Ontario government should end unnecessary ‘training’ subsidies

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Appeared in the Windsor Star, April 6, 2022
Ontario government should end unnecessary ‘training’ subsidies

One thing government likes to spend money on—the list, alas, is very long—is employment and skills training. Recent announcements by the Ford government in Ontario include $28 million for pre-apprenticeship training, more than $13 million for electrical training and apprenticeships, more than $2 million to train workers for careers in the horse racing industry, nearly $1 million for training workers in food and beverage processing, and so on.

Many of these and other similar announcements are part of a more than $200 million “Skills Development Fund” and feature varying language that fits the same general pattern—there’s a labour shortage and the careers being subsidized are rewarding and lucrative. Supposedly labour shortages in certain industries and the attractiveness of these careers justify subsidies, but this supposition is not supported by any principle of economics.

It's important, in the first place, to define a “shortage.” If the number of electricians in the labour market is lower (and the price of their services higher) than some arbitrary level determined by politicians, that does not mean there’s a shortage. All it means is that there are few electricians and their services are costly. But because there’s a small quantity of something, and it’s expensive, does not justify a government subsidy.

In economics, a shortage occurs when at the market price, the quantity that consumers demand exceeds the quantity that producers supply, so consumers have trouble buying at market price. In a free market, the price would rise to ration demand and encourage supply, swiftly eliminating the shortage. Again in this case, there’s no economic justification for a government subsidy to encourage supply.

What about the argument that careers in skilled trades or horse racing or whatever the case may be, are rewarding and lucrative and should be subsidized? This too is no reason for government subsidies. If the government will subsidize careers because they are “good” careers, why not also subsidize tasty restaurant meals because it’s “good” food or luxury cars because they’re “good” automobiles?

If the benefits of training for a career exceed the costs, people will train to enter those careers in absence of the subsidies, no different to how people buy good food or good cars if they judge the benefits to be higher than the costs. Any marginal purchases—of skills training, food or cars—that result from government subsidies are purchases that carry higher costs than benefits, and thus destroy economic value.

There’s another possible justification for these skills training subsidies—the government subsidizes university degrees so extravagantly, to the tune of billions of dollars annually, so to try to balance it out in the labour market and improve fairness, the government should also spend money on training for careers in the skilled trades. Unfortunately, this too fails to justify Ontario’s skills training funding.

If to correct an imbalance created by one government intervention, the government introduces another intervention, the result would be a persistent imbalance and a continuous piling on of interventions, all of them bad. Better to correct the imbalance by removing the original intervention instead of piling another one on top of it. The Ford government should eliminate its Skills Development Fund—and take an axe to university subsidies, too.

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