MRO Magazine

New federal budget promotes apprenticeship

Ottawa, ON -- In today's knowledge-based economy, a more educated and skilled labour force is key to Canada's compe...

Ottawa, ON — In today’s knowledge-based economy, a more educated and skilled labour force is key to Canada’s competitiveness in the world, the federal government noted in its 2006 budget, announced May 2, 2006.

Recognizing that government investments in education and training are critical to productivity and economic growth. the budget proposed that federal support for education and training be increased significantly.

Included in the budget are a new tax credit of up to $2,000 for employers who hire apprentices, and a new $1,000 grant for first- and second-year apprentices.
The government noted that the difficulty Canadian employers have in finding skilled tradespeople is becoming an impediment to economic growth. Meanwhile, many young Canadians find themselves stuck in low-paying work, and are either not encouraged to consider the trades or unable to do so because of financial barriers.

To encourage employers to hire new apprentices, the budget proposed a new Apprenticeship Job Creation Tax Credit, effective May 2, 2006. As a result, eligible employers will receive a tax credit equal to 10% of the wages paid to qualifying apprentices in the first two years of their contract, to a maximum credit of $2,000 per apprentice per year.


It is estimated that this measure will reduce federal revenues by $190 million in 2006-07 and $200 million in 2007-08.

In addition to current federal support provided to apprentices through the Employment Insurance program, a new Apprenticeship Incentive Grant program will be established effective January 1, 2007.

The program will provide a cash grant of $1,000 per year to apprentices in the first two years of an apprenticeship program in one of the Red Seal trades and other economically strategic apprenticeship programs. This grant will be included in computing the income of the recipient for tax purposes.

The Government of Canada will be consulting with provinces and territories, employers and unions to best determine which other apprenticeship programs will be included in the program. Their views will also be sought concerning how to deliver the grant.

This grant for apprentices, together with the proposed tax credit for employers, will provide a strong incentive for more young Canadians to pursue apprenticeships and hence meet the future need for skilled tradespeople that is crucial to the sustained growth of the economy, says the government.

The cost of this new Apprenticeship Incentive Grant program, under the auspices of the Minister of Human Resources and Social Development, is estimated to be $125 million over 2006-07 and 2007-08. These measures will reduce federal revenues by $75 million in 200607 and $80 million in 200708.

It is estimated that about 100,000 apprentices will benefit as a result of the new grant and tax credit.