This week’s federal budget proposed the creation of a new benefit for working-age adults to encourage us all to keep learning and reskilling. Here’s how the budget says this will work:
Starting in 2020, the Canada Training Credit will be a kind of virtual individual learning account for all workers (aged 25 to 64 years old). In each year that an eligible worker earns at least $10,000 (but less than $150,000), $250 will be credited to his or her account by the Canada Revenue Agency (CRA).
Why insist on some minimum employment income? Well, likely to try to target this to Canadians who are actively in the labour force and might need training to get ahead or even stay in the job they have. At the same time, the upper limit on the income likely tries to make the new program somewhat progressive. It could be made even more progressive, but there are trade-offs with simplicity and a needs- or means-tested approach is not so straightforward when it comes to adult training dollars. Perhaps it’s better, for now, to put the policy plumbing in place, see how things run and then adjust the flow of resources as needed.
So, $250 per year will go into your new notional Canada Training Credit account, to a lifetime maximum of $5,000, and then what? Well, the government hopes that having that credit might encourage you to take a course or workshop that you otherwise wouldn’t. Although 68 percent of Canadians 25-64 have completed a trades, college or university education program, governments of all political stripes have been warning us for decades that we have to expect to keep re-skilling and that we have to become lifelong learners.
By best estimates, 15.5 percent of all Canadians aged 25-64 report paying for formal training in the last 12 months. In France, where workers build up a “time bank” for training, participation in education and training seems to be a little higher at 20.5 percent of adult workers, according to 2014 stats compiled by the OECD. So maybe there’s some appetite for training and maybe account-based policy designs can help.
As education expert Alex Usher has argued, the new Canadian Training Credit has a bit more in common with the Government of Singapore’s SkillsFuture accounts. There, the city state gives all adult citizens (but not landed immigrants) a $500 credit, plus periodic top-ups, to pay for adult training or education. Five percent of Singaporean account-holders used their credit in one year for some form of training, according to a 2017 article. Looking at the fairly modest amount allocated to the new Canadian credit, it seems the Canadian government might be expecting a similarly modest take-up rate.
But a few important caveats are needed for any comparison between Singapore and the proposed Canadian policy. First, in Singapore, most social policy – from health care through housing – is delivered through mandatory personal accounts. Canadians, by contrast, are more accustomed to policies that encourage them (or not) to buy a savings product like a Registered Retirement Savings Plan (which does also allow withdrawals for adult education) or a Registered Education Savings Plan from a financial institution, where they feel more control over deposits and withdrawals.
How will Canadians react to a government program in the form of an account that can grow over time rather than a conditional and usually temporary benefit they apply for like EI?
If the Government of Canada does find that it can build and deliver a system of virtual accounts for adult education, there is no reason it shouldn’t also be able to do the same for kids without an education savings account. Right now, two-thirds of low-income children are missing out on an education savings bond for no reason except that they don’t have a private-sector savings account it can be deposited into.
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The second important caveat in any comparison to Singapore has to be in the intensive administration and investment in ancillary services that has gone into SkillsFuture. Not only does the government certify each and every course eligible for SkillsFuture money, but it also tries to provide personalized guidance to users as they decide what kinds of training to take. This week’s federal budget says that the Canada Revenue Agency will be administering the new Training Credit accounts. Singapore’s style of intensive administration and service delivery just isn’t something the CRA – or any other agency in the federal government – is really equipped to handle.
Does this mean that new credit is doomed to be rife with fraudulent claims or to pay for hobby classes like watercolour painting or digital photography?
On the former (the risk of fraud), I don’t think so. Federal and provincial governments already have a reasonably well-developed system for certifying providers of education and training through the Canada Student Loans Program and various active measures under Employment Insurance. One approach, as they do in Singapore, is to pay any Training Credits directly to training providers rather than individual learners. That doesn’t seem to be what the budget imagines given that users will pay their course tuition upfront and then get to claim up to half of it back out of their available training account balance with CRA.
Having once helped to design, implement and evaluate a large-scale pilot of individual learning accounts in Canada, I can tell you from personal experience that issuing thousands of small payments to multiple vendors of education and training can be complex, time-consuming and administratively costly. But that same experience also taught me that lower- and modest-income learners can’t afford to wait to get back money they’ve paid out of pocket. When fleshing out the implementation design for the Training Credit, the government should ensure that users can make a claim anytime in the year, not just at tax-time.
As for whether this might just lead to more spending on hobbies instead of so-called hard, job-ready skills (like learning the R statistical software as I swore to do this year), here Canada could learn something from the Singaporean experience. While there’s good economic evidence of labour market returns to investments in human capital, it’s the essential and “soft” skills that seem to be key, less so your field of training.
In Singapore, the early users of SkillsFuture tended to pick photography and baking courses. The Government of Singapore didn’t see those choices as a failure. One of its main policy goals was to “foster a culture that supports and celebrates life-long learning,” and matching learning to current employer demands for skills was not. If taking a watercolour course is the thing that gets you hooked on learning again, if it lets you develop new fine-motor skills and improves your pattern recognition, if it builds your “soft skills” by working alongside other painters, maybe that’s not a terrible way to invest $250 of taxpayer money on lifelong learning.
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