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Devon Energy Corp.'s Jackfish Projects processing plant near Conklin, Alberta.Jimmy Jeong/Bloomberg

Alberta's NDP government is dangling a carrot of $5,000 grants to employers who hire new workers over the next two years, but businesses are skeptical about whether the program will actually work as intended and create new jobs.

As oil prices hammer Alberta's finances and spur thousands of layoffs, the provincial government said it will spend $178-million over the next two years to offer grants of up to $5,000 for each new full-time equivalent position created by businesses, non-profit entities and charities. The Job Creation Incentive program is expected to help spur 54,000 new jobs in 2016 and 2017, according to Tuesday's provincial budget.

Oil and gas producers operating in the province are shedding workers and shuttering projects. This week saw Royal Dutch Shell PLC announce it is halting construction on its Carmon Creek oil sands project, and the news that Devon Energy Corp.'s Canadian unit will lay off 15 per cent of its staff. The Alberta government says the pain isn't over yet as the province's unemployment rate is likely to increase in 2016.

Even though the job incentive program is supposed to encourage job growth, businesses say the grant would likely be an afterthought for any hires they were going to do anyway. Owners and executives simply say they are looking at cutting jobs right now, not creating new positions.

"Like many companies in Calgary, almost all companies in Calgary, we've been laying off people for the last several months – and if we needed staff, we would hire them," said George Brookman, chief executive of West Canadian Digital Imaging Inc.

Mr. Brookman's firm – which provides printing, scanning and designing services for oil industry and architectural engineering clients – has cut about 50 people from a staff that numbered 320 at the beginning of the year. More layoffs could be coming.

"I'd be lying if I said we aren't still looking at it all the time," he said.

At Red Deer's Babycakes Cupcakery, co-owner Diana Knapton said the small operation lost one employee this year after she was forced to move away from the city when her husband lost his machinist job. Ms. Knapton said the two owners and one remaining full-time employee have stepped up their efforts and still serve up 500 to 1,500 cupcakes a day. The provincial grant would never motivate her to add employees, she said.

"That doesn't really give me any incentive to do anything. I kind of dislike the one-time payoffs ideas that come up in budgets."

At the Canadian Federation of Independent Business, Alberta director Amber Ruddy said the program does not reflect the reality of what business owners are feeling right now.

"Businesses are in a really tough situation where they're looking to cut back on staff," she said, noting the group's survey of small-business owners in September found that more than a quarter are expecting to cut full-time staff in the next three months. That compares with 6 per cent in September, 2014.

Ms. Ruddy said there are positives to the program, but the government needs to earmark some of the funds for small businesses only, so bigger firms don't scoop up all of the grants.

Lindsay Tedds, a visiting economics professor at the University of Calgary's School of Public Policy, said in order for the program to be successful, the government must consider such items as the quality of the jobs eligible for the grant and the length of employment. The program must also ensure companies cannot manipulate the timing of firing and hiring in order to collect the grant money, she said.

"As soon as we design an incentive system, it takes hours for smart people to figure out their way around it and then you don't achieve the outcome that you want," Dr. Tedds said.

Justin Smith, director of policy, research and government relations at the Calgary Chamber of Commerce, said businesses would be better served by an investment tax credit that would benefit Albertans who chose to make investments in qualifying businesses, mostly small, to hire and invest in new equipment and technology.

With reports from Jeffrey Jones and Carrie Tait