The federal government is getting out of providing employment programs across Canada. In British Columbia it is handing the province $2 billion over six years to do the job. The province touts it as an opportunity to create a "made in B.C." system of employment services, but critics say "made in Tucson" may be more accurate.

For a decade B.C. has been moving towards for-profit delivery of job programs, which critics say has led to windfall profits for big companies, but worse service for people who need help. Last year a big American company, Providence Service Corporation, bought B.C.'s biggest employment program contractor, WCG International Consultants Ltd. Thanks to federal Human Resources and Social Development Minister Monte Solberg, the province will soon have a lot more money it could spend with Providence.

"They're making money on the backs of the poorest people in the province, which we don't think is the right way to go," said Jagrup Brar, the NDP's employment and income assistance critic. "We want to make sure the money's dedicated to helping people find employment."

When it goes to a private contractor, he said, it is hard to know how much is used to actually help people and how much goes to profit.

Large bags of cash

At a Vancouver press conference on Feb. 20, Solberg publicly signed two agreements that will give B.C. $366 million a year to spend on job programs. The bulk of that, $300 million a year, is to take over programs the federal government now provides through Service Canada for people who are receiving employment insurance.

The provinces and territories are better placed to deliver job programs, Solberg told The Tyee in a phone interview. "They're closer to a lot of these issues," he said. "I'm pretty comfortable letting individual provinces decide what the best way is to serve the people they represent. Ultimately they are accountable to the electorate at election time."

The federal government will continue to monitor results, he said. "Frankly, my interest is the results that we get. I'm not as interested in the methods." If a province chooses to contract to an international company that specializes in moving people into employment, and the company gets good results, that's great. "It doesn't particularly bother me where they call home."

B.C. ministers for economic development, Colin Hansen, and employment and income assistance, Claude Richmond, joined Solberg for the announcement. Neither was available for an interview.

Made in BC

"This is a more made in B.C. approach," said employment and income assistance spokesperson Richard Chambers.

The announcement said Service Canada will continue providing programs to people on employment insurance until Feb. 2, 2009, when it will hand them over to the province. They will then be managed by the Employment and Income Assistance Ministry, which already has responsibility for welfare-to-work programs.

B.C. has committed to honouring contracts with existing service providers for two years. Then the province will be free to do its own thing.

"There will be a lot of consultation with stakeholders as we go further," said Chambers. "In due course, there is the opportunity, and that's the rationale for it, for a more co-ordinated approach to employment training programs . . . . This is the day after. There's a lot of work to be done between now and February next year."

"I think it could be a very good thing," said Norma Strachan, the CEO of the non-profit association ASPECT -- B.C.'s Community Based Trainers. "It depends how it is administered. If it's well co-ordinated it could lead to better delivery of service . . . . I hope that's what happens."

Private model?

However, a "co-ordinated approach" to employment programs may mean a lot more money going to a publicly-traded American company, Providence Service Corporation. Six months ago the Tucson, Arizona-based corporation bought B.C.'s biggest welfare-to-work contractor, WCG International Consultants Ltd.

The sale price included $9.2 million cash, about $8.3 million worth of shares and an "earn out" clause worth up to $10.8 million depending on how the company performs up to Dec. 31, 2008. All told it could be a windfall of nearly $30 million for the share holders.

It is difficult to imagine, Brar said, that Providence will be able to make back the purchase price. "How much money was there to make a profit?"

As it happens, as part of the sale, WCG's financial statements were filed in October 2007 with the U.S. Securities and Exchange Commission. They provide a glimpse into the company that was previously unavailable.

In the year ended Sept. 30, 2006, WCG spent $3.7 million on program delivery. Over the same period the company spent $4.4 million on management salaries and had $6.3 million in retained earnings.

The move to private contractors started under the NDP in the late 1990s and expanded under the Liberals after 2001. WCG's programs were at the forefront of that move. They include JobWave for welfare recipients and Triumph for people receiving disability benefits.

"One of our concerns is they'll keep giving money out to groups like that," said Strachan. Over the last few years, she said, federal money has kept many community-based trainers open while the province has moved funding to big corporations.

Local non-profit organizations tend to spend more time with clients, work with ones who are harder to employ and know their communities well, she said. And they aren't trying to turn a profit, so have more money to spend on actual programs. "It's better than giving it to big corporations to get rich."

Entry by acquisition

Representatives of Providence, including CEO Fletcher McCusker, did not return calls by press time.

A New York financial analyst who follows the company, Gregory Williams, said he had spoken with McCusker recently. The purchase of WCG gave the company an entry into Canada, he said. "The hardest part was getting the reception politically," he said, but the provincial government "welcomed them with open arms."

"Fletcher seemed to be very optimistic," he said. "He said it was nice to be welcomed . . . . He did say the warm reception was opening doors to the rest of Canada."

The company has had greater success expanding by buying companies than it has by bidding on contracts, he said. "Politics is often a barrier, being the new kid in town, that's why acquisition is the best way to go. Entering a state or country yourself, you're in an uphill battle."

Providence does a good job and retains almost every contract it has, he said. The company provides a wide range of services in the United States, with 905 government contracts in 37 states and the District of Columbia as of March 31, 2007, and may look to expand what it does in Canada. "They can be the whole continuum of social services. That's their forte. That could be their strategy in Canada."

Certainly Providence's announcement of the WCG purchase made it clear they were buying more than a company: "Federal and provincial governments in Canada are expected to expend over CD $1.0 billion to identify, train and place welfare recipients into meaningful employment."

Report critical of JobWave record

With a lot more money going into the industry, ASPECT's Strachan said, more big corporate players from around the world may want to get into the B.C. game. However, she added, the B.C. government has been trying to improve its relationships with non-profit service providers. There is more recognition now, she said, that the groups add value that for-profit companies can't.

"My hope is that somewhere in there some sanity will prevail," she said.

There are other clues the province has become less enamoured with WCG. A 2004 report for the ministry by Peter Adams and Cathy Tait of Victoria Consulting Network Ltd., Evaluation of the Job Placement Program and the Training for Jobs Program found JobWave and programs like it did not work as well as advertised. People in the programs do only marginally better in their job hunts than people who aren't in the programs, they found, and it would take at least six years before the government saved enough in welfare payments to pay for the program.

And the company's revenues from the province have been uneven. In fiscal 2006-2007, the most recent year available, B.C.'s public accounts show, the company received $16.8 million from the province. That was the lowest payment to the company since 2000-2001, and about half the $33.6 million it got from B.C. in 2005-2006.

The NDP's Brar also noted the number of people receiving welfare has been climbing, at least in some categories, showing job programs may not be working. "They're not getting the help they need," he said. "Why is the number of single men growing for the last two years? These people are falling through the cracks."

The money spent on employment programs would be better spent helping people, he said. "Who is the focus here? Their friends or the people falling through the cracks?"

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• Libs' Welfare-to-Jobs Program a Bust, Reveals Delayed Report
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• Welfare Reform's Public-Private Partnerships
  The Fraser Institute says they're a huge advance in social policy. Critics say work placement companies are growing rich but doing little.