for children to get the best start in life. Such opportunities are critical to children’s physical, emotional, social, linguistic and intellectual development—setting them on a path of lifelong achievement.

Investments in early learning and child care also recognize the reality that in today’s economy parents are more likely to participate in the paid labour force and need access to affordable, quality child care that provides a caring and stimulating environment for their children. However, recent statistics show that while seven of ten women with children under age six are in the labour force, there are only enough regulated child care spaces for 20 per cent of young children.

The Government of Canada understands that quality early learning and child care programs and services play an important role in promoting the healthy development of young children. Over the past several years, the Government has worked with provinces and territories to build support for families and children in recognition of the benefits that accrue to society. The September 2000 Early Childhood Development Agreement and the 2003 Multilateral Framework Agreement on Early Learning and Child Care are but two examples of these efforts, as described in the box below.

Canadians can be proud of these investments. At the same time, the Government of Canada recognizes that more can be done working with provinces and territories to advance the quality and accessibility of regulated child care in Canada. A strong, shared initiative for Canada’s children is one of the best investments that governments can make in the social and economic fabric of this country.

Following up on the Speech from the Throne’s commitment in October 2004, federal-provincial-territorial ministers responsible for social services, with the exception of Quebec, announced in November 2004 that they had begun to work towards a shared vision for an Early Learning and Child Care initiative that would become a pillar of Canada’s social foundations. Ministers agreed to be guided by four key principles—quality, universally inclusive, accessible and developmental (QUAD)—in setting priorities for investments in their respective ELCC systems (see box on QUAD principles). They are working together on how to meet their shared objectives and on building a framework for quality services across the country.

Recent Federal-Provincial-Territorial Agreements in Support of Children

Under the 2000 Early Childhood Development (ECD) Agreement, the federal, provincial and territorial governments agreed to make significant new investments in the areas of promoting healthy pregnancy, birth and infancy; improving parenting and family supports; strengthening early childhood development, learning and care; and strengthening community supports.

As part of the ECD Agreement, the Government of Canada committed to provide $2.2 billion in funding over five years to provincial and territorial governments through the former Canada Health and Social Transfer. In 2003, the Government announced a continuation in funding after 2005–06 at the level of $500 million per year. Beginning in 2004–05, these early childhood development funds are paid as transfers under the new Canada Social Transfer. In addition, the Government of Canada invested a further $320 million over five years ($65 million annually) for early childhood development programming for First Nations and other Aboriginal children.

The 2003 Multilateral Framework on Early Learning and Child Care (ELCC) built on the foundation of the earlier ECD Agreement by increasing funding for the third of its key areas for action (strengthening early childhood development, learning and care). Specifically, in Budget 2003, the Government of Canada provided $900 million over five years to provinces and territories to help them provide greater access to quality child care and early learning opportunities.

Budget 2004 announced an acceleration in the implementation of the Framework by increasing cash transfers to provinces and territories under the Canada Social Transfer over two years, for a commitment to early learning and child care of $150 million in 2004–05 and $225 million in 2005–06, bringing the total investment to $1.05 billion over the five years spanning 2003–04 to 2007–08.

Budgets 2003 and 2004 also provided $45 million over three years (and $14 million per year ongoing) for early learning and child care for First Nations children living on reserve.

From 2003–04 through to 2007–08, these agreements represent a total federal investment of over $3.5 billion to support provinces and territories in developing programs and services for early childhood development and early learning and child care.


QUAD Principles: Guiding Investments in Early Learning and Child Care

In October 2004, the Speech from the Throne announced that the Government of Canada was committed to doing more for early learning and child care in Canada. Specifically, it committed the Government to working collaboratively with provinces and territories to build the foundations for a shared Early Learning and Child Care (ELCC) initiative.

Furthermore, the Speech from the Throne outlined four interrelated, key principles (known as the "QUAD") that will shape a shared vision for ELCC and go beyond earlier agreements and investments. The QUAD principles can be summarized as:

  • Quality—evidence-based, high quality practices relating to programs for children, training and supports for early childhood educators and child care providers, and provincial/territorial regulation and monitoring.
  • Universally inclusive—open to all children, without discrimination.
  • Accessible—available and affordable for those who choose to use it.
  • Developmental—focused on enhancing early childhood learning opportunities and the developmental component of ELCC programs and services.

The QUAD principles will guide investments and decisions in respect of ELCC programs and services, allowing provinces and territories the flexibility to address local needs and priorities. At the same time, they will provide a firm basis of accountability, whereby all governments will report annually to their citizens on activities and progress related to the principles and goals that form the ELCC vision and framework for quality services across the country.

A focus on the QUAD principles can lead to improvements in areas such as the quality and the number of child care spaces, affordability of child care services, children’s readiness for school, and supports for early childhood educators and child care providers. Together, improvements such as these will help elevate Canada’s ELCC programs and services to a new, improved level that meets the needs of Canadians.

Budget 2005 delivers on the Government of Canada’s commitment of $5 billion over five years in support of an Early Learning and Child Care initiative in cooperation with provinces and territories. Discussions with provinces, territories and stakeholders are ongoing, and significant progress towards the development of the framework is anticipated in the course of the year. A long-term vision, measurable goals based on shared QUAD principles, and the accountability of all governments to their citizens are part of these discussions. The necessary steps required to implement this vision and ensure that children have the best start in life will be taken once these discussions have concluded.

The Government recognizes that provinces and territories are at different stages in the development of their respective early learning and child care programs and services. In that context, Budget 2005 is making available $700 million, to be paid into a third-party trust upon passage of authorizing legislation. Provinces and territories will have the flexibility to draw down the funds on a per capita basis, as they require, up to the end of 2005–06, while a framework for quality programs and services across the country is developed.

Out of this $5 billion commitment, the Government of Canada will devote $100 million to First Nations on reserve, continuing to work in partnership with them to find practical solutions that address on reserve early learning and child care needs.

The Government of Canada commits a similar portion of the $5 billion—$100 million for the development of a new accountability package that will support improved research and the development of common evidence-based indicators and benchmarks.

Table 4.1
Federal Support for an Early Learning and Child Care (ELCC) Initiative

  2004–05 2005–6 2006–07 2007–08 2008–09 2009–10 Total

  (millions of dollars)
ELCC Initiative 200 500 700 1,200 1,200 1,200 5,000
Trust to provinces/territories1 200 500         700
Annual amount available 
to provinces/territories
    650 1,150 1,150 1,150 4,100
First Nations on-reserve     25 25 25 25 100
Accountability     25 25 25 25 100

1 $700 million of ELCC initial phase funding for two years (2004–05 and 2005–06) to be paid to a third-party trust on behalf of provinces and territories and accounted for by the Government of Canada in 2004–05. Two-year profile based on an assumed notional draw down by provinces and territories, as required, up to the end of 2005–06.

First Nations Special Education

Investments in primary and secondary education have long-term benefits for children, as individuals, and Canada, as a whole. As noted in Chapter 3, this is particularly true for First Nations children on reserve, who often face more significant barriers to completing their schooling than other Canadian children, and may have special needs.

Budget 2005 builds on previous federal investments in special education for First Nations children on reserve and provides an additional $120 million over five years to enhance the ability of First Nations to provide the additional resources (including teachers, specialized programs, assistive technology, and modifications to physical surroundings) required to meet the demands on the Special Education Program. A longer-term strategy for Aboriginal education, including special education, will be a key focus of the roundtable process with Aboriginal groups, leading to a First Ministers’ Meeting with Aboriginal leaders.

Ensuring Maximum Participation

Newcomers to Canada

Immigration is an important source of labour force growth. Demographic research indicates that within the next ten years immigration will account for all net labour force growth in Canada. Attracting and retaining skilled immigrants and ensuring they are able to reach their full potential sustains economic growth, promotes innovation and keeps city and community economies strong.

Since 2000, and consistent with the annual Immigration Plans tabled in Parliament, Canada has welcomed more than 220,000 immigrants to the country each year. This success in attracting newcomers has required a balancing of the objectives underlying Canada’s immigration program, including making processes faster and procedures more equitable, reuniting families, and meeting Canada’s economic and social needs.

Looking forward, it is essential that Canada continue to be a destination of choice for immigrants, and that newcomers to Canada are integrated into the economy and society as effectively and efficiently as possible. Success in achieving these objectives will depend in part on how governments work together, which will be an important element of the Canadian Immigration Framework that is under discussion with provinces and territories.

Many immigrants, however, face challenges in reaching their full potential in the Canadian labour market. They may need to acquire or perfect their English or French language skills. Many employers report gaps in immigrants’ mastery of specialized workplace language skills. A further barrier to the full labour market integration of new Canadians is the complex credential assessment and recognition requirements that need to be satisfied before they can work in their field of expertise.

As noted in Chapter 3, Budget 2005 provides $75 million over five years, under the 10-Year Plan to Strengthen Health Care, to accelerate and expand the assessment and integration of internationally educated health care professionals. This builds on the significant investments in the past two budgets—including $20 million annually for language training at advanced levels, along with $68 million over six years to work with partners to facilitate the assessment and recognition of the credentials of internationally trained workers.

For many immigrants, settlement and integration programs are the link to participation in Canada’s labour force and society. Budget 2005 provides an additional $298 million over the next five years for settlement and integration programming in recognition of the increasing demands being placed on these programs and services across the country. This additional funding will contribute to the attainment of a number of objectives—including improved labour market outcomes of immigrants across Canada, addressing the settlement pressures facing all jurisdictions, and strengthening bilateral relations with the provinces and territories.

In an effort to enhance service to prospective immigrants and temporary residents, Budget 2005 will invest $100 million over five years to take the next steps toward an integrated client service delivery strategy. This will include more efficient and responsive services and improvements to the availability of client information and assistance. In cooperation with provinces and territories, this funding will support an enhanced Going to Canada (Internet-based) immigration portal, allowing prospective newcomers to make better-informed decisions. This will allow them to more easily integrate into the Canadian labour market and society if they apply and are accepted.

Workplace Skills Strategy

The modern workplace must adapt to rising and increasingly diverse skills requirements to remain competitive. A fundamental shift in Canada’s approach to the labour market is required to ensure that it is positioned to respond to the challenges of a 21st century economy.

In Budget 2004, the Government of Canada committed to launch a Workplace Skills Strategy to help workers continuously enhance their skills to keep pace with constantly evolving workplace requirements. As an immediate measure, the budget initiated a new Training Centre Infrastructure Fund (TCIF), a three-year, $25-million pilot project that will provide matching funding for union training centres to purchase up-to-date machinery and equipment in order to enhance the quality of training.

For the next phase, the Government of Canada is prepared to work with its partners—provinces and territories, their colleges and training institutions, business and labour, and individuals, all of which have a role to play—to ensure that workers acquire the skills they need to succeed. Budget 2005 makes an additional investment of $125 million over the next three years to work with stakeholders in moving forward on a Workplace Skills Strategy. This will include:


Canada has very high rates of post-secondary education attainment. There remains, however, a relatively large number of working age Canadians who lack the literacy skills required for success in the knowledge-based economy. In recognition of the importance of improving the literacy levels of Canadians, the Minister of Human Resources and Skills Development will be working with provinces, territories and stakeholders on the development of a comprehensive strategy in support of literacy and essential skills development. As an initial step, Budget 2005 invests $30 million over three years to enhance the National Literacy Secretariat’s (NLS) capacity to further develop partnerships with provinces, territories, business and labour to foster awareness of and involvement in literacy issues and to promote learning in the workplace.

Adjustments to Student Financial Assistance Programs

Budget 2005 proposes two changes to the system of student financial assistance. First, Budget 2005 proposes to extend eligibility for loan forgiveness for Canada Student Loans in the unfortunate event that a borrower dies or becomes permanently disabled during the period of repayment. This measure will cost $3 million a year. In addition, the legislation for the Canada Millennium Scholarship Foundation will be amended to allow protected persons, including convention refugees, to be eligible to receive scholarships and bursaries awarded by the Foundation. This amendment will ensure that the eligibility criteria for Canada Millennium Scholarships are consistent with those of the Canada Student Loans Program.

Employment Insurance

The Government of Canada proposes to introduce a new rate-setting mechanism that is expected to be in place in time to set the rate for 2006. The mechanism will provide for rates to be established at an annual break-even level, which means a rate to generate premium revenues corresponding to expected program costs. In addition, in order to provide premium rate stability through the transition to a new rate-setting mechanism, the Government commits to ensuring that the rate for the next two years will not exceed $1.95. As a measure of prudence in case legislation is not passed in time, the Government proposes to give the Governor-in-Council the authority to set, in the fall of 2005, the rate for 2006.


Following from the public consultations that were launched in Budget 2003, the Government proposes to introduce a new permanent rate-setting mechanism based on the following principles:

In December 2004, the Government received the report of the Standing Committee on Human Resources, Skills Development, Social Development and the Status of Persons with Disabilities, which made a number of recommendations relating to how premium rates should be set. In February 2005, the Standing Committee on Public Accounts also produced a report, which also made a number of recommendations in this regard.

The new permanent rate-setting mechanism that the Government proposes to introduce will meet all of the principles, and also takes into consideration the views of stakeholders and the views of the Standing Committees. Under this new mechanism, the Canada Employment Insurance Commission (EI Commission) would have the legislative authority to set the premium rate. This will ensure transparency.

The EI Chief Actuary would annually calculate, on a forward-looking basis, the estimated break-even rate for the coming year based on the fall private sector economic forecasts underlying the Economic and Fiscal Update. The forward-looking basis means that surpluses, deficits, and the notional interest credited to the EI Account would not enter into the calculation of the break-even premium rate. This meets the principles of independent expert advice, and expected premium revenue corresponding to expected program costs.

The Chief Actuary would provide a public report of the break-even rate to the EI Commission, which would then consult with its respective constituencies. The Commission will then set the rate for the coming year by October 31. This will provide further transparency.

The EI legislation will be amended to provide the Commission with the authority to set the premium rate. In order to limit the pro-cyclical impact on the business cycle and contribute to stability of premium rates, the extent to which the rate could change from one year to the next would be limited to a maximum of 15 cents per year. This provides protection against sudden large increases in premium rates in the event of an economic downturn. The Government of Canada will have the authority to override the rate set by the Commission, if it were in the public interest to do so, through an Order-in-Council no later than November 30.


The Speech from the Throne made a commitment to continue to review the EI program to ensure that it remains well suited to the needs of Canada’s workforce. The Report of the Prime Minister’s Task Force on Seasonal Work subsequently provided a number of recommendations for how the EI program might be improved, as did the February 2005 report of the Standing Committee on Human Resources, Skills Development, Social Development and the Status of Persons with Disabilities. Accordingly, adjustments will be made to the EI program to respond to the evolving challenges and circumstances facing unemployed workers. The cost of these measures for 2005 was provided for in setting the EI premium rate at $1.95 for 2005. The Minister of Human Resources and Skills Development will be announcing the details of these measures in the near future.

The Government of Canada and the Government of Quebec are negotiating an agreement regarding Quebec’s parental insurance plan. As provided for in the Employment Insurance Act, the Government of Quebec proposes to establish a plan that would provide maternity, parental and adoption benefits to residents of Quebec. EI premium rates in that province would be adjusted to reflect the fact that the Government of Canada would no longer provide these benefits. The Government of Canada has indicated that, if an agreement is reached by March 31, 2005, it is prepared to provide transition assistance to the province for implementation of the Quebec plan.

Table 4.2
Investing in People

2004–05 2005–06 2006–07 2007–08 2008–09 2009–10 Total

(millions of dollars)
Preparing for the future              
Early learning and child care1 700   700 1,200 1,200 1,200 5,000
Ensuring maximum 
Newcomers to Canada              
  Integration and settlement   20 35 55 80 108 298
  Client service delivery   20 20 20 20 20 100
Workplace Skills Strategy   25 50 50     125
Literacy   5 10 15     30
Canada Student Loans 
Program change
  3 2 3 3 3 14
Total   73 117 143 103 131 567
Total 700 73 817 1,343 1,303 1,331 5,567

1 $700 million in first year to be paid to a third-party trust and accounted for in 2004–05 by the federal government.

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