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Firms’ investment in training makes a substantial contribution to human capital formation. However, there are concerns that firms are under-investing in training because of various market failures and barriers that exist, providing a rationale for policy intervention. This paper explores some of the main knowledge gaps facing policy-makers in the area of employer-supported training with the objective of identifying key policy-related research avenues that could be pursued further. Our selective review focuses on research directions that could potentially improve our understanding of: (1) the main covariates of training and the key factors behind Canada’s relative performance in this area; (2) how firms’ training decisions are affected by various factors including the structure of labour markets, innovation and technology adoption, organizational change, firm life-cycle patterns, the state of excess demand for skills in the labour market and policies; (3) the empirical importance of specific market failures related to training decisions and the form of appropriate policy responses.

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In this paper we argue for an enhanced market structure for PSE [postsecondary education] as an important means of adjustment of PSE to labour market changes. However, this market orientation, in our view (and other authors’ opinion), can only be implemented after disentangling price mechanisms and income support in PSE and addressing potential pitfalls of this approach. The paper first briefly presents the theoretical characteristics of a market-based PSE system, then examines various dimensions of the system that could crucially impact on its feasibility. Key issues relating to these characteristics are surveyed, and some of the major concerns arising from the current Canadian system outlined. The basic question of measuring the adequacy of adjustment of the PSE system to labour market changes is also raised. The central role of students in the functioning of the PSE system - both as it is now and in a more market-oriented version - is then acknowledged. Consequently, the importance of understanding students’ educational choice processes is stressed as a crucial step towards improving the PSE system’s responsiveness to labour market, which should in turn lead to greater innovation and higher living standards (among other benefits). This is an ‘issues paper’ intended to foster discussion at a government-led roundtable and, as such, emphasizes and underscores what we see as key research issues. These questions and the broader lines of the research agenda that emerges from them are summarized at the end of the paper.

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Firm-level training activity is a major source of labour force skills formation in Canada and the United States and, therefore, important to productivity growth. The focus of this paper is the relationship between firm size and employer sponsored training. The main issues considered are whether or not the types and overall level of training activity generated by employers is adequate, whether some firms under-invest in training, and whether there are labour market or other institutional factors present that impede employer-sponsored training activity. The paper begins by considering firm size and labour productivity, and finds that both shifts in product demand and technological innovation are important factors that could affect training by firm size. As well, the level, amount, and type of employer sponsored training activity undertaken in smaller versus larger firms may be related to the different benefits and costs of such training across firms of different sizes. Another focus is the importance of internal-to-the-firm organizational structures for employer training and changes in organizations, the workforce, and employment for employer-sponsored training in smaller versus larger firms. The paper develops further research areas, including sources of variation in the benefits and costs of training, the relationship between institutional arrangements and training outcomes, who receives training and who does not within firms of different sizes, barriers to training in small versus large firms, the nature of formal versus informal training in small versus large firms, and the impact of alternative policy regimes on training outcomes. The paper identifies the potential value of data sets such as the WES [Workplace and Employee Survey] in furthering a more comprehensive research agenda on training and firm size, and considers the value of supplementing large-scale data sets with analysis based on industry or firm-level administrative or case studies in order to account for the effects of institutional factors on training outcomes.

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The Canadian population, like those of the other advanced economies, is aging rapidly. One important aspect of population aging is the aging of the Canadian working-age population and workforce. The research theme developed in this issues paper is the effects of population aging on the Canadian labour market. Three areas for policy research directly linked to aging and the workforce are discussed. The first is the determinants of the labour force participation decisions of older workers. The policy questions underlying this research issue are to identify barriers to labour force participation by older workers and to examine the welfare consequences of offsetting the effects of demographic changes by maintaining or prolonging the employment of older workers. The second area for policy research is the relation between an aging population and the use of skills in the economy. In particular, this research area concerns: the effects of aging on the level and types of skills supplied by the workforce; and the effects of age differences in skills in the context of an aging population on the demand for labour by employers and on employers’ introduction of new technologies and of new forms of workplace organization. The third area for research concerns the costs of adjusting to population and workforce aging. At the level of the economy, the changes resulting from population aging will occur gradually over a period of twenty or more years. Nonetheless, an increased level of retirements and the changing age composition of the workforce may result in increased costs of workforce adjustments. Furthermore, while changes resulting from workforce aging will occur gradually for the economy as a whole, this may not be true of certain firms, industries or occupations, with implications for adjustment costs. For each of these research areas, relevant economic research is discussed and a series of research issues is presented.

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Changes in the mix of goods consumed, and changes in the age mix of the labour force are the two main channels through which population aging is likely to affect labour market flows in Canada. In this paper it is argued that research should focus primarily on the second of these channels, because these effects are likely to be more direct and will occur earlier. Promising research directions in the area of labour force aging and worker flows include descriptive research on trends in labour market flows by age and education; research on the consequences of mobility (across jobs, employers, occupations, industries and regions) for older workers; understanding the effects of Canada’s multifaceted income support and retraining system on older job movers, especially older job losers; studying the cost-effectiveness of retraining for older workers and the optimal targeting of such retraining; defining and identifying age discrimination in employment and the effects of public policy thereon; understanding the implications of downsizings and plant closures for older workers; and improving our understanding of the way a firm’s age structure affects its behaviour and performance. In addition, research that helps assess the relative importance of some of the key processes generating labour market flows in the first place - for example, on-the-job search versus creative destruction processes - would improve our understanding of the effects of aging on labour flows.

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The international mobility of skilled labour has become a key component of the global knowledge-based economy. Rising levels of foreign direct investment (FDI), international trade, research and development (R&D), technological advances and increased demand for skilled workers seem to have all contributed to an increase in the international mobility of skilled labour. Internationally mobile individuals are often found participating in industries that are largely knowledge-based and global in scope. As a result, it has become increasingly important that the economic policy discussion surrounding the international mobility of skilled labour must take into consideration the wide variety of ways the migration of skilled labour affects the economy. Numerous drivers, policy and non-policy induced, are at work. Attention must now turn towards the links between these movements and the institutions regulating them; the performance in the trade of goods and services; FDI; human capital formation and multinational enterprises location; and income convergence among countries. This paper provides an overview of the literature on four key issues surrounding the international mobility of skilled workers, while identifying potential directions for future research. First, global trends of recent international skilled migratory flows - magnitude and their composition in terms of underlying skills/education of migrants with a focus on Canada-US migratory flows. Second, fundamental (non-policy) drivers of the increased skilled migratory flows, especially among advanced countries. Third, economic costs and benefits associated with cross-country movement of skilled labour and the main factors conditioning these costs and benefits. Fourth, how policy has adjusted or should adjust to increased skilled labour mobility in the global economy.

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Meeting the challenge of the 21st century Canadian economy through rapid expansion of the highly skilled labour force involved in innovation will require important labour market adjustments. The purpose of the roundtable for which this paper was prepared is to discuss a series of issues concerning these adjustments in order to develop a medium-term research program on these issues. They include: What are the types and levels of skilled labour Canada needs and will need in building an innovative economy? Where does Canada stand now in the supply of these types of skilled labour? What are the current conditions in markets for these types of skilled labour? Does Canada have the institutional set-up needed to achieve the required adjustments? What institutional barriers are there to adjustments? Are there institutional changes that could facilitate adjustments? Section 1 of this paper takes up the first two points raised above. The section begins by discussing issues that concern the links between skilled workers and innovative activity. A better understanding of these links is a key element in developing a framework of indicators of how Canada is faring in the provision of the human resources required by a greatly increased level of innovation. Section 1 concludes by presenting and discussing a number of indicators of Canada’s current situation. Adjustments in sectors, regions and firms and in their institutional environment are discussed in Section 2 of this paper. The fourth point raised above - the role of institutions in these adjustments - is central to developing policy for ensuring an adequate supply of skilled labour in support of greatly increased levels of innovation. The research program outlined in Section 2 would seek to identify institutional constraints to adjustments (other than constraints due to the institutional structure of Canada’s post-secondary educational system, which are discussed in the issues paper Montmarquette and Boisclair, 2004 [indexed at TD/TNC 85.272]). Section 3 of the paper is a brief conclusion.

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This paper evaluates the potential economic and labour market effects of attracting more high skilled immigrant workers in Canada in the context of an ageing workforce. The analysis is done using a computable overlapping generations model, which accounts for differences in the skill composition of immigrant and non-immigrant workers. The analysis first indicates that selecting the same proportion of high-skilled immigrants as in the second half of the 1990s would raise labour productivity and living standards in the long run. It could also reduce the expected negative impact of population ageing on growth in real GDP per-capita by about one-quarter. In addition, raising the proportion of high-skilled immigrants by 0.25% of the population each year could reduce by another 50% the anticipated decline in real GDP growth. However, these gains are conditional upon the recognition of permanent residents’ credentials. Finally, attracting more high skilled immigrants may significantly reduce the skill premium, which on one hand lowers earnings inequality between high and low skilled workers, but on the other hand may reduce incentives for young adults to invest in human capital.

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Employer-sponsored worker training is recognized as one means of developing Canada into a more innovative and knowledge-based economy, in order to better compete in the growing international market place. Research into Canada’s performance in employer-sponsored training has shown that there is noticeably less training carried out by employers in this country than in the United States. The research presented in this paper draws an inventory of the types of government incentives for employer-sponsored worker training found in Canada and the US. A comparison of the relative fiscal sizes of these public policy incentives is made to determine whether they may be a factor in Canada’s weaker performance in employer-sponsored training.

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The Skills Research Initiative is a multi-year initiative undertaken by Industry Canada (IC) and Human Resources Development Canada (HRDC), in partnership with the Social Sciences and Humanities Research Council (SSHRC). Designed to support the Innovation Strategy of the Federal Government, the research partners identified four skills policy-research themes. They are: labour market and skills implications of population aging in Canada; employer-sponsored training; adjustments in markets for skilled workers in Canada; and international mobility of highly skilled workers. In the first phase of the project, papers reviewing issues for discussion were prepared on each of the four research themes and roundtables of experts from academia, the public and private sectors were held. The main goal of the roundtables was to discuss the knowledge gaps reported in the issues papers and identify promising research directions. An expert from academia was selected as a rapporteur for the day's discussion at each roundtable. Following the roundtable, each rapporteur prepared a written report that reviewed the key messages of the participants and provide their own suggestions on future research directions. These reports were instrumental in the development of the request for proposals for each research theme administered by SSHRC. This working paper is a compendium of the four rapporteurs' reports.

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