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The Progressive Economics Forum

Tim Hudak, job-killer

It’s a bit of a headscratcher.

First, Ontario Conservative leader Tim Hudak builds his whole campaign around a promise to create one million new jobs in Ontario over eight years, then one of his first campaign commitments threats  is to reduce the number of Ontario government employees by 100,000, together with a wage freeze for every government workers and lower spending in every area except health care.   As revealed by David Reevely, in keeping with his choice of great locations for campaign announcements, Hudak made this austerity announcement at a Barrie country club, where the initiation fee is $9,999 for a single membership, with close to another $4,000 or so in annual fees and expenses.

Hudak claims eliminating 100,000 jobs is equivalent to a reduction of ten percent.  Cutting the number of government employees by ten per cent would literally decimate the Ontario public service (1).   But would a 100,000 cut really cut the Ontario public service by just ten percent?

There are in fact less than 100,000 direct provincial “government employees” in Ontario. According to the latest data from Statscan there were only 92,700 provincial general government employees in Ontario in 2011 (2).  But of course Hudak uses the term “government employees” to attack the whole public sector, to feed the false impression that government is stuffed with overpaid bureaucrats who don’t deliver real public services.

In reality, Hudak would also eliminate tens of thousands of jobs in education, post-secondary education, health care and social services, vindictively attacking those who campaigned against him in previous elections even though these are areas in need of increased investment to address economic and social challenges.   Most provincial public sector employees work in these areas, with 236,500 Ontarians working in health care and social services, 139,600 in universities, colleges and trade institutions, and 265,800 in local schools.   This adds up to 734,600.

To this we can add provincial government business enterprises, such as the LCBO and Hydro (another 41,300), which wouldn’t escape Hudak’s axe, even though they’re profitable.  However, Hudak says he’d spare nurses (107,900 working in Ontario, according to the 2011 Census National Household Survey table 99-012-X2011033), doctors (31,000) and policemen (32,400).  About 2/3 of police officers work at the municipal level, so this brings the total affected Ontario public sector workers down to 626,200.  So on this basis, Hudak would eliminate about one of every six public sector employees of those not in his protected occupations.

When pressed further the CBC, a senior Hudak advisor said they’d also cut funding to municipal governments.   Now if this led to job cuts at the municipal level, with their employment of 274,600 (less ~22,000 police officers) the total affected would amount to about 879,000.  However, the base is calculated, even including the municipal workforce, Hudak’s plan would eliminate at least one in nine of every affected group of public sector employees in Ontario, still worse than the Roman army’s practice of decimation.  

It’s not clear how Hudak would force municipalities to layoff a tenth of their workforce: provincial transfers in Ontario amount to only a quarter of the total municipal revenues (3) and most of these are specific purpose program transfers and some are the flow through of federal transfers through provinces.  Would he force municipalities to slash their workforce as a condition of receiving any funding, slash provincial funding by half to force thoem to make these cuts, or use provincial powers over municipalities to issue some sort of dictatorial decree that municipal governments must deciminate their workforces by a tenth? 

Why is he so intent on destroying (public sector) jobs when his whole campaign is built around creating a million jobs?  Of course he wants to create private sector jobs, but his austerity program ignores the fact that spending by public sector employees also generates tens of thousands of jobs in the  private sector.   Every public sector jobs at the state and local level generates about 0.67 jobs in the private sector, according to Jared Bernstein, former chief economist to U.S. Vice-President Joe Biden.  Similar multipliers likely apply to Canada, which means Hudak’s elimination of 100,000 “government employees” would also lead to the destruction of 67,000 jobs in the private sector.

This elimination and destruction of 167,000 jobs in Ontario, all for the sake of austerity and more corporate tax cuts, would increase unemployment levels in Ontario by an astonishing 30 percent, from current levels of 556,000  to 723,000 and increase the unemployment rate from its current rate of 7.4 percent to 9.7 percent (4).  That would be a record level of unemployment for Ontario, with its jobless rate higher than the worst unemployment rate Ontario reached during the recent economic crisis and recession (9.4% in June and August 2009) and the highest since April 1994.

In fact, these policies would force Ontario back into recession.   It really is crackpot economics.   Austerity policies have been discredited around the world.

Apparently Hudak has a plan he’ll be releasing later to show how he’ll create jobs.  All we know so far is some of it involves reducing Ontario’s corporate tax rate down to 8 percent, which will supposedly magically create jobs.  As Canadian corporations wallow with over $600 billion of excess cash in their bank and offshore accounts, it’s clear corporate tax cuts have done little to nothing to either stimulate investment or create jobs in Canada.

Reducing Ontario’s CIT rate down to 8 percent would strike a new low in Canada.  In the only other province in Canada that planned to cut corporate taxes to that rate, the CEO of the New Brunswick Business Council had this to say:

“I think we were proven out that those (corporate tax) reductions didn’t stimulate the economy the way that they anticipated. So business council members believe that similarly returning the corporate tax to where it had been will not cripple the economy given that we didn’t see the gains from the reduction.” “We didn’t go out publicly because we didn’t want to hang (former Premier) Shawn (Graham) out to dry but we didn’t think that (the corporate tax cut) was a move the economy needed at the time.”

“[The business] council is comfortable with the idea of increasing the corporate income tax rate back to the previous levels (of 13%) under the guise of keeping it competitive,” Holt said.  “It doesn’t have to be the lowest in Canada but we still believe it has to be at a competitive level with other provinces and states but we think there is room to move.”

New Brunswick’s Conservative government only partly heeded this request , restoring its corporate tax rate to 12%, but not up to the previous level of 13% the NB Business Council has suggested.

By any rational economic or fiscal perspective, Hudak and his fellow-minded politicians are living in a bizarro world, still planning discredited austerity policies that would plunge Ontario back into a recession with possibly the highest unemployment rate in two decades, while planning deep corporate tax cuts that most corporations neither need and many don’t even want.

More to come on all this…

(P.S. Hat tip to Venai Raniga at CUPE Research for starting this analysis.)

UPDATE 13 May 2014:

The Globe and Mail’s Editorial on 13 May Can Tim Hudak win election by 100,000 job cuts? replicates some of the analysis of this blog post, also concluding that Hudak’s plan would eliminate about one in six of every six public sector employees not otherwise excluded.

The Ontario Federation of Labour also issued a press release on 13 May based on material from this blog post Hudak’s public sector layoffs would push Ontario to 9.7% unemployment levels and drive province into recession

______________________

1. The word “decimate” comes from the Roman army’s practice of killing out of every ten soldiers in their mutinous ranks.

2. Unfortunately and ironically, Hudak’s friends in Ottawa cuts t0 Statistics Canada led to the termination of these reports on public sector employment, so we don’t have more up-to-date numbers, but Labour Force Survey figures (Cansim series 282-0011) show that overall public sector employment in Ontario was 2.2% lower in the first four months of 2014 than in the same period of 2011.

3. Statistics Canada Cansim table 385-0024, also sadly terminated, latest figures for 2008.  The data releases that replaced this (Government finance statistics, Statistics Canada Cansim Table 385-0032) combines revenues and spending of municipal governments with those of Aboriginal governments.

4. Incidentally, this is almost exactly the same  increase in unemployment (-165,000 jobs) Jim Stanford recently calculated would result from Hudak’s spending cuts.

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Comments

Comment from Steve jelly
Time: May 11, 2014, 10:45 am

Track changes show in article!

Comment from fjf
Time: May 11, 2014, 11:13 pm

The problem is Hudak may be advancing a position of economic irrationality but it will not be perceived as such by that sector of the electorate he hopes will vote him into power.

My bet is that his party has spent both months and millions researching the electorate. If the Canadian union participation rate is 31.5% then 68% of the workforce lives in a world where your jobs are shipped elsewhere in the blink of an eye, in which there are no cost of living increases so your actual earning power is continually being eroded away, where the competition for good jobs is intense, where your employment is so precarious that to raise a complaint makes you a target for termination, and your wage level is under attack by temporary foreign workers. If you work in this mileu and then find yourself paying for the retirement plans of unionized workers when it is impossible for you to put aside anything for your own retirement, then I think you can see how Hudak believes he can win a majority.

I do not agree with Hudak’s platform but it must be recognized that we have created a schism in the workforce, politicians are quite willing to exploit the resulting social antagonism for their own benefit and as Harper will tell you, “wedge politics works.”

Wish I could offer a solution.

Comment from GeraldR
Time: May 18, 2014, 10:23 pm

Ordinarily, one might simply compare Ontario public service employment in 2009 – Tim Hudak’s reference year – to the present and readily calculate where the Hudaxe would fall. Sadly the mathematical inconsistencies make that implausible; in any case, with federal downloading and population growth, 2009 staffing versus increased workload means staffing below 2009 in many areas.
Freezing the wages of -7300 Ontario government employees should be relatively straight-forward: even a 100% raise on 0 dollars is still 0.
The plan for teachers is simple: more pupils, no teaching aids and no office staff. Presumably, teachers will answer the phones in their spare time and pitch in with janitorial work on PD days.

Comment from richard
Time: May 22, 2014, 8:08 am

“that the government is stuffed with overpaid bureaucrats”Yes this is true and if you can’t see that then you don’t want to.A perfect example is the bureacratic duplication in the Boards Of Education (75 boards) as pointed out by the Green party.A cost of 1 billion $ PLUS.This ontario government 65 billion $ DOLLAR PAYROLL is bankrupting the province.Two parties recognize that.The other 2 parties need the government vote to get elected.SAD sad sad. By the way there is 1.2 plus government employees in Ontario and growing.Ps General Motors went bankrupt for the same reason.High cost of labor and to many middle managers.The simplest solution would be to implement the Ralph Kline plan,cut salaries etc buy 10% AND NO JOB LOSSES and then over time cut back on the bureacrats.A win win solution.

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