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Archived - The Role of Labour Standards in a Human Capital Strategy

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Quebec’s experience with the 1% law: some possible lessons for Canada?

Given the need to consider the institutional environment in examining the effects of any mechanism for the development of human capital, it seems apposite to us to introduce here the specific case of Quebec’s experience with government intervention in the area of continuing education. For one thing, the institutional environment has a number of similarities with the other provinces or with the Canadian economy as a whole, and for another, this experience stretches over a decade, which enables us to identify some lessons learned. At this time (2006), in fact, the legislation is under government review.

In Quebec, in the early 80s, a commission on adult education had recommended legislation requiring firms to invest 1.5% of their payroll in training their workers. The recommendation was not accepted, because of divergent opinions between the unions and employer associations. After experimenting in the early 90s with an incentive approach involving a training tax credit that was inconclusive, the government of the province decided in 1995 to seek passage of the Act to foster the development of manpower training, known as the 1% law. The decision resulted in particular from the realization that Quebec was lagging behind the other provinces with regard to its investment in continuing education. To date, this legislation remains unique in Canada in this field (Charest 1999).

On the basis of foreign experience in this area, particularly in France since 1971 and in Australia between 1990 and 1994, the National Assembly passed a law requiring firms with a payroll of $250,000 or more to allocate 1% of it annually to the training of their workforce, or to pay an equivalent sum into a national fund to support the development of workforce training—in other words, a training tax.[12] Given the deep divergences of view expressed by employer and union representatives as the bill was being debated, we can say that the 1% threshold was itself a compromise, which seemed more acceptable in that it imposed few conditions on employers. In a word, the management rights of employers were respected in the matter of how they decided to invest in training. In essence, the Act is simple and flexible in its application, in that firms must invest in improving the qualifications of their workforce to the tune of 1% a year, with no requirement as to how this sum is to be distributed among employees. Note that firms may also elect to pay into an approved agency that funds continuing education, although this arrangement has been tried in Quebec only in a very marginal way, except in the construction industry, which had adopted a pooling arrangement even before the 1% law was passed; for a discussion of the case of that industry, see Charest and Dubeau 2003.

Given the divergent views of the unions and the employer associations in relation to the bill, the government opted for a law expressing the general principle, and entrusted the regulatory aspects, such as defining which costs would be eligible, to the partners themselves, in order to produce a negotiated, consensual outcome, instead of imposing a government decision on the detailed implementation of the Act. Initially, the partners were brought together in a new government workforce development corporation, the Société québécoise de développement de la main-d’œuvre, which was subsequently integrated into the Ministère de l’Emploi et de la Solidarité sociale, with the establishment of a commission of labour market partners, the Commission des partenaires du marché du travail, with regional commissions in which the partners were similarly represented. As well as creating a permanent forum for social dialogue, this did assign responsibility at the outset to the partners, who were called upon to “manage” the legislation. It also allowed for the stakeholders to develop the regulatory process as experience with the legislation was acquired. For example, the partners agreed in 1999 to a provision waiving certain administrative formalities for firms that allocated over 2% of payroll to training, those with an approved internal training service, and those that worked with employee representatives to develop a joint three-year training plan. This on-going experiment in co-management of the regulatory process remains unique to Quebec. In short, while one of the goals set in the early 90s was assumption by the stakeholders of responsibility for workforce development and the emergence of a partnership, it must be said that what has been accomplished is substantial, and perhaps too often underestimated, given the history of what have been rather adversarial relations between the parties in Quebec. Note also that in conjunction with the 1% law, the government decided to provide its support to the development of some thirty sectoral workforce committees to help employers address the issue of continuing education. The sectoral committees are also managed by the partners, and complement the work of the Commission des partenaires in order to maximize the benefits of the 1% law and contribute to the development of workforce training. In all, these decisions have led to the development of sectoral, regional and provincial networks involving over 300 union and management partners over the last decade. Without the 1% law, it is very likely that such a sustained and organized partnership would never have developed.

It is of course important to look at what the Act has produced, first in terms of investment in training, which was an explicit objective.[13] In this connection, a number of observations may be made. As Table 2 shows, the average annual percentage paid out by employers has exceeded the 1% threshold, and has grown in step with payroll.[14] Even among small firms, the threshold does not seem to be disproportionate, given the average results achieved. Note that at the minimum payroll level, the annual cost is only $2,500. Note also that except in 1996,[15] average spending has been relatively stable at about 1.5% a year. Some commentators feel this may mean that firms have reached a ceiling in their investment in training, while others see it rather as a sign of the feasibility of annual renewal of employers’ investment in training!

Table 3 indicates that the percentage of employers annually reaching the threshold set in the Act—again, except in 1996—tended to increase, or at least to stabilize, depending on the size of the firm, which could reflect a learning effect among employers. In 2003, the last year for which data are available, almost 9 out of 10 large firms achieved at least 1%, while 7 out 10 small businesses did so. Moreover, only 2% of the larger firms reported no expenditure on training, whereas 14% of them did so in 2003, and 17% in 1998. These data also show that it tended to be the smaller firms that had problems in complying with the Act, and could benefit most from institutional support in developing their training activities, particularly from sectoral workforce committees. The problems of the smaller firms are widely diagnosed in the literature (Baldwin and Johnson 1995; OECD 2003; Secrétariat d’État 1999).

Data on the provincial worker training fund, the Fonds national de formation de la main-d’œuvre, essentially support this analysis of the development of corporate behaviour over the period. Overall, contributions to the fund increased over the first three years, because the number of firms subject to the Act was growing quickly, but when the number stabilized in 1998 at about 35,000, contributions remained almost unchanged at about $35 million a year, barely 0.04% of the total payroll of such firms in Quebec. These funds are reinvested annually in activities in support of training based on the submission of projects by firms or sectoral committees, in the main.

Although no formal comparison can be made of the development of investment by firms with the period before the law was passed, since there are no comparable data from before its coming into force, some data and studies point to favourable effects of the passage of the 1% law in Quebec. For example, a 2002 survey of employers subject to the Act found that 33% said they were investing more in training than before the law was passed, 66% said investment had remained stable, and 2% said they were investing less than before (Direction de la recherche, de l’évaluation et de la statistique [research, evaluation and statistics branch] 2005, 24). Recent data on adult education in Canada indicate, moreover, that among the provinces, it was in Quebec that formal training increased most between 1997 and 2002, moving it from last place to 8th out of 10, and more importantly reducing substantially its divergence from the national average (Peters 2004). Using another source of data allowing interprovincial comparisons, other studies have shown a positive effect of the 1% law in Quebec on the probability that employers will offer formal or on‑the‑job training, although the effect is statistically significant only with respect to the latter (Turcotte et al. 2003, 45).

With respect to distribution or equity, the 2002 survey of employers subject to the Act showed that while about two-thirds of management, supervisory and professional staff received training, only about half of office, production and sales and service staff did so (Direction de la recherche, de l’évaluation et de la statistique 2005). These results are not significantly different from those obtained in other studies of the whole of Canada (Peters 2004). Similarly, Quebec data indicate that workers with low levels of education participate much less in training than those with higher levels: 39%, compared with 74%. (One interesting fact, however, is that when firms invest more than 1% in training, the variations in participation between categories of employee are reduced.) It thus seems that the law has not really had an effect on the distribution of training that differs from what we see elsewhere in Canada, with the necessary reservations concerning the comparability of data from different surveys. In a way, this is hardly surprising in that the Act offers no directive or incentive to change the distribution of the workplace training effort in relation to the standard choices made by employers or their own thinking on the subject. Note moreover that employees questioned in a 2002 survey by the same government department viewed the Act favourably: 95% of those familiar with the Act attributed positive effects to it. One problem, however, is that only 2 employees in 5 knew that the law existed, and this was almost 8 years after its passage!

Another effect that can be associated with the passage of the 1% law is the increase in collective agreement clauses in Quebec that deal with training. Since the Act did not assign any particular rights or authority respecting training to the unions in the workplace, they have endeavoured to negotiate clauses with employers designed to establish some measure of union participation in this area. In work on this subject directed by us (Parent 2005), we thus found that between the period preceding passage of the law in Quebec—1990-1995—and the five years following its application to all firms subject to it—1998-2003—the proportion of collective agreements with at least one clause covering workforce training in the private sector in Quebec rose from about 35% to 50%. Moreover, the same proportion had risen only very little from 1980 to 1995: about 5 percentage points. About 25% of collective agreements surveyed in 2003 called for the establishment of a union-management joint committee on training, whereas the figure did not exceed 10% from 1980 to 1990. These data support the idea of the development of a partnership with respect to training that is expressed in the Act, a partnership that is taking shape here in the workplace.

Lastly, note that the law highlighted the need for better organization of the training market in Quebec. In this connection, a process for trainer certification by the Emploi‑Québec agency within the Ministère de l’Emploi et de la Solidarité sociale constitutes a means of providing structure to that market, since it validates the skills of private providers of training services to corporations. More than 4,000 trainers have now been certified in Quebec. On the supply side, continuing education by public institutions such as school boards, colleges and universities has also expanded to provide a better response to the training needs of employers. In 2001, the Commission des partenaires du marché du travail adopted a general framework for skills development and recognition to support learning strategies for formal workplace training. The training must lead to a qualification to be certified by Emploi-Québec, but its content will be defined by the sectoral workforce committees on the basis of occupational standards they will also set. One of the arrangements supported by this approach is the apprenticeship scheme for which Emploi-Québec is responsible. This scheme is in its early days, and in 2003, when about 30 trades were involved, there were only just over 3,000 apprentices in Quebec.

It will be more difficult to pursue the analysis of the effects of the 1% law in the years ahead because of a major change in its application. The Liberal government elected in Quebec in 2003 quickly decided to raise the payroll threshold for firms to be subject to the Act to $1 million, effective 2004. This means that most—70%—of the firms that were previously covered no longer have any obligation to provide continuing education, and about 11,000 firms remain covered. It can be argued that the effects of this decision are negligible, in that these firms accounted for only 16% of the payroll of all firms covered and were responsible for only 13% of all spending on training in Quebec, but it makes one wonder about the repercussions of the message the government has thus sent about the importance of supporting workplace training activities. The fact remains that Quebec’s 1% law now applies in essence only to firms which, as tables 2 and 3 show, readily meet their legal obligation, which might raise questions as to the need to keep the legislation, at least in its present form. Thus, it will be interesting to see what action follows the government’s evaluation of the Act scheduled for early in 2006.

We shall conclude this brief outline of Quebec’s experience with a few remarks. First, although Quebec witnessed a debate pitting unions against employer associations much like that often seen in Canada as a whole, as discussed in part 6 hereof, it was possible in North America to introduce a specific law designed to develop continuing education. In our view, this was due to the political will of the government to support workforce development, and to the nature of the chosen instrument of intervention which, while coercive, left considerable leeway for the stakeholders in its implementation. This institutional compromise sent a message to Quebec firms that training was an important issue, and brought social partners together in a regulatory process, instead of locking them into an adversarial one. In this respect, we find here one of the characteristics often cited in the literature: the importance of involving the stakeholders in the regulation of training.

It should also be said that the 1% law was not brought in as the sole instrument of intervention in the development of human capital. The maintenance of the tax credit for the apprenticeship scheme, the establishment of a partnership structure provincially and in the regions through the Commission des partenaires du marché du travail, and the setting up of some thirty sectoral committees are all institutional resources designed to complement the Act. To that we can add the numerous services to employees and employers provided by the government through Emploi-Québec. Thus, we can cite an institutional complementarity that has had manifold leverage effects in the area of training. What we have here in fact is a multiplicity of forms of intervention that we have also seen in the literature. We should add that these forms should not be set in stone, but should be accompanied by a process of continuous evaluation. Institutions must evolve with the field they seek to regulate, and it is important to involve the stakeholders in that evolution. In that sense, the 1% law did not solve all the problems in the field of training, and it is for stakeholders to determine what adjustments are needed on the basis of the new objectives prompted both by our experience with the law over the last ten years and by the reality of the job market of today and the next ten years, which has already changed from the reality of the early 90s.

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Date Modified:

2011-11-22