DATE:  May 7, 2014

LOCATION:  Algonquin College – Ottawa Campus, Ottawa, Ontario

SUBJECT:  Minister of Employment and Social Development Jason Kenney delivers a speech recognizing the work at polytechnics to ensure graduates have the skills employers need at Polytechnics Canada’s 2014 annual conference “The Future We Want, the Difference We Make.”

Hon. Jason Kenney: I think the work that Polytechnics Canada and all of its member colleges represented by you here tonight is in many ways the most important work being done in the Canadian post-secondary education sector. And that’s really what I’m here to talk about tonight.

Algonquin College represents 159 college programs, with 21 apprenticeship programs and 61 online programs, to name just three from an impressive list of what’s offered at this college, typical of all the polytechnics across Canada.

Now let me just begin my remarks by situating them in the kind of context of Canada’s economy. Of course, up on Parliament Hill we have our partisan debates about our strengths and weaknesses, but fundamentally, I think we can all recognize that the Canadian economy is doing pretty well—in fact, significantly better than most other developed economies. The recession, the global downturn here was shorter and shallower than in virtually any other developed democracy, and the recovery has been stronger, with the creation of some 1.1 million net new jobs since the 2009 downturn— the overwhelming majority of them—about 90 percent of them—being full-time jobs, and 80 percent of them in high-wage industries.

We have one of the strongest fiscal positions in the developed world, with one of the lowest levels of debt, of public indebtedness at the federal level in the developed world. We’re going to have a balanced federal budget next year, and a number of provinces moving to balance—at relatively low tax levels for our history. In fact, the federal tax take as a share of our Gross Domestic Product is at its lowest level since the mid-1960s. And still that word has not got out very well around the world, and people still have this brand idea of Canada as a high-tax jurisdiction and a country that not too long ago was a bit of fiscal basket case.

Well, we have turned that around, and we now have the lowest taxes in the world on new business investment, at least amongst the major developed economies of the world.

Bloomberg just last week ranked Canada for I think the third straight year as the best country in the world in which to do business. The World Economic Forum says we have the strongest financial sector or the strongest banks. And the good news goes on and on. And these are things about which we should be grateful, but with all of those strengths come certain challenges.

But first, you know, the future’s looking even brighter—brighter because Canada, as you know, has always been an export-driven economy and we are diversifying our export markets in important ways. For far too long, of course, we have been over- dependent on the United States as virtually a captive market for our goods and services, but we are diversifying, having moved from 4 to 43 free trade agreements in the past 6 years, including trade agreements with the European Union, 28 member states representing 500 million consumers, largely in highly developed economies. And we will be the first jurisdiction in the world with simultaneous, basically tariff-free access to the market of 300 million people in the United States and the 500 million people in the European Union.

To that, we are adding, we hope, market free access to one of the most dynamic and the most innovative economies in Asia, that of South Korea, which will begin accelerated Canadian market access to these enormous and growing Asian economies.

So altogether, things are looking bright from a fiscal point of view. We’re doing relatively well in our domestic economy. Our export markets are opening up. And on top of all of that, we are on the cusp of what some people are calling a new industrial revolution in Canada’s economy that is a result of the hundreds of billions of dollars of capital investments that are coming on stream in extractive industries in a huge swath of northern Canada.

From the offshore oil and gas in Newfoundland to heavy minerals in Labrador to precious metals in northern Quebec, mining operations in northern Ontario’s Ring of Fire, to new hydro developments in Manitoba, potash and uranium in Saskatchewan and hydraulic fracturing in southern Saskatchewan, resulting in an energy boom there, to of course our bitumen reserves, oil, gas and other resources in Alberta, new mining developments in northern B.C. and all across the three northern territories opening up new horizons of opportunity, especially for our First Nations people, our Aboriginal people who happen to be proximate to so many of those huge new investments.

And by the way, each one of those developments, every one of those mines, every one of those projects of course is a public policy challenge. We have to make sure all of those things happen in a way that is environmentally sustainable and responsible. But if even a relatively small fraction of these prospective investments proceeds, we are talking about the creation of hundreds of thousands of high-paying, high-quality jobs primarily in skilled trades and vocations. And the challenge, as you know, is that our education systems have not been preparing young Canadians for those kinds of jobs in adequate numbers.

Now this is the big challenge that we will be facing. If there’s one reason that we are unable to fully grasp the potential offered by this “new industrial revolution,” it will be because we don’t have an adequate number of people with the right skills to actually fuel that prosperity.

Now let me be clear about this. This is a subject of some debate these days. As I’ve said as long as I’ve been in this position, Canada does not have a general labour shortage. The data doesn’t support it. If we did, we’d see wage rates rising more quickly than they are. But I think it’s undeniable if you actually look at the lived experience, the reality on the ground, if you listen to what employers and their representatives are saying from coast to coast to coast, that we are facing significant and acute skill shortages in certain regions and industries.

Let me give you some of these estimates. The construction sector says they will need 319,000 new workers in the next decade. The mining industry of Canada says they’ll need 145,000 more workers by 2020. The petroleum sector estimates they need 130,000 workers—additional workers—by 2020. And Skills Canada, which is, as you know, a great organization that we support, promoting the trades, tells us that we’re going to need a million skilled trade workers by the end of this decade. And the list goes on, whether it’s the Conference Board or the Chamber of Commerce, all of them estimating significant shortages, particularly in skilled trades.

So our challenge will be to fix the paradox of too many Canadians without jobs in an economy that has a growing number of jobs without Canadians.

And by the way, this isn’t a flash in the pan. It’s not based on anecdotal views. This is not just the data. This is also very obvious and intuitive when you understand that baby boomers are beginning to retire. We have a growing economy. The economy is growing most quickly in areas with sparse population through much of northern Canada where the extractive industries are located, and they tend to be in occupations which our education system has been under serving.

And by the way, you know, some of the demographers and economists tell us not to worry too much about the aging of our society and the retirement of the baby boomers—the demographic bulge—because they say people are working longer, and that’s true—for white collar workers. But for folks who are engaged in tough manual labour every single day, guess what? They’re not going to be working as welders and as carpenters and as heavy equipment operators into their 70s in work camps in northern Canada.

So let’s be realistic about this. These are occupations where we are going to see an entire generation of highly skilled Canadians—they have already begun—leaving these occupations. That pace is only going to accelerate. And regrettably, in part because of problems in our apprenticeship systems, we don’t have adequate opportunities for them to transmit their knowledge and learned experience to younger generations.

So for me, this is a matter of some urgency, and solving it requires movement on the part of the federal government, provincial governments, employers, industry associations, unions, educators, trainers in all different sectors.

Ces difficultés sont importantes mais nous comptons sur des personnes très compétentes pour trouver des solutions, particulièrement personnes comme ceux comme vous ici aux Polytechniques Canada.

And I want to thank Nobina, Ken and their whole team at Polytechnics here in Ottawa for playing an integral role in helping us address these challenges.

Vous vous proposez en vous appuyant sur des recherches et des données probantes des idées qui retiennent l’attention des décideurs au sein du gouvernement fédéral.

You challenge my officials to update their thinking on the changes underway in the Canadian education system, and I’m the first to admit that Ottawa doesn’t always have the answers. That’s why we appreciate the valuable input and the challenge function that Polytechnics Canada provides.

Let me give you just one very pressing example of what I’m talking about. The centrepiece of the most recent federal budget was called the Canada Apprenticeship Loan. The idea with the Canada Apprenticeship Loan is that apprentice students,  when they’re doing their formal block training, will be able to apply for and obtain interest-free financing through the Canada Student Loan Program. Students will be able to apply for up to $4,000 in interest-free loans. It’s estimated that at least 26,000 apprentices a year will benefit from this. It’s just one of the things that we have to do to break down this ridiculous idea that skills and vocational training and applied learning are somehow second-tier or second-class forms of education.

And guess what? The idea of the Canada Apprenticeship Loan came directly from Polytechnics Canada. In fact, I recall exactly the moment when. I had only been in my current post for a few weeks, and I heard about this whirlwind of ideas and energy, Nobina Robinson. Everyone told me I had to meet her. She had the solutions to the skills challenges that Canada was facing.

So we arrange a meeting for Nobina, and she came in, and I couldn’t get a word in edgewise for an entire hour, as you might imagine, which was just fine because she downloaded a brilliant analysis of the challenges that we’re facing in our post-secondary education system, and some fantastic solutions. And she said, “Why is it, Minister, that we give preferential loans, supported by the federal government, to students engaged in full-time academic studies at degree-granting universities, but we leave the apprentices out in the cold?”

And I looked at that, and I thought, you know, here we have a problem. We’ve got—thankfully—a growing number of young Canadians registering in apprenticeship programs. We’re now up to about 340,000. Well, that’s good news. The bad news is only half of them are going on to completion. We have an apprenticeship completion problem in this country. And I believe one of the reasons is because the opportunity cost for young people to leave their good-paying jobs as apprentices and go and do their formal block training is significantly high.

You know how it is. If you’re a young fellow in your early 20s in a welding apprenticeship program, and you’re working up in the oil sands in northern Alberta making 35 or 45 dollars an hour, well, first of all, you know how young people are. Their spend rate, their burn rate automatically goes to their amount of money—to consume every dollar that they’re generating, right? Young fellows in their 20s are not famous savers.

And so they kick up their spend rate, and they’ve got the lease on the new truck, and they’ve got the nice new apartment. And they’re spending every dollar that comes in. And the idea of suddenly going cold turkey for two months, so they can go down to SIAST or NAIT or BCIT and do their block training, suddenly is a very expensive and risky one. And so all the incentives are just to keep working and generating the income and to kick the apprenticeship can down the road.

Well, we have to soften the blow for them. We have to create the incentives for them to actually get to that journeyman Red Seal certification, so that they have that level of formal skills that they can transmit to others.

And a number of things need to be done in this area. First of all, we’ve brought in a policy that allows employers to pay those folks on their block training up to 95 percent of their regular salary level on top of employment insurance benefits, with no penalty. So the responsible employers can keep their apprentice employees whole during their block training. Point one.

Point two. We’ve now in this budget launched the Canada Apprenticeship Loan, which gives them a financing option to get through that period, as well to cover living expenses and other related expenses to reduce the opportunity cost.

And point three, in the budget, we’ve also launched a pilot project to support innovative ways of delivering the block training online and through remote learning, so that perhaps some of these people can stay in the remote work sites where they’re located and actually take their block training in smaller increments over weekends and evenings and through creative delivery of those programs. I know a number of you are doing that already.

Now this stuff isn’t terribly exciting. None of these ideas make it to the front page of the Globe and Mail, and I don’t think, Nathan, we’ve actually had a single question in the House of Commons on the Canada Apprenticeship Loans—probably a good thing— because I think there’s actually consensus around it.

By the way, political journalists—I’ll let you in on a secret, they’re actually fight promoters. So if there’s no fight on the issue, there’s nothing to report. But these are great ideas. And guess what? It was Polytechnics Canada, it was Nobina who came, and she said we’ve been trying to push this for years, but no one will listen. Well, someone finally did. And I’ll be honest, we encountered a certain resistance. I think the resistance was because before, you had to have 10 weeks of class in an accredited program in order to qualify for the Student Loan Program, and we didn’t want to water that down, we didn’t want to dilute it.

But you know, I think there was an unconscious bias behind that policy decision. And the unconscious bias was that apprenticeship learning isn’t really the equivalent to university education. And when I heard that argument offered, that’s what pushed me over the line. And I said, look, that’s exactly why we need to do this. We need to it not just to facilitate some financing options for young apprentices, so they complete their programs. We need to do it, just as importantly, in order to send a symbolic signal that the federal government regards apprenticeship learning in the trades as every bit as valuable as going to university in an academic program, and that’s what the loan says.

So thank you for the constructive role that you play.

Now another solution to this challenge of the future skills gap is to take a long and hard look more broadly at our secondary and post-secondary education systems.

Let me start by using Polytechnics Canada as an example of what I’m talking about. In case you haven’t figured it out yet, by the way, I’m a big fan of Polytechnics Canada and the work that your colleges do. And let me explain why I’m a fan.

Across Canada, you have 280,000 students enrolled in 11 institutions across 55 campuses. You offer a wide range of programs—a hundred stand-alone degrees, 24 joint degrees, 754 diplomas, 558 certificates, 200 graduate certificates and 225 apprenticeship programs.

What unites students across those different streams of learning is that they get good jobs. Some 90 percent of polytechnics students in Canada are employed after six months, and some of those coming out of the degree programs, it’s much higher. How many other educational institutions can boast numbers like that? Well, frankly, we don’t know, and that’s part of the problem, isn’t it? 

Interestingly, polytechnic schools are increasingly becoming a finishing school for general arts and science bachelor degree holders. Forty-six percent of your students have partially completed some kind of university or college training before enrolling at a polytechnic institution. Twelve percent of your students have actually completed a bachelor’s degree, and another 15 percent a college diploma or certificate before enrolling.

Students are flocking to your institutions. And by the way, I know you’re turning away far more than you can accommodate. They’re flocking to your institutions because of your small class sizes, your hands-on training on equipment used in industry, your teaching by industry-experienced faculty, and your integrated learning through placements, co-ops and internships—in other words, through applied learning. And of course, there’s also that 90 percent employment rate I mentioned before. As the jobs minister, I kind of like that.

The case outlined above demonstrates that the polytechnic model is hugely successful and the exact type of programming that governments should be supporting far more vigorously than they currently are.

That’s why it’s so frustrating to me when I hear that provincial government funding for polytechnic colleges isn’t keeping up with funding for other forms of post-secondary education. Between 2008 and 2013, the number of prospective students—people aged 20 to 34—in provinces with polytechnic institutions has increased by over 9 percent, all right? At the same time, federal government transfers to the provinces for post-secondary education through the Canada Social Transfer have increased by nearly five percent annually over the same period. So your prospective clientele’s grown by nine percent. The federal funding to the provinces has grown by five percent—sorry, we haven’t kept up with your population growth—but here’s the catch. Provincial funding to polytechnics through your operating budgets has only increased by 2.8 percent over the same period. And so there’s something fundamentally wrong with that. Provincial funding as a percentage of your operating budgets has actually decreased by an average of 2.9 percent.

So to summarize my point, employers from across Canada tell us that there is a current and growing demand for skilled workers in the very fields that your institutions are training young Canadians for. You’re producing a 90 percent employment rate—more than that in certain programs. And you’re clearly tremendously successful at knowing what jobs are in demand today, preparing graduates for those jobs. And yet your share of provincial support is not keeping up with the funds that the federal government is giving to provinces for post-secondary education. I want to know, where is our money going? And I think the federal government has a right to know that question.

It’s not our business to administer post-secondary education. We acknowledge – nous – évidemment, nous reconnaissons entièrement la juridiction constitutionnelle des provinces et territoires quant à l’éducation, y compris l’éducation postsecondaire.

Cela étant dit, en temps qu’une source des fonds importants pour l’éducation postsecondaire, d’après moi, le gouvernement fédéral a le droit au moins à poser les questions d’où vont les investissements des contribuables fédéraux? 

At the very least, while we respect provincial jurisdiction in the areas of education policy—as a major funder, I believe the Government of Canada has every right to ask why those dollars that we are increasing to provinces for post-secondary education are not finding their ways into the budgets and programs delivered by Canada’s polytechnic institutions.

Go ahead and applaud. I won’t turn you in to your provincial ministers, I promise.

I’m meeting with those provincial ministers, my Forum of Labour Market Ministers this summer, and make no mistake: I am putting this on the table. The next time the provinces ask me to spend more on post-secondary education or they ask us to increase their allotment for immigration or bring in more temporary foreign workers or what have you, I’m going to tell them that I expect to see money move to where results are in our education and training systems. That means moving money to polytechnics.

Now this is just one area of our secondary and post-secondary system that needs to be reviewed. We also need of course to do a better job of making a compelling case to young Canadians to consider a future in apprenticeship programs, in applied learning and in the skilled trades in particular.

For too long, we’ve settled for this kind of one-size-fits-all approach to youth employment, which has essentially been to tell young people to stay in school for as long as they can while in many ways frowning on vocational schools and apprenticeship training.

Provincial governments need to realize that the choices they made in the 1970s and 80s to downgrade vocational education were shortsighted. Forty years ago, most high schools offered vocational training. But for some reason, provincial education ministries and school boards decided to push vocational and skills training to the margins. In the 1990s, York University found that the number of technology courses taken by secondary school students in Ontario dropped from 480,000 in 1973 to 257,000 in 1996. Now it would be very interesting to see more recent data because all of the indications are that number has plummeted even further.

And that’s made worse still by the burden of debt incurred from staying in school longer, doing as they were told to do and then struggling afterward to find a good-paying job.

Let’s bear in mind, however, that some countries have fared significantly better than Canada—such as European countries—when it comes to connecting education and training to jobs in the labour market.

And that’s precisely why in March of this year, I led a study mission, which included Polytechnics Canada. Ken was there and Larry from SIAST attended together with all of the major Canadian business organizations, some of our largest unions and representatives from five of our provincial governments. And in Germany, we saw their phenomenal vocational training system. Now you all know about it; it’s almost mythic in its international reputation. And let me begin with the usual caveat. Of course we cannot replicate the German system, rooted as it is in hundreds of years of the guild system and their particular political legal system. We can’t replicate it. But what we can do is learn from it.

And here’s what I learned. I learned that nearly two-thirds of young Germans at the average age of 16 go into paid apprenticeship programs, typically with three and a half days on the work site, where an employer is paying them a good stipend of a thousand euros a month and then a day and a half in a vocational college, where they’re learning the applied theory of the skills they’re developing on the work site.

And I learned that on average those German apprenticeship programs are completed in three years. They’re graduating with their certificate, on average, at the age of 19, and 95 percent of them are going into employment in the field for which they were trained without student debt, with practical work experience, with a certificate that has equal value in every corner of their country, of their federation, and a certificate which is considered by everyone as having the same educational, social and economic value as a university degree. And that was perhaps the core learning that we had.

You know, that wasn’t just the advocates of the trades saying this. It wasn’t just the employers or the unions saying that. It was the academics themselves. I must admit I was astonished to hear one of the leading scholars of the German education system, a fellow with two PhDs, express how concerned he was to see a growing percentage of young Germans going into academic university programs as opposed to apprenticeship trades programs. I’d love to meet an academic in Canada who would share the similar sentiment.

And maybe this is why the German unemployment rate for youth is about half of our unemployment rate for young Canadians.

Of course a key part of the German system is the sense of responsibility amongst employers to contribute. German employers contribute the equivalent of 49 billion Canadian dollars per year in apprenticeship programs alone. And that contrasts rather unfavourably to private sector investments in skills development here in Canada.

You know the numbers. We have the highest level of public sector state-supported investments in skills development in the OECD. But we are the bottom of the developed world when it comes to how much companies, the private sector, put into skills development. So we need to find ways to prime the pump to encourage our employers to take up the challenge.

You know I was recently at the B.C. Business Summit. All the major employers in British Columbia were there. And every time I meet with these guys they say to me they need temporary foreign workers, they need more immigration numbers, they need to address the labour challenges in those ways. And I say to them, listen, I don’t want to ever hear you coming talking to me again about labour shortages and skills gaps unless and until we see demonstrable increases in private sector investments in skills training and preparing young people for the jobs of the future.

Now to give the employers their due, many employers are star performers, and many of them do participate. Many of them sponsor programs in your colleges and help you acquire new capital equipment for training—and I think we’re beginning to turn the corner on this. I think employers understand they have to put more skin in the game.

This, by the way, was really the idea, the motive idea behind our Canada Job Grant, an idea that became unnecessarily controversial, but we’ve since reached agreement with all provinces and territories for them to deliver this Job Grant. The idea was actually radically simple in a way. It was picking up the Germanic idea of employer-led training and investment in training initiatives. This is a particular challenge for small and medium-sized businesses.

When we ask SMEs in Canada why they don’t put more money into training, why they don’t hire more apprentices, they tell us it’s because they are terrified of poaching. For an SME to spend thousands of dollars putting a young person through a diploma program or tens of thousands through an apprenticeship program as an indentured apprentice, only to find that person, as soon as they’re certified, poached by a major employer with deeper pockets and a bigger payroll, that’s a very serious point of exposure for small businesses.

The idea behind the Job Grant is simply to reduce that exposure for them, so that they can identify young people or a group of people for a specific training program, at the end of which they have a guaranteed job, but we’ll come in and support roughly two-thirds or as much as three-quarters of the training costs. They have to put some skin in the game. They have to be involved in recruiting the individual. They have to guarantee them a job and hopefully mentor them through the process. We hope this will begin to replicate some of the magic in the German training system.

You know, it’s not just in Germany. We also visited the United Kingdom, whose system, for various obvious historical reasons is closer to our own. But here’s the interesting thing. The UK went through very much the same kind of single-minded focus on academic post-secondary education in the 1980s. And they’ve begun to try to reverse the momentum back towards applied learning. In the 1980s their polytechnics all graduated to degree-granting universities essentially. And now they’re trying to build up the college sector doing vocational training, doing apprenticeship programs with teenagers, so that, again, they’re coming out before they’re 20 with valuable skills and typically very good employment prospects.

And did you know that in the United Kingdom someone who does an apprenticeship program makes $275,000 more in Canadian dollars over their lifetime than those that graduate with a university degree.

By the way, we need comparable data here in Canada. We simply don’t have it. And some of the data being used in this debate is, shall we say, more than a little misleading. To compare the outcomes of all university grads in Canada, many of whom are boomers in their peak earning years, many of who are in the highest paying professions, to compare that aggregate average with everyone else is an irrelevant comparison.

But let’s begin comparing the employment earnings of, I don’t know, sociology majors to welders. Let’s begin comparing the outcomes for bachelors in communications with power engineers. If we actually begin doing more disaggregated real world comparisons, then we have some data that’s useful to share with young people.

Now don’t get me wrong. I have to make this disclaimer. We do not—I do not for a moment seek to denigrate the enormous value of academic post-secondary education that’s offered by our universities or the humanities or the liberal arts, all of which are enormously valuable and most of which programs lead to great outcomes. But what I am suggesting is that what we must begin doing in Canada is to replicate what in Europe they call the parity of esteem between different forms of education, training and employment. We must stop sending cultural cues to young people through their high school counsellors, their parents, their governments that they are somehow failing or not realizing their potential if they pursue a technical vocation or trade. We need to clearly and at every opportunity indicate that the choice of going to a Canadian polytechnic and working in a technical vocation is every bit as valuable as going to university and getting an academic degree.

There’s a whole lot more we have to do, but I’ve spoken long enough. Let me just perhaps summarize it by saying that the Government of Canada is trying to play its role to create the right incentives, to send the right signals. For example, we created the Apprenticeship Incentive Grant and the Apprenticeship Completion Grant, which, together, represent $4,000 available to students who go through their apprenticeship programs. We’ve created the Apprenticeship Hiring Grant for employers to incentivize them to do the same. We created the Tools Tax Credit.

And by the way, we’ve reformed the immigration system to try to support skilled people in these kinds of vocations. You know, since the early 1970s, Canada basically closed its immigration system to blue-collar immigrants, people who work in the trades. We opened a new door in the Skilled Trade stream of our immigration system and through our Provincial Nominee programs in the last few years. These are highly skilled people who can come in as permanent residents and be the journeymen to take on apprentices. We need to reduce journeymen-apprenticeship ratios in those provinces where they are unrealistically high to allow smaller contractors to take aboard apprentices.

We need harmonization in the apprenticeship programs across the country. The New West Partnership in Saskatchewan, Alberta and B.C. is doing this. The Atlantic provinces are, with our support. It would be nice to see the two central Canadian provinces get with the program.

We of course need to continue knocking down the remaining barriers to interprovincial labour mobility and to mutual recognition of trades and professions. And we need to do more to recognize the skills of foreign-trained professionals and tradespeople who are too often under-employed in our economy.

And of course we must all continue to focus particularly on those groups in our population like young Aboriginal Canadians who are massively under-represented in the workforce.

So these are big challenges, but the good news is I believe we’ve begun to see a significant change in the debate and the allocation of resources. The recent announcement by the Government of British Columbia that they’ve begun reengineering their secondary and post-secondary education systems, that they want to track labour market outcomes from all of the PSE streams and they want dollars to follow results is extremely good news. This is a model that can and must be replicated right across the country.

So with the innovative ideas and programs that you are delivering, with a federal government that is in full support of this new skills agenda, with provincial governments coming onboard, with employers understanding the urgency of these issues and increasing their investments, particularly in engaging Aboriginal Canadians in the workforce, I believe we can see a bright new horizon in a reform in our post-secondary education system that ultimately will be all about helping us to help young people to realize their potential and to contribute to our wonderful country’s prosperity.

Thanks very much for your time and for all the good work that you do.

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