Philip Rafalko Security, Trade and the Economy

Budget 2017: Jobs, Innovation, and Canada’s Plan for a Changing Economy

This past week, my colleagues at the NATO Association of Canada diligently provided discussions on the latest federal budget around healthcare spending, feminism in economics and its impact on labour, housing, and international assistance. Their analyses speak to the many social dimensions of life which are affected by economic activity in Canada and abroad. Any budget, after all, affects our lives. To that end it is fitting to wrap up our series on Budget 2017 with a look at the approach this budget has taken to promoting economic prosperity for all Canadians.


About two weeks ago, the federal government unveiled Budget 2017, with emphasis on “Building a Strong Middle Class.” Aside, of course, from playing the obvious trope of representing “the middle class” as basically everyone, the budget hones in on a couple of crucial themes, notably change and transformation. The world economy is in a state of flux. Consequently, Canada’s economy is changing, and this budget intends to embrace it. The priorities of gender, Indigenous reconciliation, clean energy, fair taxation, and innovation all speak to notions of progress while simultaneously seeking to address gaps in social policy and the economy.


Perhaps above all else, the federal government has clearly conveyed that it is serious about job creation. As Finance Minister Bill Morneau noted in a statement, “Budget 2017 is about jobs. It’s about creating good middle class jobs today, while preparing Canadians for the jobs of tomorrow.” With a rapidly changing economy, new skills will be in demand and many others will become obsolete. Any budget hoping to fill these gaps must focus on transitions from school to work, between jobs, starting a family, and to retirement.


Chapter 1 of the budget presents the government’s plan for skills, innovation, and jobs. The language is replete with references to engagement with new technologies and the knowledge economy. It also mentions expanding business opportunities and integrating skills training into workplaces. It lays out a bold objective to “double the number of high-growth companies in Canada […] from 14,000 to 28,000 by 2025,” with focus on creating well-paying jobs and getting more female entrepreneurs to the table.


Budget 2017 promises $5.2 billion toward skills training for education and employment, as well as $3 billion toward innovation in the economy. It tackles innovation on multiple fronts, adding on to an estimated $22.6 already being spent on innovation by the federal government. $950 million is up for grabs for businesses who lead in innovation efforts, and there is a formal plan to create “Innovation Canada,” a government program which aims to support innovators.


The budget also includes $395 million to employ youth in vulnerable positions, such as Indigenous youth. This year alone, the government expects to spend $1.18 billion on skills and innovation, and its programs demonstrate an attempt to bridge economic expansion with its core values of progress and inclusivity. To support its plan for jobs, Budget 2017 has spending provisions for migrant workers and skills accreditation for new Canadians, as well as $81.2 billion for long-term infrastructure development and imminent upgrades to housing and childcare. Interestingly, it proposes an Infrastructure Bank to be funded mostly by private money.


Of course, not everyone is happy with this budget. Its drawbacks include a rising deficit, and Employment Insurance (EI) premiums. This year, the budget deficit sits at $28.6 billion, up from last year’s projections and campaign promises the year before. Many of the usual complaints from all sides of the political spectrum are present in debates surrounding the budget, for example that higher taxes prevent Canada from attracting more talent and building an innovative economy, or that failing to provide tax fairness means not being able to fulfill promises on gender, climate change, or child care. Furthermore, slashing the transit tax credit has been seen as hurting poor Canadians who depended on it the most, as well as hurting the government’s revenue-raising capacity.


Having set out to deal with change, the budget will have to prove itself in dealing with the economic uncertainty which leads to insecurity for many Canadians. This year’s budget has been released along the backdrop of slow but steady economic growth over the past few years. Concerned with maintaining growth and attracting foreign investment and talent, the priorities of Budget 2017 may be put to the test by forces not entirely in the government’s control.


2016 boasted 1.4% Gross Domestic Product (GDP) growth for the Canadian economy, up from 0.9% the year before. Importantly, most of this growth came from the last two quarters. However, experts have said that these figures obscure a less appealing picture of the Canadian economy, which included a drop in imports, decreased business spending, and a Canadian dollar whose value declined due to lackluster trade.


Canada also created 200,000 new jobs across the country in 2016, with strong showings in Quebec and BC, and a particularly good December w 81,000 new full-time jobs. However, job creation is also a problem because the numbers on employment don’t tell the whole story. Official statistics can be problematic at least partly because they rely on voluntary survey results, whose response rates are declining. The types of jobs which have been created are also important: 2016 saw a loss of over 20,000 manufacturing jobs, replaced with more jobs service sector. In addition, December’s numbers may not have not completely balanced the growth of full-time jobs compared to part-time jobs, which rose over 6% as of November 2016.


This year’s budget has some ambitious goals, but it also leaves some things out which may become dangerous in the long run if unattended. With all the talk of jobs and innovation, the budget fails to provide a comprehensive plan to engage with all sectors of the economy. As Helaina Gaspard writes in the Maclean’s article linked above, “Innovation means white lab coats and utility belts; they’re not mutually exclusive.”


The success of the budget’s job creation plan will remain uncertain as Canada has not yet dealt with how changes in the economy such as automation threaten to permanently erase many existing jobs. Furthermore, a failure to diversify the Canadian economy will leave the government dependent on commodity prices, notably oil, to raise revenues, and may cause political and economic problems as the deficit continues to rise. As Canada pivots its economic activity toward the future, some reflection may be needed on what we will be leaving behind in the process.


Photo: “‘Big Pete’ Ramagos, rigger at work on dam (TVA) Douglas Dam, Tenn.” (June 1, 1942), by Alfred Palmer via Wikimedia Commons. Licensed under Public Domain.

Disclaimer: Any views or opinions expressed in articles are solely those of the authors and do not necessarily represent the views of the NATO Association of Canada.

Philip Rafalko
Philip Rafalko holds a BA in Politics & Governance from Ryerson University, and an MA in Political Science from the University of Toronto, specializing in Political Economy of International Development. His main areas of interest include global governance, social conflict, systemic inequality, and human security. As Director of International Business and Economics, Philip hopes to show the connections between economic, political, and social aspects of security. A believer in social activism and learning through doing, he has volunteered in the education sector in Tanzania and has worked to engage Canadians about the history of colonialism and Indigenous peoples. His hobbies include playing and listening to music, doing martial arts, and visiting new places both near and far. He can be contacted at