Policymakers and governments are facing daunting challenges such as climate change, aging demographics, income and wealth inequalities, low productivity, unstable geopolitics, and international conflicts. For some, this means governments need to develop new approaches and capacities to meet these challenges. For others, the solution is to limit the size of government by focusing on key priorities and reallocating resources.
Both groups should agree that measuring and improving government efficiency and effectiveness is a smart way to boost state capacity. Without accurate and ongoing measurement of government performance, it is not possible to know how well governments work or whether initiatives to make them work better are successful.
Assessing government results requires measuring how efficiently programs are delivered and how effectively they achieve their objectives. Efficiency improves when programs are delivered at lower cost or with fewer inputs over time through productivity enhancements such as technology investments, alternative delivery channels or reorganization. Using scarce public funds more efficiently frees up financial resources for other priorities.
Effectiveness measures the extent to which programs achieve their expected outcomes and provide value for money — that is, whether they provide benefits that are greater than their costs. Measuring effectiveness allows governments to make better-informed decisions by identifying which programs achieve desired outcomes most effectively. It also helps governments better understand the trade-offs involved when benefits are difficult to measure, such as when pursuing equity or meeting national defence imperatives.
To examine productivity in Canada’s federal public service and inform the government’s economic plan, the President of the Treasury Board appointed the Working Group on Public Service Productivity in fall 2024. In 2025, the working group (of which I was a member) provided 19 recommendations to measure and improve the productivity and effectiveness of the public service.
Implementing these recommendations would help the federal government both measure and improve public service efficiency and effectiveness.
If a government wants to improve public-sector productivity, the first thing it needs to do is measure it. This is easier said than done. Since governments mostly produce non-market outputs (i.e., they do not sell their services at market prices), measuring output indicators for public services is challenging.
Until recently, Statistics Canada has followed international standards that allow for two ways of measuring government output: the direct inputs approach, which treats the resources used to produce public services as a measure of output; and the direct output approach, which measures what the public sector actually produces.
While the output approach is recommended, the input approach is considered the fallback when measuring output is too challenging (e.g., defence spending). What is unique about Canada is that it uses the input approach across all government sectors, whereas many countries have used the output approach for sectors such as health and education for some time.
This makes for an unsatisfactory and often misunderstood measure of productivity for the public sector. In a review of Statistics Canada’s measure of public-sector productivity, Phillip Smith, a former assistant chief statistician at Statistics Canada, concluded that the measure was misleading and should no longer be published. In December 2025, Statistics Canada terminated its national public-sector productivity series “due to the difficulty of adequately measuring production” in that sector and began to publish labour productivity indicators only for the business sector.
An alternative would be for Statistics Canada (with input from departments and agencies) to follow the example of the United Kingdom and the European Union and develop and test a direct output approach to estimate public service productivity. As with the business sector, the output of many public services can be measured using physical counts or quantities of services provided to Canadians, such as patients treated, students enrolled, inspections conducted or passports processed.
While the output of many key activities conducted by the federal government would inherently be difficult, if not impossible, to measure, programs delivering direct benefits to Canadians would be strong candidates for testing an output-based approach to measuring public-sector productivity.
The federal government should require departments and agencies that provide services directly to Canadians to develop and report on productivity metrics for those services. These metrics should be standardized by type of service to facilitate comparisons across programs and reported alongside how often service standards are respected. (Service standards are commitments made by governments on the level of service Canadians can reasonably expect, such as processing times for passport applications).
Productivity indicators and service standards should be consolidated on a single government website to facilitate public access. This information would not only help Canadians and government officials assess performance but also provide Statistics Canada with the data needed to develop output-based productivity measures for the federal public service.
The federal government’s Expenditure Management System is designed to ensure that all existing and new programs are focused on results. It requires public servants to identify, measure and report on an array of performance indicators and targets. The system is built on three pillars: the Policy on Results, which provides the framework for measuring and evaluating program performance; Departmental Plans, which set out targets; and Departmental Results Reports, which report on results achieved.
The system should not be replaced, but there is an opportunity to simplify and improve it. Replacing a plethora of program-level performance indicators, objectives and self-determined targets with a unified framework for measuring efficiency and effectiveness would reduce the reporting burden on departments and be more useful for decision-makers.
The federal government can start making changes now, without waiting for an overarching measurement framework. The Working Group on Public Service Productivity made many recommendations for the federal government on how it could boost productivity, including accelerating investments in artificial intelligence (AI) technologies.
In its response to the Working Group on Public Service Productivity, the federal government indicated that improving public-sector productivity and measuring the impact of its actions are priorities. It went on to emphasize that it intends to accelerate the adoption of AI to enhance public-sector productivity and develop a “consistent approach to measuring the productivity impacts of AI use cases across the Government of Canada”.
The Treasury Board Secretariat recently published the federal government’s first public AI register, providing information on where and how AI is being used across the public service. The register includes over 400 projects from 42 federal organizations, including most departments, where a range of AI tools are being developed or deployed. The mere fact that so many AI projects are being developed and implemented within the federal government is impressive.
Less impressive is the absence of quantitative estimates of the expected or realized net gains from any of the projects, such as reductions in operating costs net of investment costs or specific improvements in services provided to Canadians. This oversight suggests either a lack of capacity or, possibly, a lack of willingness within the federal public sector to adopt rigorous measurement.
While measuring public-sector productivity is important for determining whether its capacity is growing or shrinking, there is a question that is even more important to consider: are government programs and activities providing a net benefit to society?
To answer this question, we need to consider the costs and benefits provided by a program. For example, a training program would pass a cost-benefit test if the benefits to participants — such as increased employability and earnings — exceed the program’s costs, including the cost of raising taxes to finance it.
As mentioned above, this cost-benefit assessment is, in principle, handled by the federal government’s Expenditure Management System. Under this framework, program performance is assessed in terms of relevance, efficiency — which encompasses both operational efficiency (e.g., productivity) and allocative efficiency (e.g., the net benefit experienced by program participants or beneficiaries) — and effectiveness, which concerns whether programs achieved their intended outcomes.
Deputy ministers are responsible for establishing, implementing and maintaining departmental results frameworks. Within departments, the head of performance measurement and the head of evaluation, together with program managers, are responsible for ensuring the appropriate data collection and other systems are in place.
In theory, the Expenditure Management System should provide the federal government with the information needed both to measure public-sector productivity and to determine whether programs provide value for money through cost-benefit analysis.
Unfortunately, a recent C. D. Howe Institute report indicates that when evaluations are performed, they rarely assess productivity or value for money. Instead, they tend to focus on implementation issues, qualitative assessments (e.g., recipient satisfaction) or how program beneficiaries are affected, without assessing whether the outcomes can be attributed to the intervention itself. There are, however, a few federal programs that have been evaluated with state-of-the-art cost-benefit analyses. For example, the federal-provincial Labour Market Development Agreements and Pathways to Education program invested in systems that linked administrative and economic data. The federal government should build on these exemplary evaluations.
But these evaluations are the exceptions rather than the rule. Excessive flexibility in the federal evaluation framework makes it difficult to produce useful assessments of productivity and value for money. Departments have wide latitude in how they assess these core economic concepts, including through approaches that are only loosely connected to them. As a result, evaluations often fail to report on these basic performance indicators that would allow decision-makers to compare programs and assess whether they deliver value for money at the lowest possible cost.
Given the diversity of government programming, evaluation approaches should retain some flexibility. However, that flexibility should apply only once departments have met a set of mandatory requirements. A recent C.D. Howe Institute conference report suggests the evaluation framework should be revised to require departments to assess programs’ value for money, alongside relevance, efficiency and effectiveness, using clearly specified methodologies. Standard efficiency metrics, such as output-to-input and unit-cost ratios, should be mandatory, as should appropriate value-for-money tools, such as cost-benefit analysis.
Strengthening evaluation practices would better equip ministers and other decision-makers to make difficult choices about whether to create, maintain, scale up, scale down or eliminate programs. The objective is not simply to identify and cut “wasteful” spending, but to give decision-makers comparable information about the costs and results of different programs when allocating scarce public resources.
Some may argue that it is difficult to apply cost-benefit analyses across all federal programs and that they may not be feasible for initiatives such as social or redistributive programs. We think the evidence suggests otherwise. For example, the U.S.-based Policy Impacts initiative created a library with over 200 programs, including social and income-transfer programs, with unified cost-benefit analyses.
The federal government’s experience mandating and applying cost-benefit analyses across departments under the Cabinet Directive on Regulation demonstrates what can be achieved when a framework clearly requires a common analytical approach. Under the directive, departments and agencies developing or amending regulations must provide a regulatory impact analysis that identifies and assesses the costs and benefits of the proposed regulation. This approach has been successfully applied to regulations governing activities that, at first glance, might not seem well suited to cost-benefit analysis, including energy efficiency, food nutrition labelling and foreign influence transparency and accountability. This suggests that a mandatory requirement to assess costs and benefits need not prevent departments from applying judgment or adapting their analysis to the characteristics of individual programs.
This is not to suggest that cost-benefit analysis will always provide sufficient information for decision-makers to assess a program. Programs that pursue fairness objectives — such as income redistribution, reconciliation or strengthening social trust — involve outcomes that are inherently difficult to quantify. Evaluations should therefore complement the value-for-money perspective provided by cost-benefit analysis with a thorough assessment of a program’s broader impacts, including its effects on fairness and equity. Blending quantitative and qualitative analysis would give policymakers a more complete basis for weighing trade-offs between economic performance, fairness and other policy objectives.
Is the federal government interested in measuring and enhancing public service efficiency and effectiveness? The evidence suggests that it genuinely is. What is less clear is whether the public service can walk the walk.
In the 2025 Speech from the Throne and the prime minister’s May 2025 mandate letter, the government recognized the importance of improving the productivity of the federal public service to achieve better results for Canadians. In its response to the Working Group on Public Service Productivity’s recommendations on measuring and enhancing productivity, the government indicated that most of the recommendations either align with existing government actions, including those outlined in its 2025 budget, or could inform future work by the Cabinet Committee on Government Transformation.
One notable exception is the government’s decision not to pursue the working group’s recommendation to measure productivity across Canada’s public sector. This is unfortunate and a missed opportunity but should not prevent Statistics Canada from continuing its exploratory work on measuring output in the education and health sectors.
But does the public sector even have the capacity to improve how it measures productivity? Evidence from program evaluations and the AI register suggests that the public sector lacks capacity and, possibly, willingness, to establish a rigorous measurement framework. If the government is serious about its commitment to measuring and improving public-sector productivity, it will need to provide clear direction and invest in the capacity required to deliver it. In addition to rewriting the evaluation framework, as discussed above, and investing in data systems and people skills through training and recruitment, the government could take some relatively simple steps. For example, it could return to departments and agencies included in the AI register and require them to provide an assessment of the expected or realized returns on their AI projects.
What about ensuring that programs focus on results and provide value for taxpayers’ money? The public service does not have a good record of conducting cost-benefit analyses of government programs, and the evaluation policy framework needs to be updated to clarify what exactly is expected from program evaluation. The federal government should update the framework to make systematic assessments of programs’ value for money through rigorous cost-benefit analysis a mandatory part of program evaluation. This would be the most important long-term contribution the federal government could make to achieving better results for Canadians.
The troubled times in which we live may require governments to increase their capacity to deliver on new and ambitious policies and missions. But any added capacity must be effective and efficient. Likewise, current programs and initiatives should also be able to deliver results.
In both cases, the federal government will need a measurement framework that systematically tracks the efficiency and effectiveness of government programs and activities. Such a framework would ensure appropriate results are achieved for current programs and activities, as well as new initiatives. The federal government appears genuinely interested in improving public-sector efficiency and effectiveness. But without the right framework to achieve its mission, it risks overestimating its capacity to deliver for Canadians.
Canada’s economy is evolving, which will bring both positive and negative change. But transitions — such as moving toward a low-carbon economy, shifting trade relationships or the rise of AI — can disrupt specific workers in specific places. In some instances, people in affected sectors will keep their jobs or move into new, often similar, roles. But for those who lose their jobs, the path forward is rarely obvious. Finding a new career is a complex decision, and Canada’s approach to workforce development has historically failed to adequately equip workers, businesses and communities to face these disruptions.
This study demonstrates what a place-based, skills-based approach to transition planning can look like in practice. Rather than starting from credentials or job titles, it asks two questions: What do workers actually do on a day-to-day basis? And where do the competencies they have overlap with other occupations?
Applying a data-driven methodology across seven Canadian communities susceptible to workforce disruption from the low-carbon transition, the study identifies potential career pathways for 15 occupations and the specific skill gaps workers would need to bridge to alternative occupations. In doing so, it also makes the case for greater investment in the data infrastructure that underpins this kind of place-based analysis.
In practice, this framework narrows hundreds of potential career pathways to a manageable number. The approach follows four steps:
Our study does not advocate for any single pathway, nor does it predict which opportunities will emerge in a given community. Because the analysis works with existing occupational data, it cannot capture emerging opportunities — such as new roles tied to nuclear, defence or major infrastructure investments, or shifts driven by changing trade relationships. It also relies on national-level competency profiles that may not fully reflect local labour market dynamics.
For example, a heavy equipment operator may have the skills to become an elevator constructor, but if multi-storey buildings are not planned for the community, it is not a realistic pathway. These limitations underscore a central argument of this study: that greater investment in timely, granular and accessible skills data and projections would make this kind of analysis significantly more powerful. And because career transitions are ultimately personal and shaped by community context, this framework is designed to be refined through local knowledge and engagement — providing an evidence-based foundation for decisions that workers, communities and policymakers reach together.
While the methodology focuses on disruption that could arise from the low-carbon transition, the same approach can be used to support workers facing disruption from trade policy, automation or other structural changes.
Based on our findings, we offer four recommendations for governments, employers and education providers to better support a skills-based approach to workforce development:
1. Federal, provincial and territorial governments should institutionalize a skills-based approach to workforce development.
2. Federal, provincial and territorial governments should invest in data infrastructure to make skills-based approaches effective.
3. Education and training institutions, working collaboratively with industry, should experiment with innovative approaches to delivering non-cognitive skills.
4. Communities facing foreseeable economic transitions should be equipped with actionable skills-based analyses and supported in building the local capacity to use them.
Like many advanced economies, Canadian governments are increasingly turning to industrial strategies to try to strengthen their economic sovereignty — defined here as the capacity to protect and shape key domestic economic capabilities — and to support economic growth aligned with the global energy transition and net-zero emissions goals. This represents a shift from previous decades when governments in Canada generally favoured market-led approaches and limited direct intervention.
Industrial policy refers to government actions that deliberately seek to shape the structure of economic activity, which could include what is produced, where production takes place, or which firms, sectors or regions and places are supported in pursuit of a public goal. It’s not new. Government efforts to promote economic development in particular sectors have a long history. Consider Alberta’s oil sands industry or Ontario’s automotive industry. What sets the current period apart is the scale and scope of industrial policy. Government intervention in the economy is now much more extensive, ambitious and better-funded.
Three pressures are driving this new generation of industrial policy: weak productivity growth and persistent regional divides that market-based policies have not fully addressed; climate and digital transformations that require co-ordinated long-term investment at a scale and pace markets are unlikely to provide without public direction or support; and geoeconomic rivalry as countries increasingly use trade, investment and industrial capacity as strategic tools to advance economic and geopolitical interests.
In this context, industrial capacity is increasingly seen not only as an economic policy but also as a requirement to achieve strategic autonomy — the capacity to act independently or with a significant degree of independence from other powers.
While industrial policies could help address these issues, they also pose a hard test of state capacity to steer economic change. More specifically, this refers to whether governments can achieve the following: set clear and focused objectives; design instruments that fit those objectives; co-ordinate across institutions and levels of government; deliver policies effectively, including arm’s length bodies where useful; and evaluate results.
A key challenge facing policymakers is to ensure they have the institutional capacity to guide economic transformations. Our research suggests that the design and governance arrangements underpinning industrial policies largely influence whether state interventions will catalyze and support economic transformation or merely subsidize the status quo.
How are recent industrial policy measures in Canada designed and implemented? How do they compare with those in other advanced democracies?
In a recently published report, we explored this question by assessing and comparing the governance of industrial policy in Canada and the United Kingdom. The U.K. offers a useful benchmark. Like Canada, it has historically relied on market‑oriented approaches to economic development and has been cautious about more direct government intervention. Yet, it has still managed to advance an industrial policy agenda despite the disruptive effects of Brexit and frequent changes in political leadership. As both nations have recently moved toward explicit industrial strategy and deliberate government intervention, they provide a useful setting for understanding how states with similar institutional structures navigate this policy field.
Our analysis does not seek to evaluate whether recent industrial policies have achieved their intended results. Instead, we draw on a comparative analysis to provide a set of evidence-grounded principles against which strategy design and governance arrangements can be evaluated.
We identify five key elements:
(See figure 1 for an overview of means across all areas for Canada and the U.K.)
Figure 1. Comparing Canada and the U.K. on industrial policy elements
Source: Authors’ analysis based on: Krawchenko, T., McCann, P., Arcand, B., & Hsu, M.-W. (2026). The governance of new industrial strategy: An inclusive and green agenda for economic transformation. 10.18357/1828/23746
A key idea from our report is that these five mechanisms reinforce one another. Strategies that acknowledge spatial complexity — the differences across places, regions and local economies — tend to reach for more binding requirements or incentives with clear conditions. This is because place-specific challenges require targeted responses. Conversely, strategies that lack place-based grounding tend toward generic, weak instruments. Strategies without governance accountability tend to have gaps between the stated goals and the tools used to achieve them.
While such relationships do not imply causality, they align with the literature on industrial policy, which underscores the importance of these dimensions in state-led economic transformations. In this way, these mechanisms provide a framework for assessing the capacity of states to govern industrial transformation.
In what follows, we explore each element and reflect on how they can help improve industrial policymaking in Canada.
Research on industrial policy has long warned against the pitfalls of overpromising its benefits. For policymakers, a key way to minimize this risk is to first articulate a vision of where the economy should go and why. Then, translate this vision into measurable, time-bound economic targets that reflect competitive goals in specific value chains, i.e., from input to production, processing and end use. While ambition is important, it must be paired with a deep understanding of what is actually achievable. Policymakers need high-quality information in specific sectors to devise such targets.
Our analysis shows a number of industrial strategies in Canada fall short in this regard. Many policy documents lack any measurable objectives, making it almost impossible to track progress. In addition, many outlined objectives are too broad to help focus investments. For example, many strategies set employment and export targets within broad economic areas such as clean energies, natural resources and digital technologies. While each area on its own may be promising, their broad formulation makes it difficult to map the precise part of the supply chain that governments aim to build or grow. Without such details, policy targets cannot be used to co-ordinate investments or monitor whether government support translates into productive capacity.
Canada’s strategy on critical minerals is a partial step forward on this front by explicitly prioritizing six sectors: lithium, graphite, nickel, cobalt, copper and rare earth elements. But it falls short of turning these priorities into actionable economic targets that reflect the role Canada could play in this global value chain. While recent international commitments — such as the G7 pledge to reduce reliance on single suppliers for rare earths and permanent magnets to under 60 per cent by 2030, with an ambition to reach 50 per cent “as soon as possible” — begin to articulate dependency‑reduction goals, they do not yet translate into clear, Canada‑specific production, investment or capability targets along the value chain.
The U.K. critical mineral strategy offers a better approach. It sets the objective of meeting at least 10 per cent of that country’s critical mineral demand through domestic production by 2035. This economic goal is then translated into production targets for specific critical minerals, such as at least 50,000 tonnes of lithium carbonate equivalent by 2035. In addition, the report estimates the quantity of each prioritized critical mineral across a range of end-user sectors, such as electric vehicles and life sciences, thus helping to anticipate the scale of the opportunity and boost investment across entire supply chains.
The U.K.’s critical minerals strategy is not an isolated case. Our analysis shows it has set production or deployment targets for several economic priorities, including low-carbon hydrogen, carbon capture, utilization and storage, and offshore wind. This approach aligns with existing literature, which emphasizes the importance of turning economic visions into measurable competitive objectives.
In public debates, industrial policy is often associated with government subsidies to preferred firms. Under this approach, the key task facing policymakers is to correctly identify the most promising companies, then design policies that ensure cost-effective results, such as adequate profits to sustain the firm.
But to really understand industrial policy, we need to start from the observation that the structure of an economy, or what is being produced, matters for public goals. A key task for policymakers is to ensure the economy is on a trajectory aligned with societal ambitions. This entails not only assessing current performance but also anticipating future transformations that reshape global value chains. So, a core function of industrial policy is deliberately aligning structural change with public goals to achieve outcomes that markets may not deliver at the necessary scale or pace.
Achieving this objective requires more than simply subsidizing firms. It requires a diverse and co-ordinated mix of policy instruments, including funding, financial incentives or procurement policies that shape production and demand in strategically important areas. These areas can include digital and clean technology products and services that matter for climate, security, or productivity and prosperity goals.
In other words, industrial policy is not about picking corporate winners but about deliberately co-ordinating investments to catalyze and support the development of economically promising value chains in areas that advance economic, social, environmental and national security objectives, including sovereignty and economic resilience.
Our report shows that co-ordination across supply-side and demand-side policy instruments is less developed in Canada than in the U.K. Supply-side instruments strengthen the capacity to produce or provide targeted goods, services or technologies, while demand-side instruments create or stabilize the markets for those goods, services or technologies.
The U.K.’s industrial strategy for offshore wind is a concrete example. Guided by a clear target of 50 gigawatts of power by 2030, it combines targeted support for domestic manufacturers with incentives, such as contracts for difference, with a set price for output and a government guarantee it will pay the difference if market prices are lower. This strategy aims to encourage electricity generation from renewable sources, including wind.
The strategy also sets a target of achieving 60 per cent local content in the offshore wind supply chain by 2030, thereby helping to align investment in domestic wind turbine manufacturing with electricity generation. With the U.K. accounting for more than 40 per cent of Europe’s total installed offshore wind capacity, it is a good example of how industrial policy can support decarbonization goals.
Canada is moving more slowly in deploying a comprehensive policy mix in industrial policy. Consider the electric vehicle (EV) industry. In recent years, Canadian governments have introduced ambitious policy measures to support both the production and consumption of EVs. But mechanisms that deliberately link domestic production to consumer demand, such as local content targets or requirements, remain largely absent. Failure to close this gap risks hindering Canada’s ability to achieve both its climate and economic goals in transportation.
While recent federal initiatives such as the Defence Industrial Strategy and the forthcoming Nuclear Energy Strategy show a shift toward more integrated, value chain‑oriented approaches in other sectors, a comparable level of co-ordination has yet to emerge around EVs.
All of this suggests that the question is less about how much governments should spend on specific firms than about whether policy instruments — tax incentives, regulations, R&D funding, consumer subsidies, etc. — work together to accelerate investment and build or grow production capacity across strategic value chains.
The governance dimension of industrial strategy — the institutions and processes used to co-ordinate, monitor and adjust strategy — is an important predictor of whether strategic ambitions translate into actual changes in investments, production and sectors.
In general, the literature points to four key dimensions of robust governance arrangements in industrial policy: industrial strategy is embedded at the heart of government; sector-specific co-ordination bodies are used to drive structural change; dedicated public-private forums co-create roadmaps and strategies; and departments take a whole-of-government approach to the policy mix using sustained, multi-year horizons.
Advanced democracies have long been portrayed as institutionally ill-equipped to govern state-led economic transformations. While there is still room for improvement in the U.K., the British government has made important progress in recent years in this area.
In the climate sphere, research published in Nature Climate Change has broadly described the country as exhibiting “high levels of state capacity and research body autonomy, as well as substantial policymaking authority afforded to climate-motivated bureaucrats.” Progress has also been made in industrial policy. A report by the International Institute for Strategic Studies noted that, following recent institutional reforms, “new ministries are [now] better aligned with the challenges of the energy transition and the digital transition, and imply greater focus in the UK government on strategic industries.”
Our findings broadly align with these observations, showing that the U.K. overall embeds collaborative delivery mechanisms across many of the studied strategies. Across the policy documents studied, we also found a relatively strong integration of climate and industrial objectives, which helps overcome departmental silos. This is not to say that the governance of industrial and climate policy in the U.K. is without weaknesses. These observations should instead be read as evidence that state capacity-building is possible and is happening here.
Like other studies, our report found that in Canada, the federal government is falling behind its trading partners in modernizing its governance arrangements for industrial policy. We found that the federal government often relies on ad hoc, temporary bodies to inform and govern industrial strategies. Without permanent co-ordination bodies specialized in specific sectors, Canadian industrial policy currently lacks the institutional foundation to learn and correct course based on independent expertise.
At a moment of rapid geoeconomic change, the ability to adapt strategy in response to new information is a condition for relevance. Addressing this gap is a critical step to move Canada’s industrial policy toward a better place.
One striking finding from our comparative analysis is that place-based thinking often goes hand in hand with stronger policy instruments. This type of thinking seriously considers how economic conditions, including assets, opportunities and challenges, differ across places and regions. Strategies that explicitly acknowledge spatial diversity by naming regions, targeting clusters or recognizing that different parts of the country face different opportunities and risks tend to use more robust policy tools than strategies that treat the national economy as if all places are essentially the same.
Nearly 70 per cent of U.K. strategies combine high place-sensitivity with strong instruments while 41 per cent of Canadian strategies combine low place-sensitivity with weak instruments. One reason is that place-based industrial strategy requires governments to develop detailed, contextual knowledge of specific industrial ecosystems, which are also conducive to more robust policy targeting and co-ordination with subnational governments.
In addition, the effects of deindustrialization, such as the loss of industrial jobs, firms or production capacity, are often highly uneven across regions and sectors. As such, place-sensitive industrial strategies are critical to avoid deepened spatial inequality.
The tendency of the federal government to prioritize spatially undifferentiated instrument design — sector-neutral tax credits, broad innovation programs, horizontally applied competitiveness measures — appears insufficient to rise to this challenge. There is also a tendency to put place-based policies into regional development agencies instead of integrating place-based approaches into national policies.
Our findings provide quantitative evidence that strategies investing in understanding clusters, local production systems and regional ecosystems are often the ones that advance more sophisticated policy instruments.
Quebec’s aluminum strategy is a good example. It prioritizes the local transformation of resources in specific regions and uses intermediary organizations to help inject local knowledge into policymaking and to connect innovation infrastructures to the specific needs of industries. This illustrates how place-sensitive thinking can be harnessed to improve the design and governance of industrial policy.
At its core, governing economic change is a distributive question, which inescapably creates winners and losers. For industrial policy, this means how gains from economic transformation are shared across firms, regions, communities and social groups must be an integral design criterion.
In the Canadian context, this takes concrete form in what has been called “inclusive industrial policy” or a framework in which economic growth, innovation and firm success are pursued alongside economic and social inclusion, community wealth and environmental sustainability. Core instruments include using public procurement to create local jobs and opportunities, broadening who can access and shape investment capital, and embedding inclusion metrics such as building equity goals and measures into program design and evaluation metrics.
Our comparative data found both Canada’s strength and its characteristic gap in this dimension: Canadian strategies score significantly higher than U.K. strategies on recognition of specific groups, reflecting the stronger integration of Indigenous rights frameworks and equity-oriented participation requirements. But this recognition advantage is often not matched by distributional instruments, such as community benefit agreements, equity stakes and mandatory revenue sharing. A good example of how to do this correctly is Indigenous Business Australia, a government enterprise that promotes the equity participation of Indigenous communities in industrial projects to foster their economic independence and the nation’s prosperity.
The U.K. strategy for carbon capture, utilization and storage offers another mechanism for making industrial policy work to reduce regional inequality between London and the country’s industrial regions. By making firms’ access to government funding for such projects conditional on locating in government-designated industrial regions, this mechanism helps promote green sources of economic development in economically struggling geographic areas.
It is worth noting that the prioritization of regions was not based solely on political considerations. The U.K.’s industrial regions were independently mapped using transparent criteria to identify those with the greatest economic potential for these projects. This approach to spatial prioritization helps align social and environmental goals with the pursuit of credible business opportunities.
All of this points to the need for industrial policy not only to improve its awareness of marginal communities but also to share appropriate returns with them. Without such redistribution, recognition creates the appearance of inclusion without the substance of shared prosperity.
Many nations are now using ambitious, targeted industrial policies to build specific industries in the 21st-century economy. In this environment, Canada needs targeted, co-ordinated and place-based industrial policy to address its current challenges, such as weak productivity and social inequality, and to strengthen its position in global value chains.
At the same time, there is no question that industrial policy is difficult. Canada needs to have an open, transparent debate about how it is done to ensure that risks and rewards are appropriately distributed across society. But to be productive, this conversation should not centre on how much state intervention is needed to shape economic transformation. We argue that a more productive starting point is to ask whether states possess the capacity to advance industrial policy strategically, accountably and in ways that distribute the benefits of change broadly across society.
To recapitulate, the evidence points to five interlocking elements to move in this direction: an operationally grounded vision; a diverse, integrated instrument mix that includes demand-side tools; a governance architecture that embeds accountability and enables learning; place-based thinking that acknowledges and addresses spatial heterogeneity; and inclusion that delivers material redistribution, not merely procedural recognition.
Canada’s current issues — geopolitical and trade pressure, climate targets and renewed federal interest in industrial policy — create a clear opportunity to apply these good design and delivery practices in industrial policymaking. If we focus on getting these design fundamentals right, industrial strategy can substantially shape Canada’s economic and social future.
For decades, Fort McMurray has been synonymous with one thing: the oil sands, a vast deposit of viscous, heavy oil mixed with fine sand that accounts for the fourth-largest proven oil reserves in the world.
But to the more than 82,000 residents of this northern Alberta community, it is so much more. It is a place of stunning nature, located at the intersection of four rivers where the forest stretches as far as the eye can see and where the northern lights dance across the night skies. It is a place of recreation, where passion for the outdoors is combined with a love of adventure.
And, perhaps most of all, it is a place where people look out for one another.
When a wildfire known as the Beast destroyed a significant portion of the town in May 2016, the community came together in shared trauma and grief to build back what was lost. Then, just after the start of the COVID-19 pandemic in 2020, a major flood hit and the community was forced to rally once again.
Fort McMurray also lives with the ups and downs of oil prices, and with the jobs and housing costs that rise and fall in tandem.
Then there is the extreme weather that frequently leads to treacherous driving conditions.
Shared adversity has fostered a culture of neighbours helping neighbours when the need arises because, as everyone knows, it could be them next. It is this culture that has created a strong community that residents are proud to call home. People visit for a few days or a couple of weeks and end up staying for decades.
“It’s a special place,” said Sandy Bowman, Mayor, Regional Municipality of Wood Buffalo. “Everybody comes here on a two- or a five-year plan, and they’re still here. I’m that person, and so many of us are. It’s the community and the people. It’s not just about [the oil sands] industry. There’s a different feel in Fort McMurray, and people are proud to be here.”
Yet the community also faces an underlying susceptibility to global forces because of the high concentration of employment in a single, export-oriented industry: oil production. Whether it is the global energy transition, U.S. threats of trade disruption or the trend toward cost-cutting automation, change and uncertainty are expected to loom large over the community in the coming decades. The spike in oil prices due to the Iran war is boosting company profits but is unlikely to translate into new investment without clear longer-term signals on oil prices, global demand and pipeline infrastructure.
An agreement between the federal and Alberta governments, and a partnership on a new West Coast pipeline, offer the potential for a more collaborative approach to oil production than in the past. But residents are also looking for more government support to navigate workforce disruption, investments in training and recognition of some of the unique social challenges their community faces.
Prime Minister Mark Carney has indicated a desire for change in the federal public service to deliver on the Liberal government’s Make Canada Strong agenda. He hopes to realign the country’s economic and political relations to respond to new global and North American realities. The question is whether the public service has the capacity to effectively and efficiently execute such an ambitious agenda. Given widespread concerns about declining public trust in government, it is important to assess public service reforms by whether they increase trust in public institutions.
The overarching discourse around public service reform has focused on efficiency and speed. Whether efforts to streamline the public service and make decisions faster will impact overall trust is still unclear. Improved speed and efficiency may increase perceptions of public service competence, but risk decreasing perceptions of benevolence and care, as inevitably some groups will feel their interests and values have not been considered in decision-making.
We must ask whether the public service has the capacity to execute the current government’s mandate, but also whether it has the capacities needed to build trust in the institution. Recent research suggests that the ability of public servants to engage directly with citizens is one such capacity.
Political trust is linked to the public’s belief that political actors and institutions will look after their interests and values when exercising power. Research shows that trust can affect institutional stability, political participation, and the public’s willingness to abide by laws and accept the costs of policy. While Canada generally performs well on indicators of public trust compared to other OECD countries, typically only about half of Canadians say they have a lot of trust in the federal government. Trust in the public servants specifically isn’t high either. The 2026 Confederation of Tomorrow survey, of which the Institute for Research on Public Policy is a partner, found that 61 per cent of respondents were not confident in the ability of public servants to plan ahead by 10 to 20 years.
Populist politics, which rely on anti-government rhetoric and fostering distrust of political institutions, has become more mainstream in Canada in the last five years. This development further threatens political trust in the country. If we are indeed in a hinge moment, with political and economic changes that have not been seen in a generation, then higher levels of trust in political institutions, including the public service, will be necessary to weather disruption.
How can trust be maintained or increased? While the determinants of trust in political institutions are multiple, complex and contestable, a starting point is the three-pillar framework used in organizational psychology, political science and public administration. The framework suggests that trust is determined by competency, the ability or capacity to perform a task; benevolence, caring for and considering others’ interests; and integrity, being honest and following through on commitments.
Where does the public service rate on these pillars and where are opportunities to increase trust? New, yet-to-be-published research from Andrea Lawlor and Marc Bodet, at McMaster University and Université Laval respectively, has begun to unpack what, exactly, the public trusts different political institutions to do. In their 2025 fieldwork, the researchers found that Canadians have higher trust in the public service on competency elements like carrying out its duties well, having the capability to perform its job and being knowledgeable about its work. These all speak to the effectiveness and efficiency of the public service. Where Canadians trust the public service less is on questions of benevolence, whether it acts in the best interest of the public and if it would take advantage of the public. The public had the least trust in the public service’s integrity, whether it delivers on its promises and does what it says it will do (figure 1).
Carney’s approach largely focuses on the public service’s competence in executing policy decisions and delivering services. The Clerk of the Privy Council Michael Sabia’s open letter to the federal public service in July 2025 highlighted the need to focus on fewer priorities, simplify procedures and processes to act faster, and increase accountability for results. Mission-driven government has been the buzzword under Carney. The approach, originating with the U.K. government, focuses on framing priorities as missions to overcome departmental silos and get different parts of government pulling in the same direction.
Former clerks and a chief of staff have largely echoed the need for the public service to move faster. They have offered a range of options including restructuring departments, decreasing the power of the centre, reviewing spending priorities and establishing a Chief Operating Officer. Academics have also been involved, examining capacity and co-ordination issues, assessing digital transformation, service delivery and data management, and considering the impact on employees.
There’s an implicit assumption in these discussions that increased public service competency will lead to greater public trust in government. But evidence on the extent to which performance contributes to citizens’ trust in government is, at best, mixed. Focusing on competency, where the Canadian public service already enjoys higher trust, risks further undermining the pillars that command less confidence, thereby missing the best opportunity to improve trust. A focus on speed and efficiency creates a trade-off with the benevolence pillar, as time is needed to hear and consider competing interests and explain important decisions.
When promises made to the public to secure political support are broken, the integrity pillar is undermined. Of course, competency is required to deliver on promises and ensure integrity as well. In short, the public service must be able to do things right, but it also has a role in ensuring government is doing the right things.
One key area of Carney’s bureaucratic reform agenda is accelerating approvals of major infrastructure projects to grow Canada’s economy and decrease reliance on the United States. This represents a test case for the government’s public service reform approach. The government established the Major Projects Office, headed by Dawn Farrell, a chief executive with significant experience in the private sector, and committed to a streamlined process that leads to project approvals in two years.
Given the length of approval times for projects like the Trans Mountain Pipeline, two years would certainly qualify as an increase in efficiency. But the experience of pipeline review processes in the early 2010s under the Stephen Harper government suggests that trying to move quickly may undermine trust in both the institutions involved and the broader government. This was particularly true among local and Indigenous communities that were directly affected by the projects. Already, Indigenous leaders and environmental groups have expressed concern about the new process and their ability to have their voices heard. Communications from the Major Projects Office have habitually emphasized that Indigenous rights and environmental responsibilities will be honoured. But if these groups are not satisfied, the integrity pillar will be undermined, leading to a further erosion in trust.
A key test will be how the Carney government reforms, focused on speed and efficiency, interact with existing strategies and plans. These include the Government of Canada Trust and Transparency Strategy, and public service reform initiatives like Beyond2020 and the Call to Action on Anti-Racism, Equity and Inclusion in the Federal Public Service. All these strategies, to some extent, suggest increasing public participation, expanding partnerships and collaboration, and empowering diverse voices inside the public service. But they were initiated under prior prime ministers and clerks and predate the seismic shift in Canada’s relations with the United States under the second Trump administration.
It may be enticing for the government to focus on transparency and modernizing access to information legislation as the primary means to secure the public’s trust. Access to information about government activities and decisions is a necessary condition for trust. But it is by no means sufficient, as it is largely a one-way, government-to-public form of interaction. Two-way interaction, where the public can provide feedback and input into decisions, is essential to building trust. A recent OECD report found that the largest gap in trust in the federal government was between Canadians who felt the political system gave them a say and those who felt it did not.
Public service reforms that will build trust in government must dig deeper than efficiency and speed in decision-making. They must recognize the trade-offs of streamlining processes, including fewer avenues for public deliberation and input. Reforms that do not recognize this trade-off and promise more and better of everything will ultimately undermine the integrity of the public service.
The first step in addressing these trade-offs is thinking of public servants not just as inward-looking administrators, focused on processes and procedures, but also as outward-looking managers. In this second role, public servants seek to create public value by considering the goals and aspirations of people and communities, rather than thinking of them as clients seeking the efficient delivery of a product or service.
Public servants deliver democracy not only by implementing government decisions but also by participating in public discourse and helping define the public interest. My research, published in International Review of Administrative Sciences, highlights that Canadians already recognize this as an important role. In 2021, I surveyed 830 public servants from all levels of government across Canada, nearly 2,000 members of the public and 74 members of Parliament. Majorities in all three groups rejected the idea that public servants should remain anonymous and shielded from public scrutiny. They also agreed that public servants have a responsibility to engage with media and stakeholders about their work (figure 2).
This shift in the role of the public servant is not only desirable but may also be inevitable. Public servants are increasingly losing their anonymity and being scrutinized as individuals in the public space. Recent media coverage of Deputy Minister of National Defence Christiane Fox, as well as her public statement on findings that she breached a provision of the Conflict of Interest Act while working at Immigration, Refugees and Citizenship Canada, illustrates this trend. Public servants will not remain anonymous and free from public scrutiny even if they want to.
While competence will likely remain an important pillar of public trust in the public service, in the 21st century, it must be balanced with the public servant’s capacity to engage directly with Canadians. Such engagement demonstrates benevolence and integrity and creates an institution that truly earns the confidence of Canadians.
Canada’s employment insurance (EI) system is failing its first major stress test since the COVID-19 pandemic.
Unemployment rates continue to rise, exacerbated by challenging trade wars with the U.S. and China. Yet, as more Canadians find themselves without a job, the share of the unemployed that access EI regular benefits — income support for those who lose their jobs through no fault of their own — has fallen. In July, the most recent month for which data is available, 1.65 million people were unemployed, but only 606,000 received EI regular benefits.
This is a problem for everyone. Nearly two-thirds of the unemployed slip through the first layer of Canada’s social safety net, weakening one of the program’s most important functions: to stabilize the economy and its participants. During an economic shock, laid-off workers spend some of their benefits at local businesses, helping to prevent a worse downturn. When the majority of the unemployed can’t access these supports, we are all more vulnerable to a recession.
As in past economic downturns (like in 2008, 2016 and 2020), the federal government introduced a series of temporary changes to EI. While intervention is merited, the consistent need for these ad hoc measures over the last 15 years points to long-identified issues and raises questions about the program’s ability to respond automatically to major shocks.
These new measures seem designed to achieve these goals: slow the rise in unemployment by helping tariff-impacted businesses avoid layoffs, bolster the program’s stabilizing role by improving access to benefits, and provide a longer time frame for support to long-tenured workers.
This commentary assesses the initial impact of some of these temporary measures. It explores the underlying reasons for the program’s declining coverage, offering a data-driven perspective ahead of the upcoming federal budget on November 4.
In principle, the EI program is designed to respond automatically to economic shocks. As more people become unemployed, the number of people receiving benefits rises as well, often in tandem. Between 2015 and 2020, for example, regular benefit recipients made up roughly 40 per cent of the unemployed on a given week. This relationship is often called the beneficiaries-to-unemployed (BU) ratio, and is a key, while imperfect, metric of program coverage[1]. Figure 1 charts this ratio and its component parts over the last decade.
As this interactive dashboard shows, the gap between the number of unemployed Canadians (the lighter area) and those receiving benefits (the darker area) has widened since early 2024. Consequently, the BU ratio (red line) has fallen to 35 per cent, one of its lowest points in recent history outside the pandemic. Not pictured, the BU ratio was closer to 75 per cent prior to the early 1990s recession and the changes to eligibility requirements that followed.
Program coverage is consistently lowest for workers aged 15 to 24, as EI rules on prior work often exclude students and new entrants to the job market. This group has seen a decline in coverage proportional to the national average, in stark contrast to that of older workers. For Canadians aged 55 and over, the BU ratio has remained remarkably stable over the same period.
NOTE: The figures are best viewed on a desktop computer.
The weakening of program coverage is happening within a broadly deteriorating economic climate. When the first round of EI changes was announced in March, the unemployment rate was already 6.7 per cent, higher than it had been in the preceding years.
By the time the most recent announcement came in early September, Labour Force Survey data for August showed employment falling for the second consecutive month, pushing the unemployment rate up to 7.1 per cent — its highest level since 2016 outside the pandemic.
At the same time, the number of available jobs is shrinking. As of the second quarter of 2025, there were nearly three unemployed workers for every job vacancy, a significant increase from last year. This combination of rising unemployment and fewer open positions creates a more competitive and difficult job market, making a robust and accessible EI program more critical than ever. It is in response to these alarming trends that the federal government has introduced a number of temporary measures.
So far in 2025, the government has introduced four main temporary changes for EI benefit claims within specified periods. Here are a description and preliminary analysis of each measure:
Initial thoughts: The Work-Sharing Program, while greatly enhanced, has famously battled with low uptake. Historically, it has made up less than two per cent of claims, which suggests these changes will likely struggle to have a major impact on the broader economy.
Initial thoughts: These are great ways of ensuring workers can access benefits promptly. However, they primarily affect the timing of when benefits begin and the initial amount received, without changing program eligibility in the first place.
Initial thoughts: The only change that directly aims to increase coverage. It’s an odd way to do it, because it’s effectively reducing the number of hours needed to qualify. In most cases, entrance requirements are lowered by only 35 hours, or the equivalent of completing one less week of full-time work. As Jennifer Robson suggests, only a small share of the unemployed were on the margins of qualifying by a few hours in the latest data (2023).
Initial thoughts: Awarding additional benefit weeks to long-tenured workers provides needed supports for a specific group that might have additional difficulties finding a job similar to the one they lost. Because long-tenured workers may exhaust their benefits before securing a new job, this change certainly has the potential to alleviate some of the coverage gaps observed. However, it is too soon to tell.
In another post, Robson points out that given the recency of the pandemic and the program’s definition of long-tenured workers, it’s possible there will be fewer qualifying recipients than expected.
Taken together, these measures will only have a marginal impact on EI’s core issues of access to, and adequacy of, benefits.
However, roughly four months of administrative data are now available, allowing for a closer look at the preliminary impact of two of these measures: changes to the Work-Sharing Program and adjustments to the unemployment rates. While this initial evidence is not yet conclusive, this analysis can help inform the broader discussion about EI’s role in supporting Canadians through these tough times.
During a meaningful but temporary business slowdown, employers and employees can come together to reach an agreement with Service Canada that avoids layoffs. Instead of job loss, workers can agree to reduced hours, receiving EI benefits equal to 55 per cent of their foregone income.
The program is particularly well-suited to deal with economic shocks that are expected to be temporary. The Work-Sharing Program was made permanent in 1985 and has gone through little change since.
However, as noted above, the program has always struggled with low uptake. This March, there were only 8,000 active Work-Sharing claims, compared to 504,000 active regular benefit claims. A recent evaluation of the program determined that difficulty assessing eligibility and complicated requirements and application processes hindered participation. It also found that general awareness of the Work-Sharing Program was low.
In its recent temporary changes, the government significantly widened eligibility for both employers and employees, doubled the maximum number of weeks, eliminated the cooling-off period between successive agreements, and loosened requirements around the business’s recovery plan.
These measures appear to have had an impact. As figure 2 shows, the enhanced Work-Sharing Program saw a sharp and immediate increase in uptake after the March 2025 changes were implemented, with participation rising to its highest level in recent years. It is possible the increase was driven by the worsening economic situation, as many sectors also felt the impact of tariffs around this time. However, the sharp increase in uptake, in contrast to previous years with rising unemployment, suggests the temporary measures had some positive effect.
Nonetheless, it is crucial to contextualize this scale. Even at its peak, the program covered roughly 12,000 workers — or 2.3 per cent of jobless benefits and less than 0.06 per cent of total employment in Canada. This confirms that while the changes were effective at boosting program use – providing a crucial lifeline to the specific businesses and workers involved – Work-Sharing remains a marginal tool with a tiny footprint in the overall labour market. ESDC estimates the program averted almost 11,000 layoffs since April. By August, the number of unemployed had increased by 46,000 people reaching a total of almost 1.6 million.
To qualify for regular EI benefits, claimants must have worked a set number of hours that varies by the unemployment rate in their EI economic region. The government’s temporary change, active from April to October 2025, artificially adjusted these rates to effectively lower the hours needed to qualify. The main outcomes were reducing the maximum eligibility requirement of 700 hours to 630 hours across the country, and reducing the hours required in most other regions by 35. Regions with an unemployment rate above 13 per cent (the maximum) saw no change to their required hours.
In the four months since this change took effect, only one region has not had its unemployment rate adjusted for a single month: Northern Manitoba has maintained rates above 13 per cent all summer. As figure 3 shows, a large share of the other 61 regions had unemployment rates in the lowest category during this period, thus receiving the largest reduction in hourly requirements of 70 hours.
| Change in entrance requirements | (before adjustment) | Apr | May | Jun | Jul |
|---|---|---|---|---|---|
|
From 700 to 630 hours |
Belowor equal to 6.1% |
28 |
25 |
26 |
25 |
|
From 665 to 630 hours |
6.2% to 7% |
13 |
14 |
9 |
16 |
|
From 630 to 595 hours |
7.1% to 8% |
7 |
10 |
14 |
7 |
|
From 595 to 560 hours |
8.1% to 9% |
5 |
3 |
5 |
5 |
|
From 560 to 525 hours |
9.1% to 10% |
3 |
4 |
2 |
3 |
|
From 525 to 490 hours |
10.1% to 11% |
3 |
1 |
1 |
1 |
|
From 490 to 455 hours |
11.1% to 12% |
NA |
2 |
1 |
2 |
|
From 455 to 420 hours |
12.1% to 13% |
NA |
1 |
2 |
2 |
|
No impact (420 hours) |
Above or equal to 13.1% |
3 |
2 |
2 |
1 |
At the national level, the data from this period offers a tentative, positive signal. As shown in figure 1, the BU ratio began ticking up in 2025, indicating a slight increase in coverage. Compared to last year, the number of recipients started growing faster than the number of unemployed around March to April when the policy became active.
However, it’s difficult to be sure the policy was the direct cause. A more rigorous test is to look at the regional data, since the policy’s intensity — the number of hours reduced — varied across Canada’s 62 EI regions.
Figure 4 tests this relationship in two ways. Both analyses point to the same conclusion: there is no clear evidence that the regions with the largest change to the number of hours required, or the lowest resulting eligibility requirements, saw a proportionally greater impact.
In the top chart, we plot the yearly percentage change in the number of recipients of all 62 regions for each month since the policy became active. Because of the way the rule works, the eligibility requirements of a single region can change month to month. The y-axis shows these requirements by outlining the nine distinct groups into which regions could fall based on their unemployment rate — as well as the new hourly requirements. While the average change is slightly larger in months where regions were granted the highest hourly reduction (top of the figure) than most other groups, there isn’t a clear relationship between the policy’s intensity or groups and a relative increase in beneficiaries.
The bottom chart is similar, where we instead plot the difference in the yearly change of beneficiaries by the average number of hours reduced from eligibility requirements in a given month. This chart tells us whether the trend meaningfully changed once the policy became active. Like the above chart, there is no clear trend. All regions, including those with the largest reductions in hours (high on the y-axis), are spread across the spectrum of outcomes. They are not concentrated on the right side, which would have indicated a strong positive impact.
Looking only at changes in the number of recipients is not a great way to assess a policy’s impact, because this variable is highly susceptible to external trends. For example, the number of beneficiaries will naturally rise in a worsening economy, regardless of any policy change. A more reliable approach is to use an adjusted metric like the BU ratio, which controls for the size of the local unemployed population. However, this type of analysis is difficult to do with the 62 EI economic regions, which are custom-built geographies that don’t align neatly with the standard areas for which labour force data is collected.
Another option is to look at the approval rate of EI claims. Robson finds that the share of claims approved relative to claims received has dropped compared to last year in the months since the policy became active.
Therefore, while the national trend offers a glimmer of hope, evidence suggests it’s not necessarily due to the adjustments in entrance requirements. It’s likely this measure is having some impact, but it’s clear the scale of it is not proportional to the current challenge of insufficient EI benefits coverage for unemployed Canadians.
When evaluated against their stated purpose — to provide targeted support for individuals and businesses impacted by the current economic downturn — this set of temporary changes is a reasonable first step. As the preliminary data suggests, they may be having a small, stabilizing effect. However, this narrow focus overlooks the more significant drivers of EI’s persistent coverage gaps.
While a definitive diagnosis is difficult with publicly available data, I think it’s likely that a main driver of inadequate coverage is benefit exhaustion: as job searches get longer, more claimants are running out of benefits before finding work. This conclusion is supported by Statistics Canada supplementary unemployment rates, which track those that have been unemployed for longer than three months, as well as those without a job for more than a year (figure 5). Both rates nearly doubled between March of 2023 and 2025 and began falling in a similar timeline as the BU ratio. Depending on hours worked prior to their claim, and the unemployment rates of the region, recipients can receive benefits for 14 to 45 weeks in total.
Another likely contributing factor is the challenge faced by younger Canadians, who have a more precarious attachment to the labour force that often leaves them ineligible for EI regular benefits under current rules. Younger Canadians make up a small share of all claims, but it’s evident from figure 1 that both unemployment and EI coverage are going in the wrong directions.
These issues map directly onto the core challenges with EI that we identified in our 2022 research: complexity, which makes benefits difficult to administer and access; insufficiency, because benefits are often inadequate and less than half the unemployed receive them; and responsiveness, as shown by the government’s recurring need to make temporary adjustments during major economic shocks.
These fundamental challenges are not new. In fact, they were the focus of the government’s own consultations on EI modernization years ago. With the federal budget weeks away and Canadians facing an uncertain economic climate, it’s the right time to question incremental, temporary stopgap measures. Serious, comprehensive EI reform would require building a system that is truly fit for the challenges of the 21st-century economy.
When you travel along Highway 132 in Quebec’s scenic Gaspé Peninsula, rose-hued Percé Rock appears dramatically just offshore. The iconic wall of stone, rising 80 metres from the water and running 400 metres long, seems constant but has been evolving along with the dynamic region around it.
When French mariner Jacques Cartier arrived in the region in 1534 during his first year searching for a route to Asia, there was at least one other sea arch in the rock — now long collapsed. Atop the cliffs overlooking the Gulf of St. Lawrence, Cartier encountered skilled Mi’kmaq fishers and hunters. The area — known as Gespe’gewa’gi — would become one of the first nodes of seafood trade between waves of French and British settlers in the region and Europe.
Residents of the regional county municipality of Rocher-Percé, located along the rugged southwest shores of the peninsula, see the potential for a new wave of economic opportunities: expanded tourism, more seafood exports, a promising copper mine, wind energy development and the modernization of one of North America’s biggest cement factories.
But there are clouds on the horizon as well, including the threat of tariffs, worker shortages and climate change.
The ability of businesses and workers to navigate these headwinds hinges on sustaining the attention of well-meaning but distant policymakers in Quebec City and Ottawa — while ensuring economic development decisions are anchored in local knowledge and ambition.
