Editor’s Edition: Fixing the vulnerabilities exposed by COVID-19

The COVID-19 pandemic exposed many vulnerabilities across the institutions and industries key to our society, including long-standing structural challenges within the Canadian healthcare system. In the post-pandemic recovery, many of those challenges have not gone away and have, in fact, been exacerbated by severe staff shortages, particularly in Ontario, where several hospitals have had to close departments due to a lack of staff.

On this episode of Editor’s Edition, the Public Policy Forum’s Sean Speer and Yahoo Finance Canada’s Alicja Siekierska discuss the ongoing challenges in the healthcare system and how policymakers should address these issues.

“The emphasis on addressing these short-term challenges needs to be matched by a kind of similar level of ambition about the need to address these longer term, structural problems,” Speer said.

“We know that because of aging and demographics, the pressure on our healthcare systems is only bound to grow.”

They also discuss why re-shoring has yet to happen in Canada, why the government has fallen short on providing some basic services, and how airlines should be dealing with consumers when it comes to cancellations and delays.

If you have any policy-related questions, or feedback about the show, please email alicja@yahoofinance.com.

Video Transcript

ALICJA SIEKIERSKA: Welcome to "Editor's Edition." I'm Alicja Siekierska. On today's episode, Ontario's health care system is facing a severe staff shortage, with six hospitals closing departments over the weekend. We'll take a look at how the government plans on responding. And the COVID-19 pandemic resulted in global supply chain issues, prompting widespread calls for reshoring manufacturing.

But has that actually happened in Canada? We'll dig into how manufacturing has changed in the post-pandemic recovery. And as airlines continue to grapple with widespread delays, there are questions about what qualifies for a refund. We'll dig into flight compensation and what the government is doing about airport chaos.

And to get through all of this, I'm joined by Sean Speer. Sean is a Fellow in Residence at the Public Policy Forum and was a Senior Economic Advisor to Prime Minister Stephen Harper. He's here to help us dig through the policy issues shaping the post-pandemic recovery. Sean, welcome back to the show.

SEAN SPEER: Thanks, as always, Alicja.

ALICJA SIEKIERSKA: Now, over the weekend, several hospitals, as I mentioned off the top, across the province closed their emergency departments due to severe staffing shortages. And shortly before we started recording, the Ontario government actually delivered its speech from the throne where this was discussed and the health care system and how to address it. So here's what the lieutenant governor had to say about the issues facing Ontario's health care system.

- Your government is actively engaging with health system partners to identify urgent, actionable solutions, and will implement whatever measures are needed to help ease immediate pressures, while also ensuring the province is ready to stay open during any winter surge.

ALICJA SIEKIERSKA: It's clearly a challenge that was acknowledged within the speech on Tuesday. So, Sean, what do you make of the situation that Ontario's health care system is facing right now?

SEAN SPEER: Well, Alicja, this is a topic that we've covered on this program for a long time, which is the extent to which the pandemic exposed longstanding structural challenges within health care systems, really across the country. And it seems like that's sort of come to a head in Ontario in the past several days.

You mentioned hospitals closing their emergency departments over the weekend. My son was born at the Montfort Hospital here in the Ottawa area. And it's one of the hospitals, for instance, that closed its emergency rooms from 7:30 PM on Saturday night to 7:30 AM on Sunday morning, which, in a way, really draws attention to this major problem that's been brewing for some time, but, obviously, exacerbated by the pandemic.

I liked, in a way, what I heard from the LG today as part of the Ontario government's speech from the throne. But I would just caution that the emphasis on addressing these short-term challenges has to be matched by a kind of similar level of ambition about the need to address these longer term structural problems. Yes, of course, things are more acute in the immediacy of the post-pandemic period. But we know that because of aging demographics, pressure on our health care systems is only bound to grow.

So I guess that's a long way of saying it's about time we're hearing from governments, not just in Ontario, but elsewhere, that they understand the supply-demand problems. But it seems to me it's going to require more than a short-term push if we're going to ensure that not just that these emergency rooms reopen in the short-term, but that they're actually capable of serving patients over the long-term.

ALICJA SIEKIERSKA: Yeah, I think, as you mentioned, that the COVID-19 pandemic really highlighted how vulnerable our health care system was to a surge in demand. It's the main reason why so many regions had to go into lockdown was to maintain that hospital capacity and ICU beds because of the spike in cases that we were seeing over the last two years.

And so what do you think it shows that even as we're out of this and that we're not facing the same kind of ICU strain and COVID severity, necessarily, as we were in kind of the peak of the pandemic over the last two years, that we are still facing issues within our health care system? How do you think the government needs to begin to address these kind of different issues here?

SEAN SPEER: Well, there are so many ways to respond to that question. But let me focus on one in particular, which is sort of intuitive. There are many ways in which our system at present has supply problems.

Viewers will be familiar with our lack of ICU beds, which, you know, I think people didn't fully appreciate before the pandemic. People will no doubt be familiar with the lack of MRI machines and other medical technologies that result in long wait times for patients before and now after the pandemic. But a major supply issue is actually people.

We have health care human resource shortages really across the system that were bound to occur even before the pandemic because of aging demographics, but have been exacerbated because of the toll the pandemic has imposed on health care professionals, including doctors, nurses, and others. And so the focus on bricks and mortar will be important. We need more beds, more technology, more, more, more.

But we need to make sure that we have the people to provide services, really, across the health care system, from the hospitals themselves to long-term care, and in-home care. As our population gets older and more people choose to try to age at home, it's going to create a whole new labor issue within our health care system.

So I guess it's a long way of saying in Ontario here, the government has been nodding to the need to accelerate credentialization for internationally trained health care professionals. Obviously, that's a big part of the puzzle. But I think we need to be asking ourselves, are we training enough health care professionals within our education system as well?

ALICJA SIEKIERSKA: And I think another aspect to it that we've seen particularly raised among the Ontario health care unions is this idea of burnout among staff-- that the last two to three years have really taken a toll on workers and that there are just many leaving the profession or having a hard time staying within it. So is that also something that the government should be looking at-- at retaining the existing staff that they have?

SEAN SPEER: Yeah, it's a great question. It's a kind of complicated one. Not because I don't think that health care workers do important work or shouldn't be recognized for the extraordinary contribution that they've made over the past 24 months and counting-- I think we all owe a great debt of gratitude to their contribution-- oftentimes, at the point of significant personal risk.

The challenge, Alicja, is that those retention considerations, including, of course, significant wage increases, are occurring against a backdrop of high inflation. And so I think one thing that governments are grappling with is how to recognize the sacrifice and contribution of health care professionals, try to address these questions around retention, while at the same time not creating something of a price wage inflation spiral in the short-term that undermines the efforts of the Bank of Canada to try to bring inflation under control.

It's not an easy solution, and certainly not an easy question. But it's one that I think we're going to hear more and more about in the coming weeks and months.

ALICJA SIEKIERSKA: Yeah. It's such a huge challenge. And as you said, not something that is necessarily new and has cropped up suddenly. And so we'll see what happens in the coming weeks and months, especially as we do see these staff shortages and how those will be addressed in the immediate term as well as the long-term.

Sean, another vulnerability that was exposed due to the unique circumstances of the COVID-19 pandemic was our global supply chain system. You'll recall that pandemic shutdowns laid bare how reliant many economies were on manufacturing from other countries, not only for products like cars and furniture, but for critical goods like PPE and vaccines.

And so it prompted many calls to reshore key manufacturing back to Canada. But a report from RBC says there's little evidence of supply chains actually coming back to this country. RBC Economist Josh Nye said that factory construction in Canada fell to a decade low last year, and manufacturing employment is relatively flat amid labor shortages.

Domestic production is only winning out over imports in areas where Canada has historically been very dominant-- things like wood product manufacturing and petroleum. And so, Sean, what do you think it says that as we're in this post-pandemic recovery, we talk so much about global supply chains, and building that resiliency, bringing things home, that not much has changed so far?

SEAN SPEER: Yeah, it's such an important topic. I'm glad we get to talk about it here today, Alicja. I think it's important to start from a clear understanding of why these domestic productive capacities have left in the first place. These weren't cases of markets malfunctioning, they were a case of markets doing precisely what markets do, which is to allocate investment and production in the most efficient way.

And so a reshoring agenda can't be passive. If left to its own devices, the market will continue to push that kind of production to lower cost jurisdictions. If, in effect, we decide collectively that there are certain types of production, including, as you said, vaccine production, that we want within our borders for strategic reasons or out of a sense of national interest, it's going to require the use of policy levers to push and prod the market to produce that outcome.

And so we haven't really-- we've seen rhetoric from politicians, including the Ontario government, about the need for reshoring. But that hasn't been matched with much of a policy agenda. And so I'm not surprised that we haven't seen a significant change in domestic production.

It's going to require action on the part of Ottawa and the provinces if that's something that we want. And I happen to think it's something we should be pursuing.

ALICJA SIEKIERSKA: Interestingly, as you said, the market forces would make supply chains potentially longer, push it to different areas. That's something that the report found that, if anything, Canada's supply chains have gotten longer in the post-pandemic world. Several Asian countries, including China, increased their share of imports into Canada at the expense of other countries, such as the US, and Mexico, and even the European Union. Is that surprising to you given how much the world's relationship has been shifting, particularly with China-- the fact that it seems there are more imports coming in from that country?

SEAN SPEER: Yeah, a bit. You know, if we were having this conversation 12 months ago or something like that and you would have told listeners and viewers that we'd be more dependent on China, not less 12 months hence, I suspect a lot of people would have taken that bet. And it just reinforces the need for policymakers to start to develop a coherent strategy around this question of reshoring.

There are no silver bullets of the lack of cliche. It's going to require action across a number of policy areas. You mentioned earlier, Alicja, the question of factory construction in Canada. One policy lever that's underestimated when we have these types of conversations about domestic manufacturing is accessibility of employment lands. You know, there's been so much focus in recent months on the need to increase residential housing supply in Canada to deal with high housing prices in and around our major centers.

And that is certainly something that policymakers ought to be pursuing. But on the other hand, if we want to pursue a credible reshoring strategy, we need to make sure that we're also designating land for employment, in general, and manufacturing production, in particular. If you talk to firms around the world about where they're choosing to invest, access to a predictable supply of employment lands is a major consideration.

So I guess that's a long way of saying, I think coming out of the pandemic, the need for a kind of clear, coherent strategy around reshoring seemed to be a broadly supported idea. And now the onus is on policymakers to translate that idea into an agenda that really touches on a wide range of policy areas, from land supply, to taxation, regulation, human capital, and so on.

ALICJA SIEKIERSKA: And so what areas should the government focus on reshoring? Because it's not easy to bring these supply chains home overnight. And so you'll have to prioritize specific areas. Which ones do you think that the government should focus on?

SEAN SPEER: That's the big question, isn't it? Because as soon as you start to talk about reshoring, on the grounds that certain productive capacities are strategic or critical, you're going to have every sector in the economy coming to the government claiming that their sector is strategic, and critical, and ought to be receiving some form of either operating or even capital subsidy. And so one of the biggest challenges, as you say, is, how do you build some clear parameters so that you distinguish between a truly strategic or critical productive capacities versus ones that ought to be subject to market forces?

Like, I can make the case, Alicja, that the government should be intervening in the market to ensure we are capable of producing vaccines within our borders. It matters far less to me whether we are producing t-shirts in Ontario or Canada. So there are different kind of frameworks, for lack of a better term, in trying to make those judgments.

The International Monetary Fund, the World Bank, various think tanks have put out reports that almost create something of a checklist to make those judgments about which productive capacities are truly strategic or critical. And I would be transparent about it. It seems to me that's the best way to build public support for what could be some fairly significant and costly interventions in the market. Like, we're talking could be billions of dollars in public subsidies if we're really committed to bringing certain productive capacities back home, because we've made the judgment after this experience that it's in the National interest to have them here within our borders.

ALICJA SIEKIERSKA: Yes. And I think you've already seen that-- not that this is necessarily pandemic-related-- but I think of the auto industry as one example of trying to maintain that production within Canada requires governments to pitch in. It's just kind of been the nature of it. And we've seen the federal and provincial governments here in Ontario partner up in the last six months or so on several billion dollar announcements.

It's unclear the total cost that they've contributed, just because some of these companies are private and haven't necessarily disclosed that. But it is clear that hundreds of millions of dollars have gone towards keeping this domestic production and manufacturing within Ontario and within Canada. But how far does that extend to other industries is clearly a major question that governments are going to have to decide. And it'll be interesting to watch how that develops, for sure.

SEAN SPEER: Yeah. I think that's exactly right. And just the last point I'd make on this subject is that this strikes me as an area where there is opportunity for bilateral cooperation with the United States. Viewers will know that Janet Yellen, the US Treasury Secretary, has distinguished between a kind of general reshoring-- the idea that the US needs to bring all of this type of capacity back within the American economy, and what she's called friend-shoring.

So it may not need to come all home, but you want to make sure that in certain areas, you have reliable supply of different goods and products. And that means that buying it from Canada may be preferable from buying it from, say, China. And so if I was advising Prime Minister Trudeau, I would be putting this idea of a kind of continental reshoring agenda near the top of my talks with the White House. This is an area where I think our interests are aligned and where we could actually help serve, I think, American goals around resilience and security of its own domestic economy.

ALICJA SIEKIERSKA: And you saw that, I think, some of the wording in there-- that key inflation bill that was proposed in the Senate-- include terms like North America or had exemptions for fair trade partners. So clearly, Canada could fit into that. And it'll be interesting to see if that's how reshoring looks like over the coming years. But, Sean, let's round out this conversation with another area in which the pandemic exposed vulnerability and the lack of resiliency in our system.

You recently wrote an essay on TheHub.ca. about the government's state capacity . So I'll try to summarize it here-- the ability to provide services and carry out market-supporting activities as efficiently and effectively as possible. Essentially, the pandemic exposed examples of where the government is slow and unable to quickly respond to things.

I think vaccine procurement was an example that you cited, as well as the passport debacle that we're seeing now. Sean, take me through your thoughts here. What do you think the lessons have been in the pandemic when it comes to the government's ability to provide what are, arguably, some basic services?

SEAN SPEER: Thanks, Alicja. Maybe just two caveats before going into the essay. The first is it's not a comment on whether government should be big or small. In fact, it's an argument that we need to move away from a debate about whether government is larger or smaller and focus more on whether government is capable.

There are a lot of governments around the world, for instance, that spend more as a share of GDP than Canada, but seem to outperform ours when it comes to the delivery of goods and services. The second caveat is that this isn't a partisan critique. While there's been, I think, capacity failures at the federal level under the Trudeau government, there's been capacity failures across several provinces, which, of course, are led by conservatives.

I mention those caveats only because I hope people will give this line of argument a kind of fair shake. I've been struck on social media, for what it's worth, that a lot of people have interpreted it as a partisan or ideological critique. And it's not that at all. In fact, I've been surprised through the pandemic that our governments, which we, I think, rightly view proudly in terms of professionalism, and independence, and the kind of quality of people that staff these roles-- but on a number of pretty basic fronts, has underperformed at least my expectations.

You mentioned the passports as being probably the most kind of stark example, where something as basic as providing timely issuance of passports has turned into something of a crisis, where we now have long wait times and people actually being forced to cancel travel and vacation. And so, in a way, it's a call to people, irrespective of their political preferences or ideological views, to say, as much as we focus on how big or small our government ought to be, I think we probably need to ask more penetrating questions about what's standing in the way of our governments providing services in a more effective and efficient manner? It strikes me as a healthier conversation, and one that in the immediacy of the post-pandemic period, has proven to be even more important than I would have previously anticipated.

ALICJA SIEKIERSKA: So do you think this is the time where the government should, perhaps, take a look at its priorities or the key areas in which it really needs to improve its ability to deliver goods and services?

SEAN SPEER: I think so. I think a government would be rewarded by kind of taking that idea on. That is to say, committing to a reform agenda that's not about slashing and burning government, but about delivering better government. Let me just give you a concrete example, and it reinforces the kind of nonpartisan nature of this.

The Harper government, of which I was a part as you said in the introduction, came to power in 2006 with a major reform agenda to address accountability issues in the federal government that was a direct response to the sponsorship scandal of the 1990s and early-2000s. And a lot of those ideas were probably well attended-- some of them, no doubt, were partisan and political. But I think there was a general sense that the federal government operated kind of a too lax manner in the context of the sponsorship and the system needed to be tightened up.

There needed to be more accountability, more oversight, et cetera. And I think we need to have a serious conversation, Alicja, about whether this focus on accountability and oversight, and effectively a kind of box-checking exercise, has created kind of paralysis and risk aversion within our governments that have had this inadvertent consequences of actually making governments less effective. In other words, we may have to be prepared to accept the trade-off in terms of accountability and oversight, to a certain extent, in exchange for kind of empowering people within the government to exercise more agency, to have more ownership of their work.

But I guess that's a long way of saying that I do think that the past 24 months and counting has given people greater insight into how our governments function in Canada. And if they're like me, I suspect they're thinking, things aren't quite as good as we thought they were and we ought to be expecting and demanding better.

ALICJA SIEKIERSKA: Well, it's a really interesting essay. And so, again, you can check that out on TheHub.ca. But before we wrap up the show, Sean, you mentioned accountability and oversight. So I want to talk about what's happening with Canadian airlines right now. With many flights being canceled, passengers are turning to the Canada's air passenger protection regulations for compensation.

Under the rules, which were introduced in 2016, airlines need to pay up to $1,000 for canceled flights or significantly delayed flights that are delayed within an airline's control. But there is an exemption regarding safety purposes. And so as reported by the "Canadian Press," Air Canada has been denying some claims, saying that staffing shortages are a safety-related issue, so that excludes travelers from compensation.

Passenger rights advocates say this is a clear flouting of the rules. Sean, what do you think Air Canada's response here and that decision to count staffing shortages as a safety issue says about the situation that the airline is facing right now?

SEAN SPEER: I should preface my answer by saying that I'm not a completely unbiased commentator. I spent three extra hours in an airport yesterday due to delays. So that may be affecting my thinking on these subjects.

But I think this is-- let me put it this way-- Pierre Poilievre seemed to have caught fire in the Conservative leadership race with a kind of anti-gatekeeper, anti-establishment message. And you know, there's an assumption that a lot of that is focused on governments. And we just talked about some cases of government failure over the past couple of years.

But it seems to me that people's anger really extends across a host of institutions, including private ones. And I would put the airlines near the top of that list. There doesn't seem to be any accountability. There doesn't seem to be, frankly, the type of empathy that one would expect from a company that is disrupting people's plans.

And a lot of times, keep in mind, we're pretty privileged where air travel may be more common-- there's a lot of people who, like, worked really hard over the past few years, saved a lot of money to go on a trip with their family, and now [INAUDIBLE] disruption because of these issues. And the airlines basically can't even say they're sorry.

So I guess that's a long way of saying I think that Air Canada and these other companies need to take a longer view here. You know, the amount of damage that they're doing to their brands and people's perceptions of them to save, you know, $1,000 or whatever the compensation may be to people in the short-term may have kind of lasting impact on the bottom line that it seems to me they'd be wise to take note of.

ALICJA SIEKIERSKA: And it is interesting, because I do think this will be challenged, obviously, by people who choose to take it up. But the Canadian Transportation Agency that deals with these complaints is facing a backlog of-- I think the last count was 15,300 complaints. So it's going to take a long time to get through all of that and see where this kind of safety argument, staffing argument lands on that.

Before we wrap up, quickly, I did want to note, because we have talked about it so much on the show, that the House of Commons Transport Committee is going to launch an investigation into all the delays and cancelations we're seeing at airports. And Transport Minister Omar Alghabra is also expected to testify. I know that these committees don't necessarily-- they can be more of a spectacle than have concrete action. But what do you want to see out of this kind of investigation into these delays and cancelations?

SEAN SPEER: Well, as I said, I'm not completely unbiased at this point. I spent three hours in an airport with my 18-month-old son yesterday running around. So you know, maybe the minister and the parliamentarians should have to conduct the hearings while my son runs around them and knocks things over. It may not get to the bottom of the problem, but it would at least make me feel a bit better.

In all seriousness, you know, the one thing that I think I mentioned on previous episodes that Yahoo Finance has done, I think, just about better than anyone is to try to, in effect, disaggregate what the source of the problem is. Because if you're like me, you're hearing different things from different voices-- the airlines are kind of blaming the governments, the governments are blaming airlines, at different times passengers have been blamed.

You know, it's hard to discern the relative role of COVID restrictions versus staffing shortages. And so I think the parliamentary committee, it probably won't do this because it will succumb to kind of short-term partisan stuff-- but I think a real public service would be through these hearings to just try to lay out, as clearly as possible, what's actually going on. What are the underlying issues that are causing these delays?

And then I think that would, first of all, help people hold the right institutions accountable. But second, ostensibly, it would help us get to the solutions. As long as there's this lack of clarity around what's actually going on, you know, it seems to me the longer that these problems will persist.

ALICJA SIEKIERSKA: And I think those questions still remain. So I'll be watching those committee hearings and see if we can actually get to the bottom of them. And we'll see if your son can maybe sneak in and run around in the background. But, Sean, that's all the time we have for today. Thank you so much for joining us.

SEAN SPEER: Thanks, Alicja.

ALICJA SIEKIERSKA: And as always, if you're looking for the latest business news, please check out the Yahoo Finance Canada website. And if you have any questions or feedback about the show, please feel free to email me at Alicja@YahooFinance.com. Thanks for watching.

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