A New Agenda for Canada

I cannot overstate the importance we must attach to math, science and literacy skills. Canada is one of the very few advanced societies without national examinations or even provincial ones, and I believe the time has come to introduce standardized testing.

We must also encourage more young women to take math and science; make the use of computers an everyday skill for school children, just like reading; reduce our totally unacceptable level of school drop-outs.

I realize that we already ask a lot of our teachers. But perhaps we have been asking them to do the wrong things. And perhaps we need to start at the beginning and reform the programs that prepare teachers. We might, for example, require science teachers to have a first degree in science; ensure that those who teach at the junior high or high school level have a sequential BEd which follows a first degree in their particular area of specialization, rather than the integrated four-year BEd.

We must also empower teachers by giving them more autonomy, by providing incentives and by rewarding excellence. We must also ease teachers’ burdens in other ways. Studies have shown that there is no direct correlation between increased levels of funding to the formal education system and student achievement. So perhaps our money would be better spent on making sure each and every child comes to school ready and able to learn; by ensuring pregnant women and their infants receive adequate nutrition; stepping up pre-school screening; enhancing early intervention programs; providing special programs for the learning disabled and for gifted children; improving integration; and providing mentoring and peer tutoring.

By concentrating on these areas, we can identify difficulties before they become real problems–problems that require costly remedial treatment, and place a huge burden on teachers.

We should aim, in Canada, to have the best school-retention rate and the best school system in the world.

On the question of literacy, as you probably know, one in five Canadians is functionally illiterate. And there is a direct correlation between level of schooling and employment. A majority of Canadian firms report that illiteracy is emerging as a major problem among their work force.

Those Canadians that lack literacy skills often hide in jobs with low skill-level requirements and low wages. But the nature of work is changing–and the demand for skills is increasing.

That, combined with the fact that many companies now require job candidates to pass a literacy test, means more and more Canadians who are unable to do everyday tasks–the tasks that you and I take for granted–are going to find it harder and harder to be self-sufficient. Not only does this cost society billions of dollars in income assistance and unemployment benefits, it is a deeply distressing and unacceptable waste of human talent.

In New Brunswick we are doing some innovative things in literacy. In partnership with business and industry, we are helping initiate community-based programs. We are taking them out to the people who need them, where they need them: out to fish plants, the factories and the church basements. We are committed to stamping out illiteracy in New Brunswick and we are mustering all the forces we can to combat it.

I have seen example after example, in New Brunswick, of people who left school in Grade 6 or even earlier. People who have grasped the opportunity when it has come their way. People with enormous courage, who have enrolled in literacy training–and can now get a job, support their families, do their own banking, read to their children and lead truly independent lives.

But if illiteracy is causing enormous problems in terms of Canadian productivity, it is not the only cause. The face of work in Canada is rapidly changing, demanding new and higher level skills. And our education system must be able to adapt to prepare people for those changes.

Education for education’s sake is a worthy deal–as far as it goes. But as we approach the 21st century, we had better go further than that, because–let there be no doubt–Canada’s ability to compete depends in large measure on the skills and knowledge of its work force.

I read an interesting article recently by a U.S. educator, which reviewed the changing face of work in the United States. Canada’s experience, of course, has tended to mirror that of the U.S.

At the beginning of this century, by far the greatest proportion of Canada’s work force was employed in agriculture: approximately 45 per cent. Today, however, that figure is closer to six per cent. Why the huge drop? Because agriculture automated. And as it automated, we increased productivity. So agriculture is still a central force in our economy, but it is not the cornerstone of our work force.

The share of employment in other goods producing industries–mainly manufacturing and mining–was low at the beginning of this century, but peaked near 40 per cent in 1951. However, it has been on a downward trend ever since, and today, only around 25 per cent of Canadian workers are employed in production and manufacturing.

Why the big drop? Again–because production and manufacturing automated. As we automated, unskilled workers were no longer an economic commodity. That left fewer, but much more highly skilled workers in the industry.

As an example, when the president of a Quebec bakery decided last year to make his operation more technologically advanced, he also found it meant switching from low-skilled to high-skilled labour–and a work force of 100 instead of 350.

Let’s look at the service sector. At the turn of the century, approximately 22 per cent of Canada’s work force was employed in the service sector. Thirty years ago, it was 47 per cent. Today it is about 71 per cent. In fact, between 1980 and 1989, the service sector accounted for 94 per cent of all the growth in employment in Canada.

Now we all know about the skills that will be needed in the high-tech end of the service sector. But some say that many of those service sector jobs will be at the lower end of the scale: in the fast food restaurants and in the shopping malls. It’s true that people won’t stop eating hamburgers or buying T-shirts, but the demand for skilled people in those fields will still increase. Why? Because the service sector is automating–just like agriculture and manufacturing did.

Some of you are bankers, so I am sure you know that approximately 40 per cent of all consumer banking transactions are done using automated banking machines. But if I asked you what percentage they were used for 10 years ago, you would say: "None–they didn’t exist 10 years ago."

The number of cashiers and tellers has not decreased during the decade, that is because banks have taken on additional business and opened numerous new branches. So the traditional jobs are still there. But many of them require new skills for day-today servicing of those ABMs and there is also a growing need for highly skilled workers to do the technical servicing.

Do we have enough highly skilled technicians in Canada to cope with the increasing demand for these and other new, technological innovations? I read in The Globe and Mail last Thursday that we’ll soon be able to do our banking by touchtone telephone. Credit card companies may soon simply be saying: "Don’t leave home!"

What about fast-food restaurants? Is it unrealistic to assume that soon you’ll be able to stop at a machine, push a button to select a burger with cheese, push another to choose the toppings you want, and yet another to indicate how you want it cooked? And is it unrealistic to assume that you will then put in your money–just like a pop machine–and seconds later out will come your burger, untouched by human hand?

No-one will take your order. No-one will take your money. And no-one will prepare your food. Who will work there? Not the 16-year-olds we see now, but highly skilled technicians.

Another example. According to The Wall Street Journal the fastest growing firm in America is one that makes automatic, robotized checkout counters. So soon, instead of a check-out clerk at the grocery store unloading, pricing and packaging your groceries, a robot will do it. Why? Because the technology is rapidly outstripping the quality of the work force and the cost of American labour. So where is the check-out clerk working now? And who will service the robots?

In the information sector, changes have occurred at a much more rapid pace. It’s hard to believe that PCs didn’t exist in 1982. Or that the ubiquitous fax machine was unheard of–in its present form–until 1986. Now, we’re looking at voice recognition from computers, voice print, language translation, and automatic spelling, grammar and punctuation correction. Will our children be adequately prepared to join a high-calibre labour force?

The skills people need today are dramatically different than they were 30 years ago. If we are not careful, we are in danger of producing a ghetto of unskilled labour. In addition to hurting our international competitiveness, that will lead to greater social polarization, greater demands on social safety nets–and higher taxes to finance them.

How well is our education and training system responding to these changes?

We must recognize that not everyone can or wants to go on to university. And given the changing face of the work place, we should initiate more co-operative education programs; introduce German-style apprenticeship programs; and work to dispel the myth that so-called blue-collar work is grimy, unrewarding and somehow lacking in status. In Germany, there’s an old story that illustrates the point.

Two mothers were chatting, discussing their children. The first woman said her son was going to study medicine. "That’s nice," said the second woman. "Yes," sighed the first, "too bad, though, that he couldn’t get a place in the Mercedes-Benz program!"

Historically, Canada was dependent on a steady flow of skilled immigrants from Europe to fill its needs in the fields of mechanics, engineering and electronics. That flow has been drying up in recent years. In addition to improving our own apprenticeship programs, I believe we should open the doors to encourage more skilled workers to immigrate to Canada If we do not, we will never keep pace with the demand.

Canadian business and industry is surely one of the biggest stakeholders in having a top quality education system. Yet our record in private sector training is dismal. Business and industry must move now to offer constant training and retraining to its employees–in new technologies, but also in communications and leadership skills.

Recent reports from the World Economic Forum show Canada is falling behind the competition. Although we ranked fifth overall among the 23 OECD countries included in the 1991 world competitiveness report, we ranked a sad 17th in terms of science and technology–due primarily to our low level of investment in R and D. We ranked 16th in internationalization–due, mainly, to our lack of export market diversification. And we slipped to ninth place in terms of business confidence, one place lower than the previous year’s ranking.

Let’s review the history. In 1950, our manufacturing productivity level was second among the G7 countries. By 1980, we had slipped to fourth place. And by 1990, we had slipped another notch to fifth.

In the ’60s and ’70s, Canada had rapid growth in production efficiency–at around two per cent per year–and incomes doubled every 18 years. By the ’80s, however, growth had slowed to 0.5 per cent–and by then, it was taking 35 years to double real incomes.

Last year, Canadian manufacturing productivity dropped for the third year in a row, plunging 5.3 per cent–the worst drop since the 1981-82 recession. And the overall productivity of Canadian business fell 2.5 per cent, following a decline of 0.8 per cent in 1989.

Where do the problems lie? Partly in our prices–fuelled by high labour costs and high inflation. In 1980, our average unit labour costs for manufacturing were about equal with those of the U.S. Ten years later, Canadian costs were some 40 per cent higher. And we wonder why we have difficulty selling our products both at home and abroad.

If we do not achieve faster productivity growth in the 1990s, we will be faced with cutting wages, cutting production, closing plants and laying off workers.

We must also step up our adoption of new technologies. And improve our dismal record in research and development. Scientific and technological advances impact our lives personally. But they also determine how competitive countries are. With the world changing from a resource-based economy to a knowledge-based economy, Canada is falling short of the mark.

Our R and D investment peaked in 1986 at 1.43 per cent of GDP. Since then we have slipped. In fact, a 1988 study by the Organization for Economic and Cultural Development found that Canada ranked a disturbing 10th of 11 countries in gross domestic expenditure on research and development, as a percentage of GDP.

The United States spent $560 per capita, while Canada spent $244. The U.S., Japan, Germany and Sweden spent more than twice what Canada spent on R and D. And we were also outspent by France, the Netherlands, the United Kingdom, Norway and Italy. Only Australia lagged behind Canada.

As well, Canada ranked ninth in the number of researchers in the labour force. Canada had 4.4 researchers per 1,000 workers; the U.S. had 7.6 and Japan had 8.4. How can we compete on that basis?

The Canadian Manufacturers’ Association warns that Canada may become a technological third world country unless business, government and industry pull their weight.

It’s quite clear that we have not adapted to global change nearly as much as we should do, if we hope to regain our economic competitiveness. What might some of the elements be of a new agenda?

I don’t purport to have all the answers, but I do believe we should start now to look at new ways, new approaches, new priorities.

I believe, for example, that more science-driven innovation must be undertaken by industry. At the moment, industry investment in R and D is low. In Canada’s manufacturing sector, only three per cent of companies do any research at all. And overall, industry investment is three-quarters of one per cent of GDP–compared with two per cent in Germany, the U.S., Sweden and Japan.

Our pulp and paper industry, for instance, spends less on research and development than its major competition–0.3 per cent of revenues in 1988, compared to one per cent in Sweden, Japan and Finland. So how can it compete on that basis?

But despite the need for industry to step up its R and D efforts, there is a strong onus on the Federal Government to support it too. For example, in 1990, the Federal Government spent $2.7 billion on R and D–but the largest chunk (53 per cent) went to Federal Government research organizations–and just 19 per cent to business.

We need new programs to help industry and our research community work together, pooling their capital and resources. Government laboratories must work more closely with business. Industry must be helped to acquire new technology. And the tax system must be revised to improve the investment tax credit for R and D, thereby encouraging small business to perform more R and D.

The Federal Government has said we should increase our R and D spending by the year 2000 to 2.5 per cent of GDP. Is this enough, given that Sweden, the U.S., Japan and Germany spent more than that back in 1988?

Fraser Mustard, President of the Canadian Institute For Advanced Research, put it succinctly when he said that natural resources are less and less able to sustain the levels of wealth to which we have become accustomed. And that we have to make our society more idea- or R and D-driven, in order to create more wealth in this country.

What makes our neglect of science and technology so poignant is the extraordinary achievements of Canadians in this field over the years. Achievements like the Nobel-Prize winning research into molecular spectroscopy by Canadian physicist Gerhard Herzberg; the development of cobalt 60 cancer therapy; a fibre-optic system for the world’s first open-heart surgery that used a laser to clear clogged arteries; major breakthroughs in the fields of food science, health care, energy, building research, transportation and communications; the development of canola oil, so important for international agriculture; a technology to prevent forgery by putting an optical thin-film coating on $100 and $50 bills; the discovery of insulin; and many, many more.

Some Canadian companies like Northern Telecom, Spar Aerospace, and CAE, have a long and sustained history of R and D investment. And where Canadian industry has made heavy investments in R and D it has shown that Canada can compete and win.

And while we step up our own R and D, we must also take greater advantage of R and D performed in other countries–take it, improve on it where we can, and market it. Look at the transistor, developed in the U.S., yet marketed on a massive scale by the Japanese. Or the VCR, which was developed in Holland, but has been turned by the Japanese into an essential appliance in over 85 per cent of North American homes.

With the world shifting toward value attached to the knowledge content in products–and away from the resource or material content–our traditional reliance on exporting resources, with little processing content, does not bode well for the future. Many of the countries that are doing well internationally are resource-poor. The construction boom that is currently underway in Hong Kong, for example–amounting, I believe, to some $100 million–is ample proof of that.

We must place more premium on adding value. It’s no longer enough to be hewers of wood and drawers of water. We rely too much on selling logs and not enough on cutting them to meet the demanding specifications of foreign construction markets.

About 98 per cent of Canadian business is small business. But despite its key role in the economy, small business doesn’t carry much export clout. Small manufacturers in the late ’80s accounted for only three to four per cent of the dollar value of manufactured exports. They need to diversify not only products, but markets too. Right now, a high dollar, steep borrowing costs and inflation have confounded their success in penetrating foreign markets.

Unlike Canada, Germany’s small business sector is a major player in export markets. Its 300,000 small and medium sized firms account for nearly 30 per cent of exports–using niche markets and stressing innovation in both products and processes. Where the Germans have the advantage is in a strong support network of government, banks, trading companies and trade associations. This provides small business with easy access to export services.

Our trade with Asian nations is 11 per cent of our total trade. Yet by the end of the decade, the Asian-Pacific rim will account for 60 per cent of the world’s population. If there was ever an urgent need for Canada to stake a bigger claim to the Asian marketplace, that time is now. The developing world is home to four-fifths of the world’s population. We are being short-sighted if we don’t act now to capitalize on the Third World’s enormous potential.

The lack of co-ordinated trade promotion on a national scale shows our overseas customers that Canada lacks a coherent trade agenda. We don’t have enough companies in the game. To encourage more, we need a national export strategy–one that also addresses the needs of the small-business sector.

But if we are to secure new foreign markets, what about our own, here at home? Over the past few years, we have seen example after example of barriers between provinces impeding trade. In the Maritimes, we have taken a number of steps toward removing those barriers. And similar moves have been made among the Western provinces.

However, I remain deeply frustrated at the lack of progress made at the national level. Why, for example, can I buy a bottle of New Brunswick brewed Moosehead beer in Illinois or New York State, but I can’t buy it anywhere else in Canada? It just doesn’t make sense. Protecting markets has never worked in the past. It doesn’t work now, and it won’t work in the future.

Recently-announced intentions to move towards the removal of barriers to the sale of beer is a step in the right direction, but more is needed. Because of the lack of progress in concluding a national agreement, I am prepared, as Premier of New Brunswick, to sign a similar, bilateral trade agreement, with any other province or territory in the country.

I recently returned from a business mission to Hong Kong and Japan. I was absolutely amazed at the enormous business potential I saw. But two things in particular stand out:

In Hong Kong, it was obvious that you don’t have to be resource-rich to be enormously successful. An excellent education system can more than compensate for the lack of traditional natural resources.

But what struck a responsive chord in Japan was the fierce and unrelenting commitment to quality. I believe that if Canada does not start building uncompromising quality into our production processes, our products, our services indeed everything we do–then we haven’t a hope of making significant inroads into that rich market.

You’re all familiar with Ed Deming, the U.S. quality guru. Well more than 40 years ago, the Japanese were listening very carefully to what he had to say. And since they introduced the Deming Award for quality in 1950, they went on–as you know–to outstrip their industrial competition. How did they do it? With superior performance, geared to quality.

I firmly believe that if Canada is to compete, we must make quality a hallmark of everything we produce. But it shouldn’t stop there. Quality should follow our products in terms of service and follow-up. And we must make sure our customers are so satisfied that they keep coming back for more.

A society’s work culture also has a large impact on its competitiveness. According to the international labour office in Geneva, the Koreans work 48.2 hours per week, the Japanese 46.1, the United States, 34.5, and Canada, 31.5.

In addition, due to strikes and lockouts in 1990, Canada lost 270 work days per 1,000 workers. By contrast, the United States lost 50 days, Germany lost 13 days and Japan lost 3.5 days.

Canada’s competitiveness is also affected by the cost of government. Health care costs are escalating and new arrangements are needed for delivery of our health care system, to make it both effective and efficient.

And we must streamline in other areas too. For example, Ottawa now spends 36 cents of every dollar in its budget to pay interest on past debt. And last year, it cost taxpayers $585 million to operate Canadian legislatures. That is about $21 per Canadian, compared with $6 per person in the United States.

We simply must do more with less and start living within our means. In New Brunswick, for example, we reduced our cabinet by 25 per cent. We are reviewing all our programs and services, streamlining many programs and cutting out those that have lowest priority. As well, we are introducing legislation this year, to balance our ordinary account budget over a five-year cycle.

But if governments must start living within their means, what about Canadians themselves? The bankers among you will know that the average Canadian household has a consumer debt equal to 75 per cent of its annual income. That is quite a load. We must stop being a nation of borrowers.

If, instead, we become a nation of savers, our businesses will be able to borrow at lower interest rates, fuelling expansion and new job creation. Consumer debt, however, borrows from tomorrow’s standard of living for today’s gratification.

The world is changing and we are not chan