Ali Bargu
Alexander Hijzen
Reviving Productivity Growth in Canada
The Role of Worker-Oriented Policies
Abstract
Building on the analysis in Chapter 2, this chapter discusses how labour market policies can support productivity growth and structural transformation through job mobility. It starts by arguing that to restore the role of job mobility in aggregate in productivity it is necessary to promote job opportunities in high productivity firms. It proceeds by discussing how policies can promote voluntary job-to-job mobility by restricting the excessive use of non-compete agreements and limiting the adverse effects of occupational licensing regulations on productivity. It then discusses in more detail how policies can address barriers to job mobility between provinces and territories such as those due to differences in occupational licensing regulations, and the portability of benefits and pensions or those arising from rapidly rising housing costs and limited access to affordable childcare. It concludes by discussing how policies can support workers who are displaced as a result of structural change, with an emphasis on displaced workers in energy-extraction industries and industries reliant on US imports.
Findings and recommendations
This chapter focusses on the contribution of policies to reviving productivity growth in Canada by supporting worker transitions between firms, industries and provinces in a context of rapid and profound structural transformation.
Promoting opportunities for job mobility and tackling barriers to job mobility
Voluntary job mobility between firms is crucial for the career progression of workers as well as efficiency-enhancing job reallocation and hence aggregate productivity growth. However, opportunities for job mobility to better firms may be limited – and likely to account for much of the declining contribution of efficiency-enhancing job reallocation to productivity growth – and opportunities that do exist may be hindered by policy-related barriers.
Promote opportunities for job mobility to high productivity firms. Remove structural impediments to competition and increase investment in innovation, machinery and equipment and infrastructure.
Evaluate the Ontario ban on non-compete agreements and the planned ban on federal employees. There is a significant lack of evidence on the use and effects of non-compete agreements in Canada. This stands in the way of evidence‑based policy interventions to restrict their use.
Take measures to reduce the inappropriate use of non-compete agreements among federal employees and promote policy action at provincial and territorial level. This could take the form of a ban as in Ontario among federal employees, possibly complemented with moderate sanctions in the case of misuse.
Collaborate with provincial and territorial governments to limit the adverse effects of professional licensing on productivity. This could involve making regulations less restrictive (e.g. practice under supervision), separating the regulatory and representative functions of professional bodies, and privileging output rather than input quality.
Facilitating geographical mobility
Barriers to geographical mobility hamper the economy’s ability to respond to structural change, slow the spread of innovation and hold back efficiency-enhancing reallocation. In Canada, key obstacles include differences in licensing regulations across provinces and territories, lack of affordable housing, limited portability of pensions and benefits, and costly or inaccessible childcare.
Reduce interprovincial differences in licensing requirements. Improving the mutual recognition of professional licenses across provinces – particularly in personal services – would help lower barriers to labour mobility. This is one of the aims of the recently proposed One Canadian Economy Act.
Reduce housing-related barriers to mobility by expanding affordable rental options in high-productivity areas. Current plans to improve housing affordability through Build Canada Homes could be strengthened through long-term strategic planning to increase access to affordable housing in high-growth cities and regions.
Address additional barriers to worker mobility across provinces and territories. This includes access to affordable childcare and improving the portability of pensions and benefits to reduce financial disincentives to moving.
Policies to support worker transitions in a context of rapid structural change
The transition towards a net-zero economy and the increase in US tariffs on Canadian imports could increase the risk of job displacement. New evidence shows that displaced workers from high wage industries such as energy extraction and industries reliant on US imports face particular challenges. Six years after displacement, the earnings losses of workers displaced in such industries tend to be considerably higher than those from other industries. Polices that reduce the risk of job displacement or limit their consequences are typically motivated by social policy objectives but can also help sustain broad-based public support for a policy agenda focussed on reviving productivity growth and decarbonisation.
Adapt the work-sharing special measures to foster company restructuring. While these measures provide timely help to firms and workers affected by tariffs, periods of reduced activity should also be used to promote training, job transitions, and company restructuring. This would help ensure that support does not hinder necessary adjustments if tariffs persist longer than expected.
Consider complementing unemployment insurance with temporary and targeted wage support (wage insurance). Such a scheme would insure displaced workers against wage losses upon re‑employment by topping up their earnings, while strengthening incentives for returning to work.
Promote the use of early interventions in the case of individual dismissal. This could be done by requiring employers to immediately notify the labour authorities upon dismissal or even in advance of dismissal when severance pay is replaced by advance notice.
Explore innovative ways to enhance the cost-effectiveness of active labour market policies. The Federal Government could collaborate with provincial and territorial governments to promote the development of statistical profiling tools that enhance the targeting of costly interventions and allow tailoring them more closely to individual needs.
The pace of efficiency-enhancing job reallocation has declined considerably in Canada, contributing to about a half of the decline in aggregate productivity growth since the early 2000s. While it is not easy to determine with certainty what is behind this trend, it is likely to be driven primarily by demand side factors (e.g. weak investment) that have reduced job opportunities in high productivity firms. Nevertheless, there are also important barriers on the supply side that hold back the contribution of job mobility to aggregate productivity growth. Moreover, these barriers are likely to become more visible when demand in high productivity firms picks up. The objective of this chapter is to document how job mobility how can support efficiency-enhancing job reallocation between firms as well as the process of structural transformation between industries, with an emphasis on energy-extraction industries and industries reliant on US imports.
The chapter will be structured as follows. It starts by arguing that to restore the role of job mobility in aggregate in productivity growth, it is necessary to promote job opportunities in high productivity firms. It proceeds by discussing how policies can promote voluntary job-to-job mobility by restricting the excessive use of non-compete agreements and limiting the adverse effects of occupational licensing regulations on productivity. It then discusses in more detail how policies can address barriers to job mobility between provinces and territories such as those due to differences in occupational licensing regulations, and the portability of benefits and pensions or those arising from rapidly rising housing costs and limited access to affordable childcare. It concludes by discussing how policies can support workers who are displaced because of structural change and help to maintain broad-based public support for a policy agenda focussed on growth and structural transformation, with an emphasis on displaced workers in energy-extraction industries and industries reliant on US imports.
A declining contribution of job reallocation to aggregate productivity growth could point to growing barriers to job mobility or declining opportunities for job mobility. While this report identifies a number of important barriers to job mobility in Canada – as discussed in more detail below – there is no clear evidence that the importance of these barriers has significantly increased over time. Indeed, in several of the areas considered in this chapter, progress has been made to alleviate barriers to job mobility (e.g. occupational licencing). Consequently, it is likely that the decline in the contribution of job reallocation to aggregate productivity growth reflects declining opportunities for job mobility due to persistently weak investment and declining productivity growth in capital-intensive and high productivity firms.
Cross-country evidence shows that the demand side is not just crucial for the contribution of job reallocation to productivity growth in Canada but that this is true more generally as well (Figure 4.1). In countries where average annual wage or productivity growth is negligeable job reallocation does not significantly contribute to productivity growth. By contrast, in countries with high average annual growth rates, job reallocation accounts for about one‑third. The picture is clearer when focussing on wages rather than on productivity since the exercise could not be done for productivity for all countries.1 The evidence suggests that growth is often driven by high productivity firms pulling away from the rest, simultaneously contributing to higher growth and creating opportunities for job mobility by expanding their size.
Scatterplot of the average annual growth rate in average wages/labour productivity against the component of growth that is associated with efficiency-enhancing job reallocation, 2001-2019
Source: Calculations based on OECD Employment Outlook.
Promoting job opportunities in high productivity firms should be a key policy priority. As discussed in the OECD Economic Survey and the 2025 Budget for Canada: Building Canada Strong, this requires addressing structural impediments to competition and increasing investment in innovation, machinery and equipment and infrastructure (Government of Canada, 2025[1]; OECD, 2025[2]). Most of these measures fall outside the realm of employment and skills policies. However, by promoting job opportunities in high productivities they may make structural barriers to job mobility more visible. Indeed, it is possible that the potential benefits of increased competition and investment are not fully realised if barriers to job mobility are not effectively addressed. It is important therefore that the current momentum for policy action is seized upon to effectively promoting job opportunities in high productivity firms while addressing supply-side barriers to job mobility.
This section discusses selected policy issues that can increase opportunities for voluntary job mobility towards more productive firms. More specifically, it focusses on barriers to job mobility that result from the use of non-compete clauses in employment contracts and occupational licensing regulations.
4.3.1. Non-compete agreements
Non-compete clauses are contractual provisions that restrict employees’ activities after they leave their current job. These clauses can prohibit former employees from joining a competitor or launching a competing business.2 In most OECD countries, such restrictions are legally permitted and regulated to protect legitimate employer interests – such as trade secrets, client relationships, or investments in employee development (e.g. training) (Andrews and Garnero, 2025[3]). However, non-compete clauses may also be used in ways that reduce competition in both product and labour markets, potentially impeding job reallocation and slowing overall productivity growth.
There is growing evidence that non-compete are not just used to protect legitimate business interests but also to limit competition
Surveys from selected OECD countries suggest that non-compete clauses are widespread, potentially affecting up to a quarter of the workforce and used by as many as half of firms, with indications that their use is increasing (Andrews and Garnero, 2025[3]; OECD, 2022[4]; OECD, 2019[5]). While they are particularly common in knowledge‑intensive sectors – where they may serve to protect legitimate business interests – they are also increasingly found in occupations where access to sensitive information is unlikely. For example, non-competes have been used among entry-level fast-food workers in the United States (Andrews and Garnero, 2025[3]). Anecdotal evidence suggests that the use of non-competes is not uncommon and in many cases, those not appear to protect a legitimate business interest (CBA National Magazine, 2023).3 Ongoing OECD analysis confirms that the use of non-compete agreements is widespread in Canada (OECD, 2026). Non-compete clauses are frequently bundled with other contractual restraints that limit worker mobility, such as non-disclosure, non-solicitation, and non-recruitment agreements. In jurisdictions where non-competes face formal restrictions, such as Ontario, firms may also rely on alternative provisions that, while not explicitly limiting mobility, have similar practical effects.
Non-compete clauses can significantly restrict job mobility, hinder growth-enhancing job reallocation, and slow the diffusion of new technologies. As a result, they may have contributed to the slowdown in productivity growth and the decline in the labour share (Buckley, Rankin and Andrews, 2024[6]; FTC, 2024[7]). In the United States, non-competes have been shown to undermine competitive labour market dynamics by impeding efficient worker – employer matching, while also stifling product and service market competition by discouraging business formation and innovation (FTC, 2024[7]). These concerns are echoed in the 2024 Draghi report on EU competitiveness, which recommends that competition policy tackles practices, such as non-compete agreements, that constrain labour mobility across firms (Draghi, 2024[8]). Recent evidence from Austria, following the 2006 ban on non-competes for low-wage workers, suggests only a modest positive effect on overall job mobility. This contrasts somewhat with findings from the United States, which may be explained by context-specific factors, including the design of restrictions on the use of non-competes (Box 4.1).
Evidence for the United States suggests that non-compete agreements can have large negative effects on job mobility, wages and innovation – see Starr (2024[9]) for an overall review. However, empirical evidence outside of the United States is scarce (Andrews and Garnero, 2025[10]). A study of a 2006 reform in Austria which banned non-compete clauses for low-wage workers finds a modest negative effect of non-compete clauses on job mobility, and no effect on earnings growth (Young, 2024[11]). Beyond the inherent differences in their labour markets, several design factors may play a role in explaining the differing effects of non-compete regulations in Austria and the United States.
First, non-compete clauses are not the only post-employment restraint that matters. While the 2006 reform in Austria restricted the use of non-compete agreements, it also expanded the use of training repayment clauses, allowing firms to recover training costs from up to five years before a worker’s departure (previously three years). While training repayment clauses do not directly restrict worker mobility, they add costs to workers who may want to leave (Harris, 2021[12]). Considering all the clauses that may limit workers’ mobility (e.g. non-recruitment/non-solicitation of colleagues, non-solicitation of clients, repayment of training costs or repayment of benefits) is therefore key to ensure that limitations to the use of non-compete clauses do not simply translate into a higher use or higher enforcement of other clauses.1
Second, lack of clarity about the applicability of non-compete agreements hinders the effect of reforms aimed at reducing their use. The Austrian reform introduced a threshold on the wage earned by the employee below which non-competes are not enforceable. The threshold changes every year and only certain wage components are included in its definition. Moreover, what matters in the case of Austria is not the wage at the moment of signing the contract but the wage at the end of the employment relationship. This creates uncertainty by the workers concerned about the actual enforceability of non-compete agreements hindering the intended effects of the reform.
Third, even unenforceable clauses can stifle job mobility. Banning or restricting non-compete agreements is not enough if they are still used in employment contracts. Research for the United States and Italy shows that even unenforceable non-compete agreements can have a chilling effect on worker mobility, as workers often do not realise that they are unenforceable and cite them as a reason for not taking a job offer from a competitor (Starr, Prescott and Bishara, 2020[13]; Prescott and Starr, 2024[14]) (Boeri, Garnero and Luisetto, 2024[15]). Since the use of non-compete agreements in Austria was made merely non-enforceable among workers with incomes below the threshold but applicable to workers whose incomes increase beyond the threshold, employers in Austria have a clear incentive to include “dormant” non-compete agreements that become enforceable in case the threshold is passed. However, and as discussed above, workers may think that they are enforceable even if they fall below the threshold.
Another reform in 2015 in Austria, which, differently from the 2006, was done in agreement with social partners, significantly increased the threshold above which non-compete agreements are allowed and clarified the wage components to be considered. The reform also reduced the period for repayment of training to three years. The effects of the 2015 reform have not yet been evaluated and hence it is not clear how effective it has been in restricting the use of non-compete agreements and promoting job mobility.
1. In Canada, “Golden handcuffs”, i.e. stock options and bonuses tied to retirement, are also commonly used.
Note: This box was prepared with contributions from Sindri Engilbertsson, Andrea Garnero and Sergio Pinto.
Source: OECD (2025[16]), OECD Employment Outlook 2025: Can We Get Through the Demographic Crunch?, Chapter 5, .https://doi.org/10.1787/194a947b-en.
Measures to restrict the inappropriate use of non-compete agreements
Given concerns about the excessive use of non-compete clauses and their consequences in Canada, there is a case for restricting their use beyond legitimate business interests. Currently, under common law across Canadian jurisdictions, non-compete agreements are allowed but difficult to enforce unless narrowly justified (a notable exception is Ontario which explicitly banned non-compete agreements in all but a few very specific conditions, as discussed below). Case law suggests that non-competes need to be justified and proportional. This means that there must be harm, i.e. the activity of a firm must suffer from an increase in competition, and the remedy must be proportional, i.e. barring the person from taking up a position in another firm must be limited to a certain time, place or activity. In practice, it implies that a limited non-compete agreement may be enforceable for chief executives, but that this is unlikely to be the case for regular employees. Yet, non-competes may still be used in cases where they are not enforceable, with potentially detrimental effects for job mobility and efficiency-enhancing job reallocation. There may therefore be a need to go beyond the current situation to bring greater clarity on the appropriate use of non-competes and their enforceability in different settings and to restrict their use.
Federal and Provincial/Territorial governments could consider different options for clarifying and restricting the use of non-compete agreements. The most widely discussed option is to follow the example of Ontario, possibly with some minor adjustments. Ontario introduced a general ban on the use of non-compete agreements in 2021, with only a few minor exceptions: i) as part of an agreement where one party sells his company to another company, and then goes to work for the latter; ii) the employee is a senior executive; iii) the non-compete has been agreed before 25 October 2021 (International Bar Association, 2024[17]). The Government of Ontario stated that the reform was in part motivated by the intention to support efficiency-enhancing job reallocation by making it easier for high productivity and high growth industries to attract workers, while promoting worker careers by supporting opportunities for job mobility.
There are a few issues in relation to the Ontario ban that merit further discussion. First, the ban does not consider the protection of intellectual property a sufficient justification for the use of a non-compete agreements. However, this was originally recommended in the report Ontario Workforce Recovery Advisory Committee that led to 2021 reform (OWRAC, 2021[18]). One reason why this recommendation was not taken over may have been that the protection of intellectual property could be achieved also with a non-disclosure agreement. Second, the ban merely clarifies the enforceability of non-compete agreements in different settings but does not sanction their inappropriate use. There may be a case for having moderate sanctions for the inappropriate use of non-compete agreements by employers to promote a form of due diligence. Indeed, the evidence suggests that regulations limiting the enforceability of non-compete clauses may not suffice to prevent their unlawful use in the absence of penalties for their abuse by employers (Starr, Prescott and Bishara, 2020[13]; Boeri, Garnero and Luisetto, 2024[15]). Sanctions could include financial penalties, mandatory compensation for employees who face adverse employment outcomes, or administrative penalties against firms repeatedly abusing non-competes. An evaluation of the Ontario reform may help to shed light on these issues as well as the desirability of a ban on non-competes more generally.
The Ontario model goes considerably further than initiatives to restrict the use of non-compete agreements in many other OECD countries but falls short of the “Final Rule” that was initially adopted by the Federal Trade Commission (FTC) in the United States but did not become effective in the end. In contrast to the Ontario model, the rule initially adopted by the FTC essentially would not allow exceptions, not even for senior executives, and only would allow for very limited grandfathering of non-competes in employment contracts that had started before. The strict line of the FTC on non-compete agreements is based, in part, on evidence for the United States on their harmful economic effects and, in part, on the view that the protection of legitimate business interests can be achieved through less intrusive means such as non-disclosure and non-solicitation agreements. However, the rule adopted by the FTC has been challenged by several district courts. In particular, the Northern District Court of Texas has ruled that the Final Rule be set aside nationwide as it went beyond the mandate given to the FTC by Congress. At the same time, the Ontario model goes considerably further than measures taken in most other OECD countries. These typically took the form of partial bans on the use of non-compete for low-wage workers (e.g. Austria) or workers on fixed-term contracts (e.g. the Netherlands), limitations on their scope in terms of duration and geographic application or requirements related to compensation or notification (e.g. Finland, Norway).
The 2025 Budget for Canada announced the intention of the government to amend the labour code to restrict the use of non-compete agreements in employment contracts for federally regulated businesses. The government will launch consultations on proposed legislative changes in early 2026. The hope is that this will provide a model that provincial and territorial governments can take over. This also means that it will be important to actively involve provincial and territorial governments in the consultations.
4.3.2. Professional licensing regulations
Licensed or regulated professions must follow rules on entry and conduct in their field. Licensing regulations may include administrative procedures, qualification requirements and mobility restrictions (von Rueden and Bambalaite, 2020[19]; OECD, 2022[4]). As credence goods, the quality of professional services is difficult for consumers to assess. Professional licensing aims to correct market failures caused by information asymmetries between consumers and service providers. However, by creating entry barriers, licensing regulations can curtail competition, restrict business dynamism and slow growth-enhancing job reallocation. The discussion in this sub-section focusses on the role of professional licensing regulations for Canada in general, while a more detailed discussion of differences across provinces and territories is relegated to Section 4.4.
Professional licensing regulations are under increased scrutiny amid growing concerns about their consequences for efficiency-enhancing job reallocation
The share of professions subject to licensing regulations is significant and has expanded over time, covering up to 25% of workers in the United States, 22% in Europe and 20% in Canada (Bambalaite, Nicoletti and von Rueden, 2020[20]). While their use was traditionally limited to liberal professions like lawyers and engineers, it has tended to expand to include occupations, such as longshore workers, driving school instructors, transporters, and hairdressers (Bambalaite, Nicoletti and von Rueden, 2020[20]; Kleiner and Krueger, 2010[21]). Their use tends to be particularly common in health and education, where ensuring service quality is particularly important, but is also widespread in professional services, construction and transport.
The OECD indicator of occupational entry regulations allows comparing their stringency in Canada with that in other OECD countries (Figure 4.2). The indicator systematically differentiates between professional and personal services and takes account of i) mandatory licensing requirements to obtain a legal authorisation to practice (individual licensing); ii) the possibility to practice under the supervision of a legally authorised professional (collective licensing); iii) the option to carry a legally certified title (certification). Regulatory barriers are assessed along three areas: i) administrative burdens, including registration requirements with professional bodies ii) qualification requirements, including the need for a specific exam and iii) mobility restrictions across jurisdictions which relate to amongst others recognition mechanisms (see the discussion in the next section).
The Canadian approach to regulating occupational entry in professional services is broadly similar to that of the United States and that of most European countries, while that for personal services (e.g. electricians, plumbers, hairdressers, and aestheticians) tends be relatively strict. In many cases, factors that contribute to the stringency of occupational entry regulations for personal services include the obligation to join a professional association (see Box 4.2 for a more detailed discussion), the requirement to accumulate work experience before obtaining a work permit, and the more limited option to practice under supervision. The approach is rather fragmented as it is tailored to specific occupations, which may reflect a preference for regulating service provision over product standards in combination with minimal qualification requirements.
Stringency of occupational entry regulations by country, index 0‑6
Note: An indicator value of 0 indicates the absence of regulations, 6 reflects a fully regulated market. Regulations for Canada and United States represent the unweighted average of province/state level regulations.
Source: Von Rueden, C. and I. Bambalaite (2020[22]), “Measuring occupational entry regulations: A new OECD approach”, https://doi.org/10.1787/296dae6b-en.
Evidence on their broader economic consequences is limited. There is some indication that licensing slows firm-level productivity growth, harms entry of innovative firms and lowers employment growth in the most productive firms (Bambalaite, Nicoletti and von Rueden, 2020[20]). For example, in the United States, separation and hiring rates tend to be lower in states with a higher share of occupations under professional licensing regulations and job mobility across states is generally lower towards states with more stringent licensing requirements (Hermansen, 2019[23]). Licensing may also curtail employment growth and reduce earnings in occupations with similar skill-profiles (Dodini, 2023[24]). Zhang (2017[25]) shows for Canada that professionals in regulated occupations earn more than professionals in unregulated occupations, even after controlling for the characteristics of workers and jobs (observed and unobserved), suggesting that occupational wage premia for licenced professions could reflect to some extent rents arising from limited entry.
Take measures to limit the unintended consequences of professional licensing regulations
Amid rising concerns about the unintended effects of professional licensing regulations in an environment of sluggish productivity growth, policymakers are paying closer attention to how these regulations are designed and implemented. While such regulations continue to play an important role in addressing information asymmetries, it is essential to ensure they do not inadvertently hinder job mobility that supports economic growth, especially as technological advances rapidly transform the delivery of professional services (OECD, 2023[26]).
To limit their unintended consequences for productivity growth, policymakers could explore several complementary avenues. An obvious starting point would be to assess to what extent compulsory licensing regulations are needed for all workers or whether weaker forms of regulation could be used instead. For example, for certain personal occupations, it may be sufficient to allow for professional practice under the responsibility of a licensed person. Second, for occupations for which registration with a professional body is required, it is important to ensure that their representative and regulatory functions are clearly separated, following the example of the UK reform for legal services (see Box 4.2). Third, shifting the focus from input quality (qualifications) to output quality (service standards) can reduce the negative effects of professional licensing rules on competition and job mobility. (OECD, 2018[27]). For example, it may be possible to replace mandatory licensing with voluntary certification, while using customer platforms to provide information on service quality across providers (OECD, 2022[4]).
The primary role of a professional association (also known as a professional body, organisation, or society) is to represent the interests of practitioners. However, some also serve as regulators, setting entry standards and overseeing conduct within the profession. This dual role creates a conflict of interest: while advocating for members, the association also controls access to the field, potentially limiting competition. Scholars and competition authorities argue this arrangement can reduce overall welfare, as it pits professional interests against those of the public by restricting competition (Grajzl and Murrell, 2007[28]). This was also recognised by the US Supreme Court (Allied Tube versus Indian Head, 1988[29]).
To address this, the OECD recommends separating regulatory and representative functions of professional associations, either through independent supervisory bodies or internal divisions with strong safeguards. These bodies should include professionals as well as consumer advocates, academics, and regulatory experts to ensure balanced oversight. The UK’s 2007 Legal Services Act exemplifies this approach. It created the Legal Services Board to take on the functions of an independent regulator while professional associations retained their advocacy role. In the United States, regulation is typically handled by professional boards, with associations such as the American Bar Association focussing on representation.
Source: Von Rueden, C. and I. Bambalaite (2020[22]), “Measuring occupational entry regulations: A new OECD approach”, https://doi.org/10.1787/296dae6b-en.
Barriers to geographical mobility may also constrain productivity growth. These may include, inter alia, differences in professional licensing regulations between provinces and territories, lack of affordable housing, limited portability of occupational pension and benefit schemes, and costly and inaccessible childcare. Barriers to geographical mobility hamper the economy’s ability to respond to structural change, slow the spread of innovation and hold back efficiency-enhancing reallocation. This section first examines how differences in professional licensing regulations across provinces and territories shape geographical mobility and then explores the role of additional constraints related to housing affordability, childcare access and costs, and benefit portability.
4.4.1. Differences in professional licensing regulations between provinces and territories
This sub-section builds on the discussion above on the role of occupational licensing requirements for productivity by focussing on how differences between provinces affect geographical labour mobility.
Professional licensing requirements differ widely across Canadian provinces and territories with potentially important consequences for geographical mobility
Across Canada, provincial approaches to occupational licensing vary widely (Figure 4.3). Differences in the stringency of occupational entry requirements across provinces and territories are particularly large for personal services (e.g. hairdressers, electricians, taxi drivers) and comparable in size to differences between different countries Occupational entry requirements are relatively strict in Manitoba, in part due to mobility restrictions for taxi drivers, driving instructors and hairstylists, while they are largely absent in British Columbia, with only minimal qualification requirements for driving instructors. Differences for professional services (e.g. accountants, engineers, lawyers, real-estate agents) are much more limited. In part, this is because since 2019, the licensing bodies of all professional service occupations (as well as nurses), had interprovincial mutual-recognition clauses.4 Remaining differences in licensing requirements and administrative procedures across provinces, notably in relation to personal services, could still present potentially important barriers to geographical labour mobility.
While evidence for the United States shows that inter-state differences in occupational requirements significantly reduce geographical mobility (Hermansen, 2019[30]; Johnson and Kleiner, 2020[31]), there is no clear picture for Canada. On the one hand, businesses report that differences in professional licensing regulations across provinces pose a significant barrier to hire from other provinces (Statistics Canada, 2025[32]). The most-cited barrier is the waiting time for out-of-province certification or licensing (36% of firms, 57% in health), followed by the efforts required to verify credentials with regulatory bodies (23% overall and 37% in manufacturing). Note that these self-reports need to be interpreted with caution and do not reflect recent progress in reducing waiting times. On 2 June 2025, the Federal Prime Minister and P/Ts Premiers agreed on a pan-Canadian 30‑day service standard for a recognition decision on a complete application.5 On the other hand, Zhang’s (2017[25]) finds that, for young Canadians aged 21‑34, licensing requirements do not significantly affect the likelihood of moving across provincial boundaries. There is no evidence on the role of licensing requirements in geographical mobility for other age groups or its consequences for employment, wages and productivity. This represents an important area for future research.6 Descriptive evidence presented in Box 4.3 suggests that geographical mobility, among all age groups, is somewhat lower in regulated occupations than in unregulated occupations.
Stringency of occupational entry regulations by provinces and territories, index 0‑6
Note: An indicator value of 0 indicates the absence of regulations, 6 reflects a fully regulated market. Regulations for Canada represent.the unweighted average of province/state level regulations.
Source: Von Rueden, C. and I. Bambalaite (2020[19]), “Measuring occupational entry regulations: A new OECD approach”, https://doi.org/10.1787/296dae6b-en.
This box provides selective examples of regulated occupations to illustrate some of the barriers to inter-provincial labour mobility that may arise from differences in occupational licensing requirements across provinces and territories and provides suggestive evidence on the consequences of occupational licensing requirements for job mobility across provinces and territories.
Selected examples of regulation occupations
The discussion focusses on electricians and paramedics as examples of personal services, and engineers, lawyers and physicians as examples of professional services as well as nurses. Since even for these selected occupations, there are many possible constellations the discussion does not aim to be comprehensive.
Personal Services.
Electricians: Despite the existence of the Red Seal endorsement, which is intended to promote standardisation and mobility across provinces, electricians moving to another jurisdiction must often register with the new provincial authority, pay additional fees, and may be required to pass supplementary examinations. In some cases, apprenticeship hours completed in one province are not fully recognised in another (Skilled Trades Ontario, 2023[33])
Paramedics. Paramedic regulation differs significantly across provinces in terms of certification levels, scopes of practice, and oversight bodies. While the National Occupational Competency Profile (NOCP) provides a general framework, each province applies its own standards and processes for licensure. As a result, trained paramedics relocating between jurisdictions may face additional testing, retraining, or delays in recognition (Paramedic Association of Canada, 2025[34]).
Professional Services.
Engineers. Each province and territory in Canada has its own regulatory authority governing the title “Professional Engineer” (P.Eng.). Even though national agreements under the Canadian Free Trade Agreement (CFTA) aim to facilitate mutual recognition of credentials, engineers must still apply to the regulatory body in the new province, provide documentation such as proof of good standing, and pay licensing fees.
Lawyers and physicians. Mobility for lawyers and doctors is constrained by province‑specific licensing regimes.1 Applicants must typically provide documentation, pay fees, and sometimes meet additional administrative or professional requirements. While initiatives have been proposed to streamline short-term licensing, practitioners still often maintain multiple licenses to practice across provinces (von Rueden and Bambalaite, 2020[22]).
Potential implications for job mobility across provinces and territories
There is little evidence on the effects of differences in occupational licensing requirements for job mobility across provinces and territories in Canada. Descriptive statistics show that inter-provincial job mobility is lower in regulated occupations than in unregulated occupations. This may suggest that differences in occupational licensing requirements reduce job mobility between provinces.2
Percentage of workers that change province of residence
Note: Interprovincial labour mobility is the percentage of workers who changed provinces of residence from May of the census year (2016 or 2021) to December of the subsequent year (2017 or 2022 respectively). Interprovincial mobility is calculated as an average for regulated and unregulated occupations, by province, and then as an average of the four largest provinces (Alberta, British Columbia, Quebec, and Ontario).
Source: Statistics Canada. Table 14‑10‑0452: Interprovincial labour mobility in Canada by occupation. https://doi.org/10.25318/1410045201-eng; Canadian Information Center for International Credentials. https://www.cicic.ca/en/.
1. In Québec, the civil-law system prevents the automatic recognition of lawyers from other provinces and territories that follow the common-law system.
2. The analysis does not control for differences in worker characteristics across regulated and unregulated occupations.
Despite some progress, further steps need to be taken to reduce the role of licensing regulations as a barrier, real or perceived, to geographical mobility
Various efforts in Canada reaffirmed the commitment to easing restrictions on labour mobility across provinces and territories, but progress remains incomplete. The Red Seal programme establishes a national benchmark for over 50 personal services (i.e. skilled trades), licensing workers to practice in any province without re‑testing (Skilled Trades Ontario, 2023[33]). The programme establishes common skills standards and competency benchmarks for tradespeople across Canada. Workers who pass the special Red Seal examination receive a certification which grants them the right to work in any province, provided they are registered with the relevant provincial trade board.
Similarly, the 2017 Canadian Free Trade Agreement (CFTA) includes a Labour Mobility chapter that commits all provinces and territories to recognising certified workers from other jurisdictions, provided they hold a valid licence and are not subject to disciplinary actions (Government of Canada, 2017[35]). Under the agreement, such workers should be able to practice their occupation elsewhere without significant additional training or testing requirements. Exceptions are allowed only under narrow circumstances, such as concerns related to public safety, consumer protection, or the environment, and must be publicly justified and documented. Nevertheless, implementation challenges remain. Some regulated professionals – such as nurses, architects, and social workers – still face administrative fees, additional exams, or bridging requirements before being authorised to work in their destination province.7 Following the example of the European Commission, the federal government could develop a standardised framework for assessing the proportionality of public-interest exceptions and encourage provinces and territories to involve independent bodies to ensure objectivity and impartiality in these assessments (Box 4.4).
While licensing barriers persist for some occupations, limited mobility may increasingly stem from outdated perceptions rather than regulatory restrictions. Licensing requirements have evolved in many provinces to support mobility, yet workers and employers may remain unaware of these changes. Targeted communication, clearer online information, and co‑ordination with training providers and employment services could help bridge the gap between perception and reality. Promoting what is already possible in a clear and accessible way may unlock further mobility gains without the need for new legislative reform.
Workers in regulated professions continue to face important barriers to geographical mobility across countries in the European Union (OECD, 2025[36]). The recognition of professional qualifications in many EU countries involves extensive documentation requirements, which vary considerably across Member States. This reflects the fact that EU countries retain the authority to regulate professions, provided they respect principles of non-discrimination and proportionality. Many professional service providers also face numerous prior qualification checks, which can take several months to complete. Consequently, recognition procedures often remain lengthy and costly, and full mutual recognition of qualifications has yet to be achieved. These restrictions hinder labour mobility within the EU, where regulated professions account for around 22% of the workforce (OECD, 2025[36]). Since 2017, the Commission has noted only limited progress in easing restrictions for professional service providers, with high levels of regulation persisting in certain sectors, particularly for lawyers, architects and engineers (European Commission, 2021[37]).
EU countries may impose restrictions on professional service providers when justified by public interest objectives, such as public security or public health. These restrictions must be proportionate – meaning they should be both appropriate and necessary to achieve the intended goal. A notable step forward has been the 2018 Proportionality Test Directive, which requires Member States to evaluate the proportionality of proposed regulations affecting professional activities (European Commission, 2023[38]). To support this, the Commission offers a standardised framework for assessing proportionality, and encourages countries to involve independent bodies, such as competition authorities, to ensure objectivity and impartiality in these assessments. In some countries, this practice is already yielding positive outcomes. For instance, Italy’s competition authority and Luxembourg’s Council of State are mandated to provide opinions on the proportionality of new professional regulations (European Commission, 2022[39]).
In 2024, the Commission found that many of the prior qualification checks imposed on professional service providers seeking to offer temporary services in another EU country were difficult to justify and appeared disproportionate. Although Member States have pledged to eliminate a large share of these checks, their progress has been uneven and slow (European Commission, 2024[40]). In response, the Commission launched infringement procedures in December 2024 against 22 EU countries, covering more than 250 professions. This is a positive development, and it will be important for the Commission to follow through on these enforcement actions to ensure that all disproportionate restrictions are ultimately removed.
Source: OECD (2025[36]), OECD Economic Surveys: European Union and Euro Area 2025, https://doi.org/10.1787/5ec8dcc2-en.
A new federal bill represents an important step forward in improving labour mobility, complementing existing frameworks while respecting provincial jurisdiction
The newly elected government has made easing labour mobility across provinces and territories a key federal priority (Government of Canada, 2025[41]). On 6 June 2025, less than three months after taking office, it introduced a new federal bill, the One Canadian Economy Act (Bill C‑5), in the House of Commons. Bill C‑5 comprises two Acts, one being the Free Trade and Labour Mobility in Canada Act and the other the Building Canada Act. The provisions of the Free Trade and Labour Mobility in Canada Act state that a federal regulatory body must “recognise an authorisation to practise an occupation issued by a provincial or territorial regulatory body as comparable to an authorisation that the federal regulatory body may issue to practise that occupation.” Thus, the federal regulatory body must, “on application by the holder of such a provincial or territorial authorisation, issue them an authorization to practise that occupation” (Government of Canada, 2025[1]). The Act only applies to federal regulatory bodies and cannot alter the constitutional authority of provinces and territories over the regulation of most occupations. Nevertheless, this framework represents a positive contribution toward labour mobility, complementing existing federal and provincial initiatives.
The Act received Royal Assent on 26 June 2025. The government must now issue regulations to clarify how “comparable” authorisations will be assessed and to determine where exceptions may apply. Until these regulations are in place, the practical reach of the new framework remains limited. While supporters expect the reform to reduce administrative duplication for federal occupations, several stakeholders, including some professional regulators and provincial governments, have raised concerns about potential effects on standards and the division of responsibilities between federal and provincial authorities (Hill Times, 2025[42]).
4.4.2. Housing-related barriers to geographical mobility
High housing costs in Canada can act as a deterrent to geographic labour mobility by raising the effective cost of job switching for potential home buyers and new renters. While evidence directly linking specific housing policy instruments to productivity outcomes remains limited, this section focusses on the mechanisms through which housing affordability may reduce lock-in effects and support more efficient labour allocation across regions, with potential implications for productivity.
OECD evidence suggests that higher regional house prices tend to reduce inflows of workers: a 10% rise in regional house prices is associated with inflows falling by more than 3% (Cavalleri, Luu and Causa, 2021[43]). A study by CMHC (2025[44]) for Canada reports similar findings. At the same time, low rents for long-term renters may discourage outflows. Evidence from Statistics Canada indicates that renters who remain in the same dwelling for five years or more pay on average 19% lower rents than recent renters (MacIsaac and Wavrock, 2025[45]). Evidence from the United States and the United Kingdom links housing affordability constraints to weaker productivity and GDP growth through reduced labour mobility and weaker agglomeration dynamics (Anthony, 2022[46]; Anacker, 2019[47]; Homes England, 2025[48]; NERA & Greater London Authority, 2024[49]). From a productivity perspective, the key concern is that reduced inflows into high-cost, high-productivity urban centres constrain growth in frontier firms and weaken agglomeration dynamics through better matching and learning (Statcan, Brown and Scott, 2012[50]).
Compared to other OECD countries, the share of disposable income dedicated to housing is particularly high for renters in Canada, while it is close to the OECD average for homeowners who are paying off a mortgage (Figure 4.5). The share of disposable income dedicated to housing rents may be even higher for persons changing dwellings, since new leases in the rental market tend to reflect housing price developments more closely than legacy lease rates and particularly those moving to urban centres where the rise in housing prices tends to be most pronounced. High rental costs as observed in Canada can curb residential mobility – especially for lower-income households – and limit access to urban centres that provide better access to jobs in high productivity firms (Causa and Pichelmann, 2020[51]).
Median of the mortgage burden or rent burden as a share of disposable income, 2024 or latest year available, percentages
Note: Housing costs cover only those relating to mortgage costs (principal repayment and interest payments) and rental costs (for both private market and subsidised rental housing).
Source: OECD (2026[52]), OECD Affordable Housing Database – Indicator HC 1.2. Housing costs over income, https://www.oecd.org/content/oecd/en/data/datasets/oecd-affordable-housing-database.html.
The new Canada Housing Plan aims at boosting investments in affordable housing to support housing supply and stabilise housing costs (Government of Canada, 2024[53]). Such efforts could help reduce the weight of housing costs as a barrier to interprovincial worker mobility. However, the current version of the Housing Plan does not explicitly address labour-mobility considerations. To foster geographic mobility, co‑ordinated policies should link housing affordability with labour-market and mobility frameworks, ensuring that workers can pursue opportunities across provinces without being constrained by housing costs. This could take the form of aligning housing initiatives with workforce relocation programmes or embedding housing-affordability metrics into regional labour-market strategies (Government of Canada, 2024[53]).
The recent federal budget for 2025 seeks to ease some of these housing pressures (Government of Canada, 2025[1]). The government announced substantial new investments in housing supply through Build Canada Homes (BCH), a new federal entity mandated to scale up the construction of affordable and non-market housing, largely targeted at low- and middle‑income households.8 While BCH is primarily focussed on expanding affordable housing, the budget also includes measures to stimulate housing construction more broadly. Through this programme, the government aims to double the annual pace of home construction over the next decade, to roughly 430 000 – 480 000 homes per year, up from around 280 000 previously. Canada could also consider approaches used in other OECD countries to widen the range of affordable housing options available. For example, recent OECD work examines the role of specialised housing providers with a mandate to deliver and manage affordable rental housing, which can include, for instance, non-profit or limited-profit housing providers. Expanding the stock of affordable rental housing can help alleviate excess demand in the private rental market, particularly in high-pressure urban areas. Improving the affordability of rental housing can particularly benefit low- and middle‑income workers, including key service and professional occupations that are essential to high-productivity urban labour markets but are increasingly priced out of them. In turn, improved access to affordable rental housing may make relocation more feasible for workers who might otherwise face high rents as a barrier to moving to areas with stronger labour market opportunities (OECD, 2025[54]).
Building on this momentum, setting up long-term planning security for affordable housing could help workers access higher-productivity jobs
Setting up long-term planning security for affordable housing is one central dimension to support geographic labour mobility and help workers access to good jobs. By ensuring planning security through multi-year strategic frameworks that link supply, finance and support to vulnerable households, governments reduce the risk that short-term market fluctuations or policy changes undermine affordability goals (OECD, 2025[54]). These elements together help ensure that housing markets do not constrain worker mobility and the efficient allocation of labour towards high-productivity regions and sectors. Long-term strategies can help align incentives across sectors and improve affordability outcomes by stabilising expectations for investors, non-profit providers and households (OECD, 2023[55]). For example, Denmark’s non-profit housing sector provides stable below-market rental options through tenant- and municipality-governed associations, funded by municipal support and long-term low-cost loans, ensuring long-term predictable supply and affordability. Beyond affordability, the predictability of Denmark’s non-profit housing supply may help reduce housing-related lock-in effects by limiting abrupt housing cost increases when moving within metropolitan labour markets, although direct empirical evidence on the magnitude of these mobility effects remains limited. Other models have been established in OECD countries (see Box 4.5).
Affordable and social housing systems take diverse forms across OECD countries, reflecting regional contexts and policy priorities. The following overview highlights selected models and the mechanisms they use to ensure a sustainable, long-term supply of affordable housing.
Austria: Municipal and limited‑profit sector
Austria’s affordable rental system relies on a large municipal and limited‑profit housing sector that offers cost‑based rents and broad income eligibility, helping keep rental costs lower across regions; providers benefit from long‑term public financing and land commitments that support stable development pipelines.
Denmark: Non‑profit housing with long‑term finance
Denmark’s non‑profit housing sector provides stable below‑market rental options through housing associations financed by municipal support and long‑term loans. After construction loans are repaid, rents remain cost‑based with surplus revenues reinvested into a national building fund that finances renovation, new construction and long‑term stock maintenance, creating a self‑sustaining affordable housing finance circuit.
Netherlands: Regulated non‑market rentals via housing associations
In the Netherlands, a significant share of rental housing is provided by non‑profit housing associations operating under rent regulation and income eligibility rules, ensuring that a large portion of the stock remains below market rents; state guarantees and preferential access to land help sustain these associations’ capacity to supply affordable housing.
4.4.3. Other barriers to interprovincial labour mobility
Apart from differences in occupational licensing requirements, several other factors may hold back geographical mobility and merit policy attention, including limits to the portability of benefits and pensions as well as the affordability and accessibility of childcare. Survey evidence suggests that these factors can represent key barriers for individuals who consider relocating to a different province in Canada (Statistics Canada, 2025[57]; Morissette, 2017[58]).9
Portability of benefits and pensions in Canada as a barrier to interprovincial mobility
Limited portability of low-income benefits and occupational pensions across provinces in Canada represents another barrier to geographical labour mobility. Benefits to support households including social assistance and certain housing or unemployment benefits, are largely administered at the provincial or municipal level, with differing eligibility rules, benefit levels and administrative requirements. When individuals move between provinces, existing benefit payments often cannot be transferred seamlessly and typically require re‑application under new rules, for example in the case of social assistance or housing subsidies. In parallel, differences in insurance‑based schemes across provinces can affect how individuals continue to accrue rights when changing jurisdiction, notably in occupational and some public-sector pension plans where transfer agreements exist but are not automatic and may involve actuarial or administrative frictions (Public Services and Procurement Canada, 2025[59]). This institutional fragmentation can deter low-income persons from moving between provinces in search of better job opportunities. Cavalleri, Luu and Causa (2021[60]) highlight that the decentralised nature of Canada’s welfare system reduces the responsiveness of internal migration to labour market shocks due to the implicit costs of limited benefit portability. Similar concerns arise in relation to the transferability and accrual of occupational pension entitlements across provinces. Evidence suggests that enhancing the portability of social protection – e.g. through harmonised rules or nationally co‑ordinated benefit entitlements – could increase labour reallocation efficiency and reduce lock-in effects (Causa, Abendschein and Cavalleri, 2021[61]).
Childcare availability and affordability as a barrier to mobility
The availability and affordability of childcare can pose significant barriers to interprovincial mobility, particularly for families with young children. While the Canada‑Wide Early Learning and Childcare (CWELCC) initiative has lowered average fees and aims to reach USD 10/day, on average, by 2025‑2026, substantial variation in both availability and affordability remains between provinces and territories as well as between different locations within them. In large, high-productivity urban centres such as Toronto and Vancouver, high fees and long waitlists can deter families from relocating, even when better job opportunities exist. In rural and remote areas, the primary challenge is limited access to licensed care, especially for low-income, indigenous, and immigrant households. These geographic disparities can reduce parents’ willingness to move and hamper the efficient matching of workers to jobs. Addressing these barriers – by expanding affordable, high-quality childcare across all regions – can support not only labour mobility and aggregate productivity but also improve labour force participation, particularly among mothers (IIRP, 2022[62]; CCPA, 2023[63]; Thomas, 2024[64]).
Job mobility is important not only because it can promote a more efficient allocation of jobs across firms that differ in their productivity but also by bringing about structural transformation and avoid persistent labour shortages in expanding sectors.
The implications of structural change for productivity growth depend in part on the extent to which it is driven by supply factors (e.g. Artificial Intelligence), demand factors (the impact of ageing on the demand for personal services) or policy (e.g. carbon prices, trade tariffs). While structural change due to technological progress is generally efficiency-enhancing, this is not necessarily the case for demand or policy-driven structural changes. The increase in the demand for personal services in the context of an ageing population, for example, tends to depress productivity as providers of personal services are often characterised by low capital intensity and labour productivity. Policy-driven structural changes may also reduce productivity. For example, reducing greenhouse gas emissions by 40‑45% below 2005 levels by 2030 will require a shift in employment from energy extraction industries, which are among the most productive given the high level of capital intensity, towards less polluting activities, reducing aggregate productivity and increasing the risk of job loss. Similarly, the increase in US tariff on imports from Canada is likely to engender a shift from industries that are strongly reliant on US imports to other industries, which could reduce overall productivity and increase the risk of job loss.
This section presents recent evidence on the consequences of job loss in energy-extraction industries and industries reliant on US imports and discusses how policies can support displaced workers in those industries. The policies discussed in this section mainly serve social policy objectives, and in doing so, may help sustain broad-based public support for a policy agenda focussed on growth and decarbonisation, while at the same time support worker transitions from declining to expanding activities. In addition to policies that support displaced workers, this section also briefly discusses the role of work-sharing (“job retention”) schemes that seek prevent job displacement, but should do so, without undermining structural transformation (Box 4.6).
Job retention schemes (e.g. short-time work, furlough, wage subsidies) can be an effective tool to preserve jobs in firms experiencing a temporary decline in activity due to external factors such as the global financial crisis or the COVID‑19 crisis (OECD, 2021[65]). However, the use job retention schemes can be counterproductive when used to preserve jobs in firms with structural difficulties, as this will impede efficiency-enhancing job reallocation and structural transformation (OECD, 2018[66]).
In response to the threat or potential realisation of tariffs on imports from the United States from Canada, Canada introduced Work-Sharing special measures to support affected firms and workers. The special measures increased the maximum duration of support and expanded eligibility for firms and workers. To the extent that the export shock is temporary, these measures can help to preserve valuable firm-specific human capital and prevent scarring effects due to job displacement. However, it is not clear to what extent the export shock is temporary and there is a need to make structural adjustments to re‑orient production to other markets. It therefore makes sense to build safeguards into work-sharing to support job transitions.
Several European countries operate specific job retention schemes that are intended to support company restructuring by promoting training and job search while preventing job displacement. The example of Spain is particularly interesting (OECD, 2024[67]).
In 2021, Spain undertook a major reform of its job retention scheme (ERTE). The reform introduced two new ERTE types that can be activated during (i) cyclical economic downturns or (ii) sectoral transformations requiring significant labour reallocation. Both are triggered through a government-approved national collective agreement under the RED mechanism, which simplifies procedures and grants social security contribution exemptions. Cyclical and sectoral ERTE offer a 70% replacement rate and can run for up to one year, with sectoral ERTE eligible for two additional six‑month extensions.
Sectoral ERTE are designed to support structural reallocation by linking contribution reductions to workers’ participation in (partly subsidised) training and to companies implementing mobility plans to help workers transition to new jobs. Unlike training under other ERTE, which is job-specific, training in sectoral ERTE can be broader to facilitate moves across sectors. A dedicated RED Fund finances benefits, contribution exemptions and training. The mechanism was activated in December 2024 to support the automotive sector’s shift to electric and sustainable mobility, requiring firms to develop detailed retraining plans aligned with new skill needs.
Source: OECD (2024[67]), Preparing ERTE for the Future: An Evaluation of Job Retention Support in Spain During the COVID-19 Pandemic, https://doi.org/10.1787/a70bf8ec-en.
4.5.1. Displaced workers in energy-extraction industries and industries dependent on US imports tend to be hit particularly hard
Mass layoffs in energy-extraction industries and industries reliant on US imports yield large and persistent earnings losses among displaced workers and these are significantly larger than for workers who are displaced from other industries (Figure 4.6Figure ).10 The difference is particularly pronounced for displaced workers in energy-extraction industries (Panel A) and women in industries dependent on US imports (Panel D). Six years after displacement, the earnings losses of workers displaced in energy-extraction industries are almost twice as large as for displaced workers in low emission industries (27% versus 14%).11 These findings resonate well with previous evidence by Chen and Morisette (2020[68]; 2020[69]). A qualitatively similar pattern is observed in other OECD countries, although the difference between displaced workers in energy extraction and low emission sectors tends to be smaller (Panel B). Similarly, displaced workers, particularly women, in industries dependent on US imports tend to incur substantially higher earnings losses in the first three years following job loss (they are not statistically different beyond this point). Further analysis indicates that displaced workers in industries dependent on US imports are also more likely to move to lower quality firms in terms of wages, union coverage and employer-sponsored pension plans (Mehdi and Frenette, 2025[70]).
Percentage earnings losses due to job displacement in energy-supply industries and low emission industries in Canada and selected OECD countries
Note: The figure plots the difference in earnings between displaced workers and their matched counterparts (normalised with respect to t=‑2) and the corresponding 90% confidence intervals. Other OECD countries: simple average across Australia, Austria, Denmark, Estonia, Finland, France, Germany, Hungary, Italy, the Netherlands, Norway, Portugal, Spain, Sweden.
Source: Barreto et al. (2024[71]), “The “clean energy transition” and the cost of job displacement in energy-intensive industries”, and Mehdi and Frenette (2025[70]), “The impact of layoffs on labour market outcomes of workers in industries dependent on United States demand for Canadian exports. Government of Canada”.
4.5.2. Policies to support displaced workers
Policies that support displaced workers find suitable jobs not only help to alleviate hardship but can also help sustain broad-based public support for a policy agenda focussed on growth and decarbonisation, while supporting structural transformation.12
Consider complementing unemployment insurance with temporary and targeted wage support
In most OECD countries workers are insured against income shocks due to the temporary loss of employment following displacement through a combination of income support schemes, such as unemployment insurance and social assistance, and mandatory severance pay. The latter can be especially important for older workers who often bear some of the largest earning losses. In Canada, most displaced workers with stable work histories have relatively good access to income support through Employment Insurance (EI) whilst they look for new jobs. It is paid after exhausting severance pay, which may be given instead of providing notice and receiving regular pay until the end of the notice period. The minimum contribution requirements for benefit eligibility and the maximum duration of benefits depend on the regional unemployment rate. This reflects the fact that in regions with high unemployment the expected duration of unemployment tends to be longer, increasing the likelihood that benefits are exhausted before finding another job is found. In high unemployment regions, job stability may also be lower, reducing the likelihood that displaced workers are eligible for benefits. The returns to job search may also be lower due to the stronger competition for job vacancies among jobseekers, reducing concerns about the possible adverse effects of EI on the intensity of job search (Landais, Michaillat and Saez, 2018[72]; Landais, Michaillat and Saez, 2018[73]).
Temporary wage support schemes – sometimes referred to as wage insurance – can be a useful complementary tool for compensating wage losses of displaced workers from high-wage industries (e.g. energy extraction, export industries), while increasing the incentives for job search and the take‑up of job offers. Wage supplement schemes (partially) cover the difference between pre‑displacement and re‑employment wages, typically on a temporary basis (OECD, 2024[74]). As such, it can increase job search incentives and reduce reservation wages and may be particularly effective in speeding up re‑employment. The main example of such a scheme is the Trade Adjustment Assistance programme in the United States which targeted trade‑displaced older workers (Box 4.7). A recent evaluation by Hyman et al. (2024[75]) suggests that it led to higher cumulative earnings over the four years following displacement by significantly speeding up re‑employment. As a result, it essentially paid for itself through reduced expenditures on UI and increased tax receipts. However, wage support schemes also have raised concerns related to the risk of locking workers in low-productivity jobs, with potentially adverse effects for productivity-enhancing job reallocation (Cahuc, 2018[76]; Parsons, 2023[77]),13 as well as fairness, because it tends to be most relevant for displaced workers from high-wage sectors.
Canada could consider introducing a time‑limited wage support scheme for older workers for whom finding another job tends to take most time and wage losses tend to be most pronounced. To limit concerns about efficiency-enhancing job reallocation, it should be provided on a temporary basis, as in the case of Employment Insurance. To allow gathering additional evidence on its effects, including in relation to productivity, it could initially be implemented on a limited scale by targeting it to displaced workers in energy-extraction industries and industries reliant on US imports or regions with a high concentration of such activities. Such a targeted scheme would also limit its potential costs, while still providing a strong signal that concerns about the increased risk of job displacement as a result of the transition to a net-zero economy and the increase in tariffs are taken seriously. Yet, limiting wage support to workers displaced in certain sectors or regions may seem arbitrary and could raise issues of fairness. There may be a case therefore for extending wage support schemes to other sectors and regions at a later stage. This case will be stronger if there is evidence that the scheme is effective in speeding up the return to employment without undermining productivity-enhancing job reallocation.
United States: Reemployment Trade Adjustment Assistance
To help workers who lost their job due to increased international trade and to foster public support for globalisation, the United States introduced Trade Adjustment Assistance (TAA) in 1962, running until 2022. While primarily covering costs of retraining programmes and offering extended UI benefits, a wage insurance programme entitled Reemployment Trade Adjustment Assistance (RTAA) was introduced in 2009. It aimed at mitigating the financial implications of job displacement while also encouraging and expediting reemployment (Hyman, Kovak and Leive, 2024[75]).1
Under the RTAA, TAA-certified workers aged 50 or older with pre‑tax re‑employment earnings up to USD 50 000 were eligible to receive a supplement to 50% of the wage difference with their previous job. These benefits were capped at USD 10 000 and paid for a maximum of two years from the date of re‑employment or the end of state‑funded UI entitlements (26 weeks, in most states). Participation rates were relatively low, with about 30 000 workers receiving wage insurance benefits between 2009 and 2021 (Hyman, Kovak and Leive, 2024[75]).
Recent evidence shows that RTAA- eligibility increased the speed of re‑employment, while resulting in higher cumulative long-run earnings, particularly through faster re‑employment. At the same time, there is no evidence that the quality of re‑employment job is worse for RTAA-eligible workers. Because the estimated fiscal externalities of the programme in terms of reduced UI-expenditure and increased tax receipts exceeded wage insurance payments, the net costs of the programme were found to be positive, i.e. the programme yielded a net benefit to the government (Hyman et al., 2021[78]; Hyman, Kovak and Leive, 2024[75]).
Germany: Entgeltsicherung (Wage Security)
Aiming to ease the transition of displaced workers back into employment, the German Entgeltsicherung (Wage Security) programme was in place between 2003 and 2011, targeting unemployed workers aged 50 or above with a minimum remaining UI benefit entitlement of 120 days. Beneficiaries received 50% of the net wage differential to their prior earnings in the first year of re‑employment and 30% in the second year.2 Moreover, pension insurance contributions were topped up to 90% of the contribution paid on the prior salary (Dietz et al., 2011[79]).
The uptake of the scheme was relatively low, in part owing to limited efforts by the public employment services to promote its use. For example, between 2003 and 2006, fewer than 10 000 workers received wage insurance payments, most of which were prior high-income earners. Likely due to the low initial take‑up, the main evaluation of the programme in 2005 found no significant effects on re‑employment (Brussig et al., 2006[80]; ZEW/IAB/IAT, 2006[81]). However, before the programme expired, take‑up substantially increased, peaking at 20 000 participants in 2011 (Stephan, van den Berg and Homrighausen, 2016[82]).
France
Since 2011, France’s contrat de sécurisation professionnelle (job security contract) is accessible to workers laid off for economic reasons in companies with up to 1 000 employees (or those in reorganisation or liquidation proceedings), and offers a maximum of 12 months of full compensation of lost wages, capped at 50% of their remaining entitlements to UI benefits (Cahuc, 2018[76]). It has been shown to lead to somewhat faster re‑employment and more stable employment relations (DARES, 2021[83]).
1. Between 2002 and 2009, the United States piloted the Alternative Trade Adjustment Assistance (ATAA), which, compared to the RTAA, had tighter eligibility criteria and lower take‑up rates (Hyman et al., 2021[78]).
2. The wage difference had to be at least EUR 50 and re‑employment wages were required to be at least at tariff wage level (local customary wages if the company is not subject to a collective agreement) while the employment relationship must have been subject to social insurance contributions (Dietz et al., 2011[79]).
Source: OECD (2024[74]), OECD Employment Outlook 2024: The Net-Zero Transition and the Labour Market, https://doi.org/10.1787/ac8b3538-en.
Promote the use of early interventions before dismissal take place
Early interventions during the notice period before dismissal takes place can be particularly effective in reducing the cost of job displacement (OECD, 2018[84]). Early interventions can help to prevent displacement by facilitating job-to-job transitions before displacement takes place, reduce its costs by speeding up the return to work and promote better job matches and productivity. Canada has a well-developed system for providing rapid support to displaced workers in the event of mass layoffs. However, providing early support to individual dismissals is more challenging.
The provision of support to workers involved in mass layoffs in Canada is based on a combination of employment protection rules for collective dismissal, local structures for the provision of support services, and additional federal initiatives. Advance notice requirements to the public authorities in the event of collective dismissals allow intervening before displacement takes place (OECD, 2015[85]). The period for advance notice varies between 4 to 18 weeks depending on the province and the number of dismissed workers. In all provinces, except for Prince Edward Island, employers must also notify their respective labour authorities about collective dismissals, and in some jurisdictions, a copy of notice must be given to employee representatives.14 Depending on the jurisdiction, employers may be mandated by law or ordered by the government to establish a planning committee to support displaced workers or local communities. This may involve providing information about the availability of employment services, directly providing employment services to displaced workers (through e.g. Action Centres in Ontario or a Comite d’aide au reclassement in Quebec) or mobilising local stakeholders to support local communities. The Canada Retraining and Opportunities Initiative provides additional federal funding to support workforce planning and skills development in communities significantly impacted by a mass layoff.15 Employment and Social Development Canada has reserved USD 30 million over two years (2024‑2025 and 2025‑2026) to support communities and workers affected by unforeseen economic events.
Adopting a similarly structured approach in the case of individual dismissals is more challenging. One issue specific to Canada is that employers can choose to provide severance pay instead of providing advance notice and paying regular wages until the end of the contract. In some OECD countries, notice needs to be given to labour authorities even in the case of individual dismissals, allowing for the public employment service to reach out and offer their support to those who need it. The absence of an advance notice requirement to the public authorities means that in most cases employment services will only be provided once displaced workers register for Employment Insurance after exhausting severance pay. A possible solution could be to require employers to immediately provide notice to workers and the local labour authorities in the case of dismissal or to replace severance by advance notice. The public employment service could then reach out via an automated message to inform the worker about the availability of employment service in their jurisdiction. Such a system however would require delinking the provision of employment services from Employment Insurance as recommended by OECD (2015[85]). This is already the case in some countries. For example, Switzerland’s Viamia programme offers free career guidance to employed workers aged 40 and over to identify development opportunities and support job transitions (cf. Chapter 3).
Explore the use of statistical profiling to enhance the targeting of costly interventions to support displaced workers in their job search
Canada has a well-developed system of active labour market policies to support job-finding among displaced workers and unemployed individuals more generally. The Labour Market Development Agreements (LMDA) represent the main federal funding source for active labour market policies in provinces and territories. They finance services to support job search, training programmes to foster employability, as well as hiring subsidies and direct job creation to foster employment opportunities. Additional federal funding is available for harder-to-help jobseekers through Workforce Development Agreements (WDAs). Provinces and territories may also supplement federal funding with their own provincial programming. Altogether federal active labour market spending in 2019, excluding the WDAs, represented just over 0.2% of GDP, which placed Canada in the bottom half of spending among OECD countries. In recent years, significant efforts have been made to assess what works well using rigorous evaluations based on administrative data (OECD, 2022[86]). Statistical profiling tools represent another complementary approach for fostering cost-effectiveness. Based on statistical models, profiling tools can enhance the targeting of costly interventions at jobseekers most at risk of becoming long-term unemployed and help tailoring interventions more closely to the needs of individual job seekers (Desiere, Langenbucher and Struyven, 2019[87]). In principle, this could help overcome challenges related to limited funding and the need for a better identification of programme participants (ESDC, 2022[88]).
The Job Seeker Assessment Framework has been developed to support the delivery of Workforce Australia employment services. It provides an overarching structure that brings together the full range of assessment processes, tools, and resources available to individuals using online services and to providers delivering employment assistance. Providers will use the Framework, alongside their professional expertise and knowledge of local labour markets, to deliver targeted support to individuals with more complex needs.
The Framework consists of two components: the Job Seeker Snapshot and the Employment Services Assessment.
The Job Seeker Snapshot. The Job Seeker Snapshot is the first assessment an individual completes after claiming income support. It is a questionnaire designed to gather information about a person’s circumstances, job search confidence, strengths, and ability to use online services. It includes questions that generate a Job Seeker Classification Instrument (JSCI) score, which determines the individual’s risk of long-term unemployment and their servicing eligibility. This information can also help guide an individual’s choice of service and shape ongoing support requirements. Once an individual is referred into a service, the Job Seeker Snapshot can be updated whenever their circumstances change. Updates may be made by a provider, Services Australia, or the individual through their online account (with support from the Digital Services Contact Centre if needed).
Employment Services Assessment. The Job Seeker Snapshot may indicate if an individual requires further assessment through an Employment Services Assessment (ESAt) (Service Australia). Individuals may also be referred for an Employment Services Assessment by Centrelink, or by an Employment Services Provider. An Employment Services Assessment is a comprehensive assessment undertaken by Health or Allied Health Professionals, in Services Australia, to determine an individual’s ability to work and their work capacity. These could include personal or vocational issues or a long-term reduced work capacity. The Employment Services Assessment is used to determine the most appropriate type of servicing for the individual and the type of work they may be suitable for.
Source: Australian Government, Department of Employment and Workplace Relations, https://www.dewr.gov.au/job-seeker-assessment-framework.
Canada’s productivity growth depends critically on the economy’s ability to reallocate workers from declining to expanding firms and industries. The renewed will and initiatives from the Federal and Provincial/Territorial Governments are an important step forward. The Canadian Government has built momentum to address the productivity challenge through several newly proposed legislative measures. This chapter has identified key policy areas where targeted reforms can enhance workforce flexibility and support productivity-enhancing job mobility. However, the effects of these reforms will not materialise fully if they are not accompanied by demand-side measures that stimulate job opportunities towards high productivity firms and industries.
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← 1. The positive correlation remains when using the share of the component that is associated with job reallocation.
← 2. In Canada, wage‑fixing and non-poaching agreements between employers are illegal since 2023. For more information please see Wage-fixing and no-poaching agreements are illegal in Canada.
← 3. https://nationalmagazine.ca/en-ca/articles/law/business-corporate/2023/non-competes-what-are-they-good-for.
← 4. Gradual improvements have been underway since the 1994 Agreement on Internal Trade (now CFTA), culminating in the 2007 amendments by Provincial and Territorial Premiers that shifted Canada from negotiated mutual-recognition agreements towards automatic recognition across jurisdictions, though challenges remain.
← 5. https://www.pm.gc.ca/en/news/statements/2025/06/02/first-ministers-statement-building-strong-canadian-economy-and-advancing-major-projects.
← 6. Deslauriers et al. (2025[90]) argue that regulatory barriers to geographical mobility are relatively unimportant from a productivity perspective and attention should focus instead on investing in infrastructure to reduce effective geographical distances.
← 7. The Provincial and Territorial Premiers have committed recently to review Chapter 7 of the CFTA on labour mobility to provide regulators with more specific guidance on applications. Also, each province and territory would review existing exceptions allowed and notified under Chapter 7 ensure automatic or better recognition where warranted.
← 8. The federal government committed initially CAD 13 billion toward BCH, within a broader CAD 25 billion housing investment over five years.
← 9. According to the February 2025 Labour Force Survey, 73% of respondents unwilling to relocate cited personal or family-related reasons, 5.3% of those not willing to move indicated this was mainly because of financial reasons, while a further 2.2% indicated this was mainly because of high housing costs elsewhere (Statistics Canada, 2025[57]; Morissette, 2017[58]).
← 10. Agriculture, forestry and fishing are excluded from the analysis due to their seasonal nature. The present analysis instead focusses on workers who are displaced as a result of structural change.
← 11. The effects of job displacement may be understated due to the focus on mass layoffs events, consistent with most of the previous literature. However, in a recent study for Canada, Birinci et al (2023[89]) show that mass layoff often represents a combination of voluntary and involuntary separations. Isolating workers who are involuntarily displaced due to mass layoff would result in even larger earnings losses.
← 12. This section draws notably on OECD (2015[85]) and OECD (2024[74]).
← 13. One way to address this may be to condition wage insurance on training.
← 15. The initiative is delivered through the Community Workforce Development Program, a skills development programme that puts communities in charge of their economic destiny (see Chapter 3).