Federal budget 2024 : Mercer’s response 

On April 16, 2024, the federal government tabled its budget entitled “Fairness for Every Generation.”

The federal government addressing intergenerational challenges should be no surprise to Canadian business leaders, who are also juggling multiple generations’ different working preferences, health needs, artificial intelligence (AI) adoption, financial wellness concerns and retirement readiness levels. While government assistance in improving the well-being of Canadians is welcome, the details matter - because when the government invests, your organization will feel the effects.

The 2024 budget included few additional details on the Pharmacare initiative other than reinforcing that the intent is not to replace, but enhance, existing provincial and territorial supports. Although the 2024 budget takes one step towards the single payer system promised, with an allocation of $1.5 billion to support phase one of implementation over five years, many steps remain: the Canada Drug Agency must be built up, a national formulary must be developed (with a subset of diabetes drugs and contraceptives covered at launch), negotiations with provinces and territories must take place, and much, much more funding must be secured. And the questions around how the proposed Pharmacare program will integrate with private plans remain.

The federal government continues, as it has in prior budgets, to support diversity and inclusion with initiatives for women’s health, caregivers, as well as increased mental health support for youth, people with disabilities and Indigenous peoples. Mercer welcomes this focus as our research shows many Canadians are looking for more support from their governments and their employers. 

Canadian employers should take note of this budget’s commitments to fulfilling a person’s individual health and wellness needs, as it reflects the sentiment of Canadians, and invest accordingly. And for the near to medium-term, they should consider making investments in their employer-sponsored programs, aligned with government commitments, to mitigate health risks and support employee health and productivity. There are still gaps in the current social systems and there is a long road ahead on public Pharmacare.

Canada’s lagging productivity is much remarked-on. To reverse this trend, the federal government has earmarked $2.4 billion to invest in Canada’s AI sector - bolstering Canadian startups, helping Canadian companies access computational power, and helping existing Canadian businesses deploy AI solutions to make their enterprises more efficient.

We support these investments. AI technologies will not replace human workers. Rather, they will be critical to unleashing every employee’s abilities - “augmented intelligence,” as opposed to artificial intelligence.

But as we wrote in this year’s Global Talent Trends report, the way these technologies are implemented matters. Achieving productivity gains requires new ways of working, with a digital-first approach to how decisions are made, how productivity is measured, and in which humans and machines do not compete, but collaborate for the organization’s success.

This requires more than deployment of technology. It requires substantial investments in upskilling. We are encouraged by the 2024 budget’s investments in youth technology skills training, to ensure that tomorrow’s workforce is equipped with the skills necessary for tomorrow’s jobs.

The 2024 federal budget reiterated the announcement made in the 2023 Fall Economic Statement that the federal government wants to encourage Canadian pension funds to invest more in Canada. That announcement caused concern in the pension industry that restrictions on the investment of pension assets would be introduced to that effect. The 2024 budget announces the creation of a working group, led by Stephen Poloz and supported by Chrystia Freeland, that will identify priority investment opportunities for pension funds in various areas, including infrastructure and airport facilities. This working group will hopefully bring much-needed clarity on this initiative.

In addition, the budget also contained measures which will make the asset allocations of large, federally-regulated pension plans publicly available. This measure, which is described as a transparency measure, will reveal the extent to which Canadian pension funds are invested domestically and abroad.

A pension plan administrator is a fiduciary, and its sole responsibility is to ensure that the pension fund is able to meet future pension obligations to plan members. This means diversifying the fund assets both in terms of asset class, but also in terms of geography. While efforts to provide attractive domestic investments available to pension funds are welcome, efforts to pressure pension plans to invest in Canada despite their fiduciary responsibilities to their members are not.

Furthermore, the 2024 budget also contained technical measures of note related to the Canada Pension Plan - providing a top-up to the death benefit for certain individuals, improving children’s benefits and ending entitlement to a survivor’s benefit following a CPP credit split.

This budget is full of large top-line investments, but Canadian organizations will be most interested in the details. How will Canadian Pharmacare integrate with existing programs? How will it be delivered, and when? How can my organization best access funding to implement AI - and how can we implement it properly to increase our workforce productivity? What investments will be made available to Canadian pension plans?

In the year ahead, the government will be answering many of these questions - and consulting with industry along the way. Mercer will be monitoring these developments closely, so that when relevant changes are made, you will be the first to know.

As always, we remain committed to keeping you informed and helping you however we can. If you have questions about the options available to you, please click here to contact us today.