The new Grecian formula: still toxic
The latest issue of the quarterlyÂ Economic Climate for Bargaining publication that I produce has just been posted on CUPE’s website.
In this issue I have pieces about:
- the new spectre that is haunting Europe, this timeÂ of a public debt crisis
- impact analysis of Ontario’s HST tax reform by income group, already discussed below
- some analysis of recent employment, inflation and wage trends
On the public debt “crisis” that the media and many politicians have played up, it should be clear that they are taking tunes out of songbook Naomi Klein wrote about and Rahm Emanuel incapsulated: Â “never let a serious crisis go to waste”.Â Â
Many of the major policy measures put in place directly from the priorities identified by the IMF: “fiscal consolidation” focusing more on longer term concerns over age-related increases in pension costs and health care.Â Â The IMF has highlight these concerns frequently in recent years and they are emphasized again in its recent Fiscal Monitor.
A lot has been written about public sector wages and salaries in Greece, but according to the OECD’s stats, they and public sector employment levels are in line with OECD averages.Â The real problem in Greece seems to be on the revenue side (as well as a problem with sovereign debt and low rates of domestic saving of course).Â Â Some have written about high rates of tax evasion in the country, but little about why this has developed.Â Â
I think it is pretty natural forÂ tax evasion to increase given the chanceÂ when the economic and tax system isÂ seen as increasingly unfair and regressive, asÂ appears to have happened under the previous Conservative government in Greece.Â Â This is aÂ lesson for us to draw from in different ways, I suppose.
On a couple of other topics:
New jobs generally lower paid. I did some calculations of the average wage of the jobs created since the low point in employment during the recession (July 2009) compared to the average wage for the jobs lost from October 2008 to that point.Â Â It’s early times yet in this recovery, but the average wage for the new jobs created–most of which are in services–are about 10% lower than the average wage of the jobs lost.Â This isn’t as much a difference thatÂ Statscan analysts found when looking at layoffs in previous recessions, but it should still be a concern.Â
Hikes in user fees and regulated prices spurring inflation.Â Some of the common culprits (fuel, housing prices, insurance) have been driving inflation higher in recent months, but recent stats show that user fees and regulated prices–including for electricity, property taxes, water, telephone and postal services–are increasingly to blame, and these are also reflected in core inflation rates, unlike fuel prices.Â Â
I didn’t see this angle reported in the media or by other economists, though I may have missed it.Â Instead, there was a fair amount of concern raised about rising rates of core inflation — and suggestions made this should lead to the Bank of Canada more aggressively hiking interest rates.Â But increasing interest rates won’t suppress these type of cost pressures, instead they could haveÂ the opposite effect.