Ottawa, April 7, 2022
Budget fails to address labour shortages
Canadian Manufacturers & Exporters (CME) welcomes initiatives announced in Budget 2022 to stimulate innovation and investment and to ensure more efficient and resilient supply chains. However, the labour market measures announced today are not sufficient, given the magnitude of the labour shortage confronting Canada’s manufacturing sector.
“The manufacturing sector faces two major challenges today that are hindering its ability to produce and sell products: supply chain disruptions and labour shortages,” said Dennis Darby, President and CEO of CME. “Today’s budget offers important and helpful measures to stimulate innovation and implement and promote long term economic growth and ease supply chain issues, but it fails to address labour shortages. This is a miss.”
The budget was presented today by Deputy Prime Minister and Minister of Finance, the Honourable Chrystia Freeland.
Innovation: the key to bolstering Canada’s competitiveness
CME was pleased to see several measures designed to improve Canada’s innovation and investment performance, including the creation of a Canadian Innovation and Investment Agency designed to help businesses make the investments needed to innovate and grow. However, its mandate will need to be clear, agile and align with industry needs if the agency is to deliver on its mandate of improving investment growth in manufacturing.
“Overall, Canada lags well behind other OECD countries in non-residential business investment, and this is leading to a deterioration in our international competitiveness. To ensure Canada’s future prosperity, we need to reverse these trends. But to do this, Canada needs to have the right levers in place to stimulate investment, “adds Darby.
The government’s plan to cut taxes on small businesses is a positive move. It will ease the current phase-out rules related to the small business tax rate, with access to the lower rate fully phased out when taxable capital reaches $50 million, rather than at $15 million.
Also noteworthy is the establishment of a Canada Growth Fund aimed at attracting private sector investment in new and traditional sectors, including manufacturing, as well as to support the restructuring of critical supply chains.
A 30 per cent tax credit for investments in clean technology and a refundable tax credit for Carbon Capture, Utilization, and Storage (CCUS) will support manufacturers as they work to decarbonize their industrial processes. However, care must be taken to provide businesses with the necessary technical support.
CME is also pleased to see a commitment by the federal government to undertake a review of the Scientific Research and Experimental Development (SR&ED) program as well as to consider the suitability of adopting a patent box regime, two initiatives long championed by CME. Given that manufacturing accounts for a large share of Canada’s R&D expenditures, it is vital that industry is adequately consulted on any proposed changes to the SRE&ED program and on the potential development of a patent box.
Strengthening supply chains
Supply chains disruptions have had a significant impact on Canadian manufacturers, resulting in sales losses of more than $10.5 billion, according to a recent CME survey.
Ninety per cent of Canadian manufacturers say they are experiencing supply chain disruptions that are affecting their ability to produce and sell products. Of this group, over 60 per cent rate these disruptions as major or severe. Companies are struggling to find the components and products they need to fulfill orders and make sales. Strong policies are needed to help ease pandemic-strained supply chains and to prevent future disruptions.
“The measures announced in today’s budget are appreciated, but we must be able to deploy them quickly so that our companies see immediate improvement,” says Darby.
Specifically, the new measures announced today, such as the National Corridors Fund to Facilitate the Movement of Goods, the development of industry-led solutions to make supply chains more resilient, and the elimination of red tape to make supply chains more competitive could prove helpful.
Labour force: need to reduce processing times in immigration
Unfortunately, the government’s budget did not offer any substantial measures to address ongoing and acute labour shortages in manufacturing, even though the sector is currently facing a record-high 81,000 job vacancies.
CME welcomed the changes to the Temporary Foreign Worker Program announced earlier this week, but more solutions were expected in today’s budget. While the budget recalls investments made to support the processing of immigration applications, processing times remain too long.
“CME will continue to work with the federal government on our mutual goal of creating a more competitive, greener, innovative, inclusive, and resilient manufacturing sector. Budget 2022 is a step in the right direction, but more work still needs to be done,” concluded Darby.
- The manufacturing sector represents more than 10% of Canada’s gross domestic product.
- Manufacturers directly support more than 1.7 million jobs in Canada.
- The total manufacturing sales in 2019 surpassed $685 B.