Rapid Policy Update: 2017 Fall Economic Statement
Yesterday, the Government of Ontario released its 2017 Fall Economic Statement, which provides an update on the government’s finances and progress on key commitments since the release of the 2017 Budget. The government is continuing to project a balanced budget in 2017–18 and ongoing balance in 2018–19 and 2019–20, unchanged from the 2017 Budget forecast. The province also boasts a steadily declining unemployment rate which reached 5.9 percent in October 2017, and has been below the national average for 31 consecutive months.
The fall statement forecasts real GDP growth of 2.8 percent in 2017, up from 2.3 percent in the 2017 Budget. Ontario’s net debt-to-GDP peaked in 2014–15 at 39.3 percent, however it is projected to be 37.3 percent in 2017–18, lower than the 37.5 percent forecast in the 2017 Budget.
The government also made announcements related to Strengthening Ontario’s Small Businesses, Encouraging Youth Employment and Modernizing Apprenticeships for Small Businesses.
What does this mean for business?
Strengthening Ontario’s Small Businesses
The Province is announcing more than $500 million in new initiatives, over three years, for small business. Most notably the province is proposing a 1 percent cut in the small business Corporate Income Tax (CIT) rate from 4.5 percent to 3.5 percent. The Fall Economic Statement also includes enhanced financial support for small and medium]sized fruit and vegetable farming businesses and investments to enhance the vibrancy of communities and main streets.
OCC Response: As part of the OCC’s Bill 148 advocacy work, the OCC has consistently urged the government to provide a comprehensive package of offsets, which includes a reduction in the small business tax rate. These measures will help to provide small businesses compensation for their limited access to capital financing, and the pressures placed on their revenue streams from Bill 148’s increased labour costs.
Encouraging Youth Employment
Ontario will provide $124 million over three years in supports for youth ages 15 to 29 years, working with Employment Service and Youth Job Connection to support employer hiring and retention beginning January 1, 2018. Through Ontario’s Employment Service program, a small employer with fewer than 100 employees would receive a $1,000 incentive for hiring a young worker and a $1,000 for retaining that worker for six months. Additionally, if workers are hired through Youth Job Connection, a separate program that recruits youth facing employment barriers, employers would receive retention payments of $1,000 after three months, with a further $1,000 payable after six months for each worker.
OCC Response: In partnership with Canadian Centre for Economic Analysis (CANCEA) the OCC conducted an independent economic analysis modelling the impacts of Bill 148,. Evidence suggests that a 10% increase in the Ontario minimum wage could decrease youth employment by 2% to 6 % over time. Considering this challenge, funding for small business to link youth with the labour market is a step in the right direction.
Modernizing Apprenticeships for Small Businesses
The Province is proposing adding five service]sector trades to the eligibility list for the new Graduated Apprenticeship Grant for Employers: Hairstylist, Cook, Horticultural Technician, Baker/Patissier, and Appliance Service Technician. Additionally, the government is proposing supporting multiple employers to pool together and form consortia to hire, register and train their apprentices for skilled trades.
OCC Response: In our report Talent-in-Transition, the OCC recommended that the government collaborate with business and education stakeholders to increase employers’ awareness of the consortium model. By allowing for multiple employers to join and form hiring consortium, apprentices will see an enhanced system flexibility while improving support for the development of a workforce that is responsive to Ontario’s local labour market needs.