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Policy Challenge

The Covid-19 pandemic exposed and deepened socio-economic inequalities, impacting vulnerable communities with a particular intensity and severity. In the aftermath of the pandemic lingers a necessity and urgency for states and policymakers to incorporate Diversity, Equity, and Inclusion (DEI) principles in all efforts of economic development to ensure that society’s most vulnerable communities are not further disadvantaged by their socio-economic positionality.

Traditional forms of economic development and growth strategies have failed to consider broader conceptions of welfare, quality of life, inclusion, and inequality. Without these considerations, economic inequalities have been exacerbated, particularly for groups that face additional barriers to economic development. This has ultimately hindered the full participation of underrepresented groups in the economy.

As one of the seven RDAs across Canada with a mandate of promoting Quebec’s long-term economic development, particularly in small and rural communities, CED is ideally situated to bring a DEI-focused approach to their economic growth efforts.

In this regard, the central policy challenge underlining this policy brief from CED seeks to better understand and address these issues by asking ‘What are leading development models incorporating diversity, equity, and inclusion, and how might they guide CED’s interventions to revitalise communities?’. The policy challenge is centred around two selected regions in Quebec experiencing slow economic growth which are the Regional County Municipalities (RCMs) of Beauharnois-Salaberry and Montcalm. The two main objectives of the policy challenge are:

1. Identifying relevant Regional Economic Development (RED) models with DEI dimensions that are currently in practice or emerging in Canada and/or internationally; and
2. Recommending policies based on how one or more of these models (or a combination thereof) might be applied to promote RED in two selected devitalized Quebec regions.

Overview: Applying Principles of DEI in Regional Economic Development

Diversity, Equity and Inclusion (DEI) are principles that stem from fundamental ideas of social justice and human equality. The principles of DEI are broadly intended to address and mitigate the challenges faced by disadvantaged individuals and communities of underrepresented and marginalised identities. DEI strives to achieve equality in outcome by accounting for and celebrating differences in identity and using targeted approaches to ensure that environments are inclusive to those historically or presently marginalised from mainstream society.

Employing principles of DEI in economic development reduces barriers to participating in and benefiting from economic development as faced by population sub-groups. CED has identified these underrepresented sub-groups of the population based on Statistic Canada definition: Black, Indigenous, 2SLGBTQI+, members of official language minority communities, newcomers to Canada and immigrants, people with disabilities, racialized communities, women, and youth. Data from the RCMs and stakeholders’ consultations showed the necessity to expand the DEI groups to include individuals with low levels of educational attainment, individuals in lower income brackets and seniors aged 65+. From here on this expansion will be known as “Groups with Barriers to Economic Participation (GBEP).

Regional Economic Development Frameworks with DEI Principles

Policymakers and researchers often rely on economic development models to guide their initiatives, which provide tried-and-tested methods of generating economic growth. This brief uses regional economic development models that incorporate DEI principles, and are applicable to RCM contexts to guide policy recommendations.

This policy brief refers to the following RED frameworks, which were used to guide the proposed policy recommendations:

1. Place-Based Economic Development
2. Doughnut Economics
3. Main Street Approach to Economic Development
4. People Centred Economic Development
5. Inclusive Growth Framework
6. Collaborative Economic Development Model

Barriers and Opportunities in Both RCMs

In order to recommend regionally tailored policies for DEI-focused economic development, extensive research and stakeholder consultations were conducted to understand the current barriers to economic development in the chosen RCMs. This process revealed the following key insights which have been used to inform the policy recommendations in this brief:

1. A lack of accessible and affordable housing and transport is stunting regional economic development and disproportionately hindering specific disadvantaged demographics from participating in the economy (newcomers, immigrants, youth, people with disabilities, lower income, etc.)
2. The social economy sector is a valuable and viable resource for inclusive economic growth that warrants further investment.
3. The chosen RCMs have a diminishing supply of labour due to youth leakage and an ageing population.
4. Certain disadvantaged demographics face additional barriers to becoming entrepreneurs, which is contributing to the low level of entrepreneurship in the RCMs and in Quebec at large.
5. CED’s current funding eligibility for programs may exclude important local industries that can be a potential avenue for DEI focused economic growth.
6. There is a need for economic diversification, to create resilience and incorporate DEI values in the form of inclusive economic growth.

Recommendations

1. Transport and Housing

A lack of accessible and affordable transport services and housing hinders economic growth in both RCMs by limiting the recruitment and retention of employees and generating additional costs for the businesses These costs are not covered by any of CED’s funding programs, indicating that they are not recognised as vectors of regional economic growth.

The lack of affordable and accessible housing supply is a DEI issue since it has a much greater impact on people with disabilities, newcomers, people with low incomes, youth, and the elderly. Transport also has an impact since owning a private vehicle is often infeasible for lower income individuals due to financial constraints.

The Doughnut Economics and the Place-Based approach are two RED frameworks incorporating a DEI perspective that might guide CED’s recognition of housing and transports as vectors of economic development. Keeping in mind that CED cannot work on the supply of housing or transport, the recommendations are as follows:

• Recommendation 1.1: CED should extend eligible expenses to cover partial or full costs incurred by SMEs in the housing and/or transportation of their employees
• Recommendation 1.2: CMHC should set up a roundtable discussion (table de concertation) to which all RDAs similar to and including CED would be invited to join. In order to be adequately prepared to be part of this table, CED should further investigate the link between regional economic development, housing/transportation, and DEI.

2. Social Economy and Enterprises

As identified through extensive research and consultations, a significant and ongoing barrier to economic development in both RCMs is a small and diminishing labour force. This is due to the outflow of working-age residents to city-centres and the transitioning of an ageing population out of the workforce and into retirement. The labour shortage hinders economic growth in the regions by limiting business growth and increasing labour costs.

Two priorities have emerged to address the labour shortage: to retain working-age residents in the RCMs, and to attract newcomers to work and reside in the regions. Both priorities require incentives of quality of life, as accounted for in the Inclusive Growth Framework. This framework expands the traditional economic indicators to encompass social and economic inequalities, sustainability, and most importantly, quality of life.

The sector best-suited to enhance the quality of life offered in the RCMs while bolstering the economy is the social economy, driven by social enterprises. Instead of a profit-driven objective, the purpose and success of social enterprises is measured by their social impacts. The policy recommendations propose that CED:

• Recommendation 2.1: Develop separate funding stream specifically for social enterprises;
• Recommendation 2.2: Create a long-term strategy to identify and strive towards specific objectives for social enterprises to thrive in the two regions; and
• Recommendation 2.3: Hire a full-time employee to manage the support of social enterprises.

3. Inclusive Entrepreneurship Strategy

Quebec is currently struggling with low levels of entrepreneurship and enterprise creation, and Montcalm and Beauharnois-Salaberry are no exception. Low levels of entrepreneurship slow economic growth, while new enterprise creation diversifies the economy, increases innovation and productivity, and generates employment.

Socially excluded and underrepresented groups face additional barriers to entrepreneurship due to a myriad of socio-economic factors such as lower rates of education and opportunity. Thus, entrepreneurship is a feasible avenue for GBEP to meaningfully enter the labour force through self-employment.

To raise levels of entrepreneurship and reduce the barriers faced by certain groups in becoming entrepreneurs, this report puts forward policy recommendations based on the People Centred Economic Development (PCED) model as the guiding RED framework.

The policy recommendation proposes that CED create a new strategy termed as ‘Inclusive Entrepreneurship’ for individuals from GBEP groups to ensure that they are equipped with the skills and resources to build and run successful enterprises. The two main components of this proposed entrepreneurship strategy include:

• Recommendation 3.1: Funding for prospective entrepreneurs from GBEP groups pitching strong business venture ideas;
• Recommendation 3.2: Entrepreneurial Capacity Building programs aimed at helping prospective entrepreneurs build the skills needed for running a successful business.

4. Recruitment and Capacity Building

The cost eligibility of many of CED’s current funding programs is restricted to the operational costs of businesses, and fails to cover the costs of recruitment or on-the-job professional development of employees. Research shows that SMEs face barriers to effective recruitment of viable employees as well as the provision of on-the-job training due to financial and time constraints.

Informal processes of hiring have a negative impact on the recruitment of GBEP groups that resulting in lower workforce diversity. A lack of on-the-job training has a negative impact on employees’ skill development and creates a job-skill gap in the market. Additionally, training is necessary for those with low levels of educational attainment, seniors, and newcomers and immigrants to acquire and upkeep the skills required in a rapidly evolving labour market.

Using the PCED RED framework, this report recommends that:

• Recommendation 4.1: CED extends eligible costs within their funding programs to include third-party recruitment and training costs incurred by SMEs

5. Industry and Client Eligibility

An overview of CED’s 12 subprograms suggests that the eligible clients and industries may have a predominant focus in science, technology, manufacturing, and industrial sectors. From a DEI standpoint, low-pay jobs usually tend to be in accommodation, food and information services, and culture and recreation, and these roles are more likely to employ groups that face additional societal barriers and challenges to their economic development, like women, youth, seniors, visible minorities, persons with disabilities, and immigrants. In contrast, jobs in science, technology, manufacturing, and industrial sectors have and continue to be male-dominated, and the majority of small business owners are Canadian-born men, who are not members of visible minorities.