What does the study conclude? As quoted by Canadian Press, “On balance, the evidence indicates that Canada suffers from a mild case of the Dutch disease, which warrants a commensurate policy response.”

What policies does the study recommend? According to Barrie McKenna:

There is a treatment for the relatively mild impacts of Dutch Disease, the authors suggest. The federal government should pump tax revenues into big infrastructure that bolster the competitiveness of manufacturers. And the energy-rich provinces could also help “neutralize” the upward pressure on the loonie by investing “windfall revenues” offshore through sovereign wealth funds. And they rejected more radical solutions, such as capping manufacturing wages or adopting the greenback outright.

How does any of that contradict Mulcair? He has not suggested “capping manufacturing wages or adopting the greenback outright.” He has advocated infrastructure investment.

If anything, this study contradicts Brad Wall and Alison Redford, who have been completely dismissing the concept of Dutch Disease while giving away their provinces’ non-renewable resources rather than collecting appropriate royalties to invest in savings funds.

Another recent Statistics Canada report, Friday’s Labour Force Survey, indicates that Saskatchewan lost 400 manufacturing jobs in April. I had previously written that the province lost 4,600 manufacturing jobs since Wall took office. That figure is now an even 5,000.

Since Wall’s premiership began in November 2007, manufacturing employment has declined by 16% in Saskatchewan (from 32,000 to 27,000) compared to 11% nationally (from 1,998,200 to 1,786,100).

Are Saskatchewan manufacturers suffering from Dutch disease, Sask. Party sickness, or both?

I don’t want to argue that stock market performance is a very useful barometer of real economic performance. Still, this factoid is more than a little at odds with the conventional view that we are doing much better than the US, that our fundamentals are great, that resource dependency is a blessing and not a curse etc etc.

Not that the facts appear to matter, but it is surely notable that – even after two months of strong job growth – we still have an unemployment rate of 7.3%. The “real” unemployment rate in April – which includes involuntary part-time workers – was 10.7%, down only marginally from 11.3% a year earlier.  The “real” unemployment rate for youth is still 20.4%, down a tad from 21.2% a year ago.

The most recently released Statscan data on job vacancies – for the three months ending in January, 2012 – show that there were 6.4 unemployed workers for every reported job vacancy. That is actually worse than the previously reported number for September when ther were 5.4 unemployed workers for every reported vacancy.

Further evidence of labour market slack and high unemployment is the fact that average hourly earnings in April were up 2.3%  compared to a year earlier, barely matching inflation.

Even the Bank of Canada argues in the current Monetary Policy Report that there is “excess supply”and “unused capacity”  in the job market.

“Developments in labour market indicators have been consistent with the persistence of a slightly greater degree of excess supply. Despite notable improvements in March, both employment and the unemployment rate are little changed, overall, from their levels six months ago (Chart 22). Similarly,the proportion of involuntary part-time workers has only partially recovered from its sharp rise during the recession, pointing to the persistence of unused capacity in the labour market. The proportion of firms reporting labour shortages in the Bank’s spring Business Outlook Survey also remained below its historical average.” (p.22.)

But, as my friend Peter Puxley recently reminded me,  it is passing strange to argue that we can no longer afford what we could afford thirty years ago, when we were, as a society, much less  affluent.

Perhaps the best single measure of what we can collectively afford is real per capita GDP  – national income per person adjusted for inflation. Statistics Canada has usefully provided a long term historical series in a paper and a new CANSIM series. (383-0027.)

Real per capita GDP in 2010 was 53.2% higher than in 1980, roughly when the era of welfare state expansion gave way to the era of retrenchment.

As shown below, the growth rate of real per capita GDP has slowed considerably in the age of austerity – which deserves extended comment – but it has by no means ground to a halt.  This suggests austerity flows not so much from the lack of growth, as from the fact that more and more of that income growth has gone to the top 1% who just don’t want to share it with the rest of us.

Growth of Real GDP per capita, compound annual growth rates.

1960-69     3.42%

1970-79     2.80%

1980-89     1.90%

1990-99     1.60%

2000-10    0.80%

First, a word on what is not in the Budget. It is disappointing, to say the least, that the government is failing to respond to the fact that less than 40% of unemployed Canadians are now qualifying for EI, well below the already low pre-recession rate.  And, for all of the talk about skills shortages in Canada, it is notable that there is NO  increased investment at all in EI supported training which would assist unemployed workers to find good jobs.

Instead, the focus is on tightening discipline over those workers who have managed to qualify for a claim.

The vast majority of regular EI claimants welcome positive efforts to assist them in a search for a new job and will not turn down reasonable employment opportunities. And there are rules now in place.

As things now stand, EI regular claimants are expected to undertake “reasonable and customary efforts to obtain suitable employment” and can be cut off benefits if they do not do so. “Suitable” employment is defined in S. 27 (2) and (3) of the Act. A job is not suitable if it is in the claimant’s occupation but offers wages and conditions less than those offered in agreements between employers and employees, or by “good” employers.  Jobs not in the claimant’s usual occupation are not suitable if they offer a lower rate of pay than the worker enjoyed previously, except that after a “reasonable interval” a claimant is expected to accept a job which offers wages and conditions matching those in agreements or offered by “good” employers.

The clear intent of these Sections is to allow for a period of job search to find a job matching previous employment wages and conditions, and to prevent the unemployed from driving down wages and conditions.

Sections 605 and 608 of the Budget Bill repeals these Sections, and give the Minister the power to set through regulation definitions of “suitable” employment for different categories of claimants, and “reasonable and customary efforts” to find a new job. These regulations will likely oblige claimants to take offers of jobs at lower wages and with worse conditions at an earlier point in their claim, and perhaps to take any available job at some point in a claim. Language in the Budget itself suggest there may be a focus on frequent claimants.  The intent may be to require claimants to move to take an available job.

Forcing workers to take the first available job is not good labour market policy since periods of job search allow for a better fit between unemployed workers and job vacancies across the country. For example, an unemployed welder in Moncton may need time to find a suitable job in Western Canada, and deserves income support from EI for the needed period of active job search.

These pending new rules are of particular concern given the proposed changes to the appeal system for claims. A new Social Security Tribunal will replace the current system of EI Boards of Referees and the Umpire.

Appeals, which mainly concern denial of claims, are currently made to local EI Boards of Referees for 83 regions, which have three members, one appointed from each of labour and business by the respective EI Commissioners, and a neutral chair appointed by the government. The part-time members of Boards are knowledgeable of local labour conditions as well as of EI legislation and regulations, and deliver timely decisions, usually within 28 days.

In 2010-11, there were 53,905 appeals, about half of which were resolved before a Board hearing, usually due to Departmental recognition of an error. 26,290 appeals were heard by Boards of Referees, and many claims that were initially denied are upheld, underlining the importance of the process of getting a fair hearing. The great majority of Board decisions are, apparently, unanimous.

The some 1,000 part-time members of Boards of Referees who currently handle something like 25,000 cases per year are to be replaced by just 39 full-time members of the EI section of the new Social Security Tribunal (plus a very few part-timers up to a maximum of about 4 full-time positions.) Hearings from April, 2013 will be before a single, supposedly expert, full-time member of the tribunal.

It is unclear if hearings will be held in the community and how the volume of complaints can be handled without leading to long delays. There are serious grounds for concern that determinations will be much less informed by knowledge of local conditions and the changing realities of the job market than is now the case, and will instead be decided on narrow legal and technical grounds.

A third concern with the Budget Bill is changes to pilot projects which will impact on high unemployment regions found mainly in the North, Quebec and rural Atlantic Canada. As of September, unemployed workers in these regions will lose access to an extra 5 weeks of benefits, and some will no longer have their benefits based on their best 14 weeks of prior earnings.  The first $75 of earnings from taking a very short-term job will now be subject to a 50% clawback (though the 100% clawback now in place above $75 or 40% of the claim amount will be replaced by the universal 50% clawback.)

In fairness, on the positive side, the Budget does promise to deliver more timely information on available jobs to unemployed workers, and tweaks the rules regarding working while on a claim and establishing the rate of benefit based on weeks worked in such a way as to lower penalties paid by most unemployed workers who accept part-time and temporary jobs. The Department also promises to review all disputed decisions  to reduce the volume of appeals.

Still, the major intent is to tighten the system to get the unemployed back to work, any work, much faster.  At a minimum, these changes demand much closer consideration than they will get before the Budget Bill is passed.

WTO Called Upon to Dismiss Japan, EU Challenge to Canadian Renewable Energy Policy

Canadian NGOs and labour unions have sent an amicus curiae submission to the World Trade Organization (WTO) on the eve of a second hearing tomorrow into Japan’s and the European Union’s joint attack on the Ontario Green Energy Act. The groups address Canada’s failure to properly defend Ontario’s actions and call upon the WTO to respect the priority of Canada’s international climate change obligations.

“These are the first international trade disputes which create the potential for conflict between a nation’s commitments under the WTO and its obligations under the Framework Convention on Climate Change and the Kyoto Protocol. It raises fundamental questions about whether the goals of trade liberalization can be reconciled with ecological imperatives to reduce greenhouse gas emissions, and if not, which are to prevail,” says the joint amicus curiae submission from Blue Green Canada, the Canadian Auto Workers, the Canadian Federation of Students, the Canadian Union of Public Employees, Communications, Energy and Paperworkers union of Canada, the Council of Canadians and the Ontario Public Service Employees Union.

Canada, the EU and Japan are signatories to the Framework Convention and Kyoto Protocol, which seek to avert catastrophic climate change. Unfortunately, say the Canadian civil society groups, the Harper government is playing into Japan’s and EU hands by ignoring these international climate change treaties. In fact, having recently repudiated its commitments under the Kyoto Protocol, Canada has threatened to use the WTO to challenge climate measures such as fuel quality standards in the United States and EU.

The Canadian NGOs and labour unions involved in the amicus curiae submission have a strong presence and hundreds of thousands of members in Ontario, including those in the green energy sector. They support the phase-out of coal-fired electrical power generation and the development of renewable energy infrastructure and power generation to replace it.

“In simple terms, Ontario’s Feed In Tariff program for renewable power is a perfect expression of the principles of sustainable development in which environmental and economic goals are married to address the imperatives of climate change,” says their submission to the WTO, which was prepared by Steven Shrybman, international trade and public interest lawyer with Sack, Goldblatt Mitchell LLP.

The Canadian NGOs and labour unions insist that the WTO should resist efforts by countries like Japan, the EU and Canada to enlist its dispute procedures to defeat or discourage climate measures. WTO dispute panels must recognize and accede to the jurisdiction and competence of multi-lateral institutions and instruments, including the Kyoto Protocol, designed to address the climate change imperative.

Dylan Penner, media officer, The Council of Canadians 613-795-8685 dpenner[a]canadians.org
Stuart Trew, The Council of Canadians strew[a]canadians.org
Charles Campbell, United Steelworkers 416-544-5970 ccampbell[a]usw.ca
Greg Taylor, CUPE 613-818-0067 gtaylor[a]cupe.ca
Steven Shrybman, lawyer, Sack Goldblatt Mitchell LLP 613-482-2456 sshrybman[a]sgmlaw.com

Following up on Erin Weir’s most excellent interventions, here is my column in yesterday’s Ottawa Citizen on this issue.  And here is a graph that went with the column in the print edition, but which you don’t seem to see in the on-line version.  It shows that in the last decade, Canadian petroleum exports grew by close to 2 percentage points of GDP — fairly impressive.  But Canada’s exports of everything else (manufacturing, services, and tourism) declined by several times as much — and the two offsetting trends are not unrelated.  No wonder Canada is mired in a large, chronic international payments deficit, even as we scrape the stuff out of the ground faster than ever.

These diatribes against anyone who even acknowledges potential downsides or side-effects of the bitumen boom seem to herald a new, dangerous tendency in Canada’s political culture.  Opposing a bitumen-exporting pipeline in Canada these days makes you a foreign-financed subversive.  And it seems that questioning the economic effects of the bitumen export strategy makes you equally seditious.  I call this “energy McCarthyism,” and it should be rejected forcefully not just by those concerned with Canada’s deindustrialization and staples dependency, but by those worried about the quality of our democracy.

. . . when Tom Mulcair was driving hard to become leader of the New Democrats, he took polite but pointed issue with his party’s historically reflexive opposition to resource development. . . . All of which leaves us scratching our heads, now, at Mulcair’s headlong rush into open warfare with the western premiers, or indeed anyone whose livelihoods depend on the oilsands, with his talk of “Dutch disease”

But less than a week ago, Den Tandt wrote the following:

Dutch disease due to high resource revenue? NDP leader Tom Mulcair has beaten this drum for months now . . .

So, which is it? Were Mulcair’s comments a cynical change of tack or a repetition of what he has been saying all along? Surely Den Tandt cannot have it both ways.

UPDATE (May 14): I have the following letter in today’s Regina Leader-Post, the only thing it has printed on Mulcair’s side of the Dutch disease debate. Since I submitted my letter, The Leader-Post also printed John Gormley’s anti-Mulcair column. Today’s edition features three more items bashing Mulcair: Den Tandt’s latest column, Pamela Wallin’s letter, and a report on Christy Clark’s comments.

Mulcair: a good point

Your May 8 front page reported Premier Brad Wall’s criticism of federal NDP leader Tom Mulcair’s concern that resource policies are eliminating manufacturing jobs (“Mulcair ‘ashamed’ of west?”). The Leader-Post has also printed columns by Murray Mandryk, Michael Den Tandt and Barbara Yaffe repeating this criticism.

But Mulcair is addressing a genuine economic problem. While several factors have hurt Canadian manufacturing, an overvalued exchange rate has clearly undermined its competitiveness.

Yaffe claims that “Saskatchewan’s own manufacturing sector is thriving despite the high Canadian dollar.”

But Statistics Canada reports that, since Wall took office, manufacturing employment has declined by 14 per cent in Saskatchewan compared to 12 per cent nationally.

Foreign investors have bid up the exchange rate by buying Canadian dollars to take over, or acquire shares in, Canadian resource companies. These corporations are so lucrative because they obtain public resources at low royalty rates and sell them at higher prices.

The Saskatchewan Ministry of Energy and Resources’ most recent annual report indicates that it collected only $2.2 billion of revenue from $17.6 billion of non-renewable resource sales in 2010. No wonder foreign investors are driving up the loonie as they clamour to get in on the action.

Provinces should collect more resource revenue to fund public services and save for the future. Higher royalties would also temper the inflow of foreign funds, help moderate the exchange rate, and thereby facilitate manufacturing employment in Saskatchewan and other provinces.

Erin Weir, Toronto
Weir is a Saskatchewan expatriate and an economist with the United Steelworkers.

Paradoxically, official unemployment increased as more Canadians entered the labour market. This development provides an important reminder that unemployment is actually even worse than the official tally of 1.4 million.

Hundreds of thousands more have been discouraged from looking for work by the recession, but will try again when the labour market shows signs of life. The policy challenge is to create jobs not only for those officially counted as unemployed, but also for this reserve army of discouraged workers.

Unfortunately, government policy is moving in the opposite direction. Budget austerity is proving to be a drag on the labour market, with the public sector shedding 19,200 employees in April.

Ontario’s private sector also subtracted from the national figures, shedding 9,300 jobs in April. Worse still, provincial unemployment leapt by 32,800. Ontario’s average hourly wage rose by a measly 0.7% over the past year, less than one-third of the provincial inflation rate.

UPDATE (May 12): Quoted in The Hamilton Spectator

Royalty hike cure for Dutch disease

Premier Brad Wall calls federal NDP Leader Tom Mulcair “very, very divisive” for expressing concern that Canada’s overvalued petro-dollar is eliminating manufacturing jobs.

In reality, Wall is being divisive by exploiting this legitimate concern to fan the flames of western alienation. Saskatchewan and other provinces would benefit by collecting more revenue from non-renewable resources, as suggested by Mulcair.

Wall and others are correct that the exchange rate is not the only factor reducing manufacturing employment. However, as noted by The SP’s May 9 editorial and Les MacPherson’s May 10 column, economic analyses from universities, banks and international organizations indicate that “Dutch disease” caused much of the particularly sharp decline in Canadian manufacturing employment over the past decade.

Much like the Netherlands in the 1960s, Canada’s currency has surged due to a fossil fuel boom. Between 2002 and 2011, the loonie’s average exchange rate skyrocketed to 101 American cents from 64 cents.

But while Canadian-based exporters are consequently receiving much less for their output, they are paying the same amount for their inputs. The Organization for Economic Co-operation and Development calculates that, in both 2002 and 2011, the loonie’s purchasing power in Canada (including imported products) equalled 81 American cents in the U.S.

Saskatchewan has itself suffered from this Dutch disease. Statistics Canada reports that, since Wall took office in November 2007, manufacturing employment has declined by 14 per cent in this province, compared to 12 per cent nationally.

Specifically, Saskatchewan lost 4,600 manufacturing jobs, including the closure of sawmills and pulp mills harmed by the overvalued exchange rate. Other provinces lost a further 231,300 manufacturing jobs during the same period.

MacPherson is correct that judicious saving and investment of resource income could alleviate upward pressure on our currency. However, provincial governments must collect the income before they can save or invest it.

The Saskatchewan Ministry of Energy and Resources’ most recent annual report indicates that it collected only $2.2 billion of revenue from $17.6 billion of non-renewable resource sales in 2010. Such low royalties allow private companies to reap super-profits by extracting publicly-owned resources.

The Canadian Association of Petroleum Producers’ most recent Statistical Handbook indicates that the industry sold $11.1 billion of Saskatchewan oil and gas in 2010, but paid only $1.8 billion in royalties and spent a further $6.5 billion on exploration, development and operations.

In other words, oil and gas companies made enough in Saskatchewan to immediately pay off all of their investments, with $2.8 billion of extra profit left over.

Foreign investors eager to get in on the action have been buying loonies in order to take over, or acquire shares of, Canadian resource companies. This inflow of foreign funds drives up the exchange rate, to the detriment of manufacturing and other Canadian-based export industries.

Ironically, since resources are priced in American dollars, the higher exchange rate further reduces provincial resource revenues in Canadian dollars. Saskatchewan’s recent budget estimates that each U.S. cent of appreciation in the loonie reduces non-renewable resource revenue by $34 million.

The solution is to increase royalty rates, which would moderate the flow of foreign funds into our resource industries and collect the public revenue needed for the provincial savings funds that MacPherson advocates.

Of course, if Saskatchewan did so alone, it would have relatively little impact on the national exchange rate. That is why Mulcair’s comments were directed at the unbalanced development of Alberta’s oilsands – a larger-scale giveaway of public resources.

But Wall is defensive because he has mimicked and even undercut Alberta by guaranteeing ultra-low royalties to the private corporations that extract Saskatchewan’s non-renewable resources. This policy would be short-sighted even if it had no effect on the exchange rate. Dutch disease, including a proportionally larger loss of manufacturing jobs in Saskatchewan than in the rest of Canada, is just another negative consequence.

Mulcair has articulated a balanced approach to resource development that would generate more public revenue, a more competitive exchange rate, and more manufacturing jobs. Saskatchewan is well positioned to help implement and benefit from this approach by raising provincial resource royalties.

Erin Weir is an economist with the United Steelworkers union, which represents workers in Saskatchewan’s mining and manufacturing industries.

Even before the expansion of the program envisioned in the current omnibus “budget” bill, temporary foreign workers (who do not have the same rights as other Canadian workers, and whose presence here depends entirely on keeping their employers happy) already accounted for almost 30% of all net new paid jobs created in Canada between 2007 and 2011.

The TFW data in the above table comes from the annual CIC tables, based on the stock of TFW workers as of December 1 each year.  Comparing those figures to total paid employment (employees, not counting self-employed) over the same time period, it turns out that over 29% of all net new positions went to TFWs.

The TFW program, therefore, is is not a marginal activity; this represents the core of labour market strategy by employers and this obliging government.   TFW guest workers are not working primarily on farms or in the oil sands; they are working anywhere in the country (over one-third of them in Ontario) that employers complain they can’t find workers to do the right job at the right price.  That, after all, is the essence of the “labour extraction problem” that is at the core of capitalist labour relations (read Chapter 8 of Economics for Everyone for a crach course).  Hence, this initiative by Harper & Co. is aimed at relaxing a fundamental constraint on class relations in our whole labour market, and in that regard represents a very important (and dangerous) shift in the balance of power in our society.

Now, of course, the Harper government has given free reign for employers to tap desperate workers from other countries (with just 10 days’ notice), and given explicit approval to using that supply of labour to drive down Canadian wages.  Allowing TFW employers to pay 15% below the “going rate,” of course, is a moving target.  This practice itself will result in a reduction in the going rate, which in turn will allow TFW employers to pay even less for guest workers in the future.

So we can expect, barring a strong and ambitious fightback, these desperate guest workers to play an even larger role in our labour market than they already have since 2007.

Here is an excerpt from the post:

-

• The resource extractor: they pay royalties (the NWT has the lowest royalties in the world), and costs of production, then sell the resource at a profit. A mine is “economic” when they can make a profit at a level that is worth it to them.

• The Government of Canada: gets all of the royalties; gets all the corporate taxes, gets income taxes. They also hand out various corporate subsidies and tax benefits, but that is another story.

• The Government of the NWT: gets no royalties. They get some taxes, and can tax income on residents, and again on residents and non-residents alike through that lovely payroll tax salaried workers contribute to. They also hand out various subsidies and corporate tax breaks.

• Aboriginal rights holders: if the mine is in your traditional territory, its likely you will get an Impact Benefit Agreement (IBA). That will see several communities sharing yearly cash payments, job quotas, and training opportunities; maybe a few scholarships as well. Terms of IBAs vary.

• Dene Land Claim signatories: there is a provision in the Dene land claim agreements that entitle them to 7.5% of the first $2 million of resource royalties from the Mackenzie Valley each year, and a further 1.5% of additional resource royalties per year.

Check out this fascinating story in Friday’s National Post, by Yadullah Hussain, on why Canada’s oil reserves are such a uniquely hot commodity in the eyes of global oil corporations.

The story explains how private petroleum giants (like Exxon-Mobil) are having a hard time replacing the reserves they produce.  Over 80 percent of known oil reserves in the world are controlled by state-owned companies.  Most major oil producing countries (sensibly, in my view) have decided that management and ownership of this strategic, non-renewable resource should be conducted through government enterprise, presumably in the interests of the citizens who — after all — own the stuff in the first place.  [Of course, democracy is a pre-requisite for ensuring that public ownership translates into public benefit.]

That means less than 20 percent of known oil reserves are available for exploitation by private companies.  Incredibly, well over half of those privately exploitable reserves are in Canada.  Without Canada, private firms like Exxon can tap into only 7 percent of known world reserves.

There is a striking chart that accompanied the print version of the story (but which I can’t find in the on-line version) that listed the countries with the ten largest oil reserves.  Canada was the only one of those ten where the oil industry is not dominated by state-owned firms.  (Canada doesn’t even have a state-owned oil company.)

The article cited Reynold Tetzlaff, energy expert with Price Waterhouse Coopers, as follows: “If you look at the top … countries … for oil reserves, Canada is the only one that does not have a national oil company. We are the only one open for business.”

Given sky-high oil prices and oil profits, and the relentless decline of their existing reserves, the global petroleum industry has their sights set firmly on Canada as a key solution to their long-run reserves replacement problem.  Indeed, even foreign state-owned companies (from Norway’s Statoil to China’s CNPC) are getting in on Alberta’s bitumen action in a big way.  It seems especially ironic that foreign public corporations see value in investing in Canadian oil, yet Canadians presently have no public capacity to do the same thing.

“These large companies need to continue to look for replacement reserves,” Mr. Tetzlaff added.  In other words, Canada will be the hottest target for private oil investment for decades to come.

All that drooling on the part of global petroleum companies over Canada’s oil (which is uniquely accessible to private capital) is the key structural reason why our currency has so closely tracked the price of oil over the past decade.  Our petroleum exports are important, but still constitute just 18% of total exports (including natural gas).  It is not that the world wants more of what Canada produces: if that was true, Canada would not have the enormous trade and current account deficits that we now experience (despite the unsustainable windfall of petroleum exports).  Rather, it’s that global companies hunger for the right to own what’s buried under our feet.  This is reflected in high valuations for Canadian assets (especially anything related to petroleum), and (to a lesser extent) in strong inflows of real foreign investment as our oil resources are steadily sold off to the highest bidder.  This asset market effect, driving our currency far above its fair or sustainable value, is underming our national capacity to produce and sell real stuff to the rest of the world.

As I have argued before, a good way to break this damaging link between oil prices and our currency (the 25% overvaluation of which which continues to devastate all non-resource export industries, including manufacturing, tourism, and tradable services) is to take down the “For Sale” sign currently hanging on our oil reserves.

Following the lead of the vast majority of other global oil exporters, control over the pace and nature of development should be taken back into the hands of Canadians.  The non-renewable wealth embodied in those reserves should be owned and controlled by Canadians, developed in a manner consistent with the public interest — taking into account factors (like environmental sustainability, and spillover Dutch-disease effects on the rest of the national economy) that do not enter the cost-benefit calculations of the private giants hungering for Canadian oil.

Corak helpfully clarifies that the age difference has little effect on unemployment rates. To be officially classified as unemployed, one must be looking for work. The main difference is that Canada considers both “active” and “passive” job-search techniques, while the U.S. counts only the former as unemployed.

Corak’s concluding paragraph begins: “The Canadian unemployment rate would be lower if only those actively looking for a job were used to calculate the unemployment rate . . .” As a conditional statement, that is factually accurate. But it comes just as the Conservatives are proposing to cut off Employment Insurance recipients whose job searches are deemed to be insufficiently active.

A concern brought to my attention by Sam Boshra is that Corak’s wording can all too easily be (mis)interpreted as suggesting that Statistics Canada should adopt the more restrictive American definition of unemployment. Indeed, that is the message conveyed by The Globe’s headline: “A fast way to lower jobless rate: Use U.S. metrics.”

However, Corak has consistently argued that Canada’s official measure (R4) significantly understates unemployment. He is a proponent of the broader R8 measure of unemployment, which includes not only “passive” job-seekers but also discouraged workers, those waiting for jobs and part-timers who cannot get full-time work.

As far as I can tell, the only reason for applying the official U.S. measure to Canada is to produce an apples-to-apples comparison of the two countries. But even worse American unemployment is no excuse to define high Canadian unemployment out of existence.

From an economic perspective, it’s worth noting that enabling unionized workers to opt out of paying union dues would create a classic free-rider problem. Indeed, Wikipedia’s article on this topic uses collective bargaining as an example:

In the context of labor unions, a free rider is an employee who pays no union dues or agency shop fees, but nonetheless receives the same benefits of union representation as dues-payers. Under U.S. law, unions owe a duty of fair representation to all workers that they represent, regardless of whether they pay dues. Free riding has been a point of legal and political contention for decades. In Canadian labour law, the Rand formula (also referred to as automatic check-off) is a workplace situation in which the payment of trade union dues is mandatory . . .

From a political perspective, it’s worth substantiating Mandryk’s observation that this week’s musings directly contradict what Premier Wall said just six months ago during the provincial election campaign. As this screenshot shows, Wall tweeted the following clarification: “no opting out of union dues.”

However, his government’s consultation paper now includes the following question: “Are there any instances where union dues should not be collected in a situation where the employee has opted out?” (page 23).

The paper also contemplates strengthening the duty of fair representation (pages 18-19). Taken together, these proposals would require unions to devote more resources (contributed by dues-paying members) to representing people who choose not to pay dues. The apparent goal is not to “modernize” labour legislation, but to undercut the viability of unions.

http://cutvmontreal.ca/videos/1102

I’m was among a varied group of people who published a declaration tuesday, on May day, in support of the student movement. One of the main themes of our message was to link the conflict around tuition fees to the wider political economy context in Québec. Our argument being that the neoliberal paradigm which inspires much – if not almost all of the economic policy decisions taken in Québec is used and has nothing new or original to offer outside of austerity. We think that the broadness of the movement signals an end of a political economy cycle here in Québec were neoliberalism dominated. This hegemony is of course directly linked to the Charest liberals, but also to elements in the PQ and the new coalition called CAQ. We linked the environmental and labour struggles to the student struggle, which directly challenges this hegemony and calls for the redeployment of progressive alternatives. These links are made every night by the thousands of youth that gather to march in Montreal’s streets. Six of us wrote the original declaration, and then more than 200 well known personalities signed. The wind is blowing once again in Québec !
During the ensuing press conference, we were asked a question in english which I answered here, the whole press conference is available here.

One element that is new is the determination of the movement to continue on and on, even though day in day out columnists, editorialists and the media in general are supporting Charest’s position, publishing their supporters Op ed pieces calling for law and order, repression and painting the students as dangerous and violent terrorists. And this bullying is not working, the movement is evermore determined, and public opinion is less and less supportive of the government. This weekend will be a big test. The liberals are holding a strategic congress, which they have moved from Montreal to Victoriaville, a mid size town outside of the Monteal – Québec corridor. Hundred of buses have been reserved.

The pundits (like Margerat Wente’s ridiculous column this week, so Marie Antoinette….) have been predicting the implosion of the movement since March… they are so disconnected. The don’t understand the movement, nor the political culture that underpins it.

We are seeing a political rift in Québec society between those mobilized for change and a chummy and tired elite that is clinging to a model that people don’t believe in anymore. The students, some workers in the manufacturing sector, members of the northern communities, all are now mobilized against this government.

Have you noticed how common it has become to talk about replacing workers with even cheaper workers? If you’re looking over your shoulder, you’re not paranoid; you’re paying attention. There’s probably a cheaper you out there.  And in Canada, the feds are helping your boss find them.

This week, the International Labour Organization noted there are 50 million fewer jobs in the global economy than before the financial crisis began in 2008.  Some 200 million people are now looking for work, and many of them are on the move. Some have landed here.

But with 1.4 million unemployed, many Canadians, too, are desperately seeking opportunity, and trying to avoid losing economic ground.  As manufacturers continue to decamp to low-wage climes, and the public sector sheds jobs, the job options are sliding down the income scale. There, the growing competition is pushing the pay floor lower and lower.

Why? Canada, oddly, has welcomed newcomers in record numbers throughout a recession even as unemployment rates spiked. But our policies are shifting, and with it the type of labour market and society we are creating.  Today, the preferential nod is being given to a soaring number of temporary foreign workers, or “guest” workers. Make no mistake: These are people who are brought here at the pleasure of employers, and stay at the pleasure of employers.

In 2011 156,000 economic immigrants entered Canada as permanent residents, while 191,000 people entered with a temporary work permit, granted to employers by the federal government.  Many of these permits extend beyond a year, so as of December 1 2011 there were over 300,111 temporary foreign workers employed in Canada, the highest number on record. The number of temporary foreign workers has more than doubled since 2006.

The federal government is promoting the temporary foreign worker program as a solution to skill shortages now faced by employers, particularly in the West. Yet 35 per cent of the nation’s temporary foreign workers are in Ontario, and almost one in five (18 per cent) are in Toronto, which has an unemployment rate of 8.6 per cent. Labour shortage? I don’t think so.

Those numbers will soon rise. Last week, the federal government announced that employers could usher in high-skilled temporary workers like engineers and electricians in 10 days instead of the current 12-14 week approval process, noting this fast-tracking will likely be extended to other categories of temporary foreign workers.  But the fastest growing contingent of temporary foreign workers now are low-skilled workers, whose numbers have grown ten-fold in just five years. This category of temporary foreign workers are not the seasonal fruit-and-vegetable pickers that our nation also relies on.  Low-skilled temporary workers are the people who toil year-round at Tim Horton’s and Canadian Tire, in our abattoirs, nursing homes and hotels, and any workplace where employers say they can’t find Canadian workers willing to work at the offered wage rates.

Disturbingly, the federal announcement also set out new wage rules which permit employers to pay temporary foreign workers up to 15 per cent below the average paid for that type of work locally, sanctioning the creation of a two-tiered “us and them” labour market.

Even if such a rule were rigorously applied and monitored — and budget cuts may eliminate the staff to do this job — it guarantees a downward trend in wages for everyone.  Fifteen per cent below the average is a recipe for continuous decline when labour shortages are filled, as a matter of policy, by those who get paid less and are not allowed to stay long enough to ask for more.

Lower wages for most workers will not be an accidental, unintended result of this federal policy initiative.  Ottawa’s recently announced reforms did not include a change in the four year cap on residency for temporary foreign workers, brought into play in 2011.  That rule guarantees two things: one, employers can minimize the costs of churn; and two, a permanently temporary class of workers is created, keeping wages and expectations low.

The insider/outsider ethos is also reinforced by policy design. The salute to increased use of temporary foreign workers was also not accompanied by increased quotas which the federal government sets for the number of people that provinces can nominate for fast-track citizenship. In Alberta, by the end of 2011 over 58,000 people were working under temporary foreign work permits, up from about 37,000 at the end of 2007.  The province can only nominate up to 5,000 of these workers to become Canadian. The vast majority of low skilled temporary foreign workers have no avenue for permanent residency.

This latest twist in Canadian immigration policy accelerates the growth in income inequality which, left unchecked, can destabilize and disrupt the economy, society, and democratic institutions.

By positioning more temporary foreign workers as the fix for labour shortages — a malaise that will only get worse in the coming years — the federal government is assaulting deep-rooted values that have guided Canada’s evolution as a society.

Even the Chinese railway workers of the 1800s came with “landed immigrant” status. Emphasizing the benefits of a disposable class of workers is a very recent, and unsavoury, development in our history.

This nation was built by immigrants who had a stake in its future.  Together we created an economy which today is the tenth largest in the world.  While the economy will continue to grow, the distribution of the gains from that growth threatens to become rapidly even more lopsided.  Policies like favouring temporary foreign workers over economic immigrants means the next generation of Canadians are all but assured to have a lower standard of living than the current generation of decision-makers have enjoyed their whole lives.

As an economist, I understand cheaper labour will benefit some employers in the short term, though the longer-term results will slow purchasing power and growth.

As a Canadian, I am appalled that public policy can be boiled down to this.  We are all cheapened as a result.

In the meantime, enjoy this interview with the author.

The road to Tevele is red sand and sloppy in the rainy season. The pick- up truck bounces in and out of ruts as we head thirty-some kilometres from Massinga to this out-of-the-way rural community, located between the ocean and Mozambique’s national highway. I am travelling with Dr. Gerri Dickson, director of the Centre for Continuing Education in Health, and two teachers from that institution: Cipriano and Flávia, both of whom studied in Saskatoon as part of their teacher training.

The Centre for Continuing Education in Health has a long relationship with Tevele. The núcleo, a group of leaders selected by the various surrounding communities, meets regularly with staff and students from the centre to address the health needs of the people of Tevele. Over the years, they have selected malaria and HIV/AIDS as areas of focus, and have done various public education campaigns and research projects to try to improve prevention and access to treatment.

Núcleo members, many of them quite elderly, walk for miles to attend the meetings. While waiting for those who are late to arrive, we huddle around a fire built in a hollowed-out section of a large tree to take off the morning chill. After morning tea, a group of keen participants starts a raucous gathering song: “a kama wasiya” (time is running out). It’s a classic, well known by the members, and people clap and dance, animating the meeting grounds.

Like the centre, I also have a long relationship with Tevele. On each of my previous visits to Mozambique, I’ve taken time away from clinical work at the hospital to learn more about working with communities to improve health. The members of the núcleo are now old friends, and each visit feels like a family reunion. In 2007, I spent an extra week in the community, holding clinics and trying to improve my grasp of Xitswa, the local language.

The visitors and núcleo members gather under a large mango tree to start the day’s session. The sun comes out and warms us to the point of leaving our jackets in the back of the pick-up. Part of the opening of every meeting is the singing of the national anthem: Moçambique, Nossa Terra Gloriosa, an event that is taken very seriously. Everyone stands at attention, looks straight ahead and sings in a sombre voice. Passersby on the road to town stop and stand until the song is over. This time, halfway through the second chorus, the rain starts anew. This is no drizzle; it’s a tropical, soak- to-the-skin-in-seconds downpour. Given the solemnity of the song, no one can run and seek shelter. We grin and bear it, watering pouring down our faces as we finish the final lines of the anthem, then run into the newly built community development centre to start our meeting. While the topic is, as always, the health of the community of Tevele, today we aren’t talking about malaria and mosquitoes. We’re talking about money.

The most important determinant of health, much more than access to health care, genetics, or culture, is income. The members of the Tevele health núcleo may not have read the latest research on the social determinants of health, but they see every day the way in which the amount of money people have access to shapes their wellbeing and longevity. Every one of them has lost friends and family members to preventable and treatable illnesses like malaria, HIV, and malnutrition. They see how it is the poorest families that suffer the most, see how for the want of a few meticais a child dies at home rather than reaching the hospital for treatment. One of the younger núcleo members, Senhor Ronaldo, has not been feeling well lately. He has been losing weight and having frequent minor illnesses. His wife had left for South Africa a few years ago and last year she returned. She died a few months later. Many people from the area go to South Africa for work in the mines and other industries there. Coming home sick from South Africa has become synonymous with AIDS. Ronaldo has worked with the núcleo, educating local communities about HIV/AIDS and other sexually transmitted illnesses. He knows very well he should be tested and start treatment if positive, he knows that both testing and treatment are free of charge, but despite that knowledge, he still hasn’t gone for testing. This is not procrastination; he simply can’t afford the 50 meticais (about $2 CDN) to make the trip in one of the battered Toyota pickups that go regularly to Massinga. If he had some form of income beyond what he can grow on his machamba (small farm cultivated by hand) he would be able to access the care he needs. If there were more local income opportunities, perhaps his wife wouldn’t have had to leave for South Africa to make money.

Recognizing how important local sources of income are for their families and their community, the núcleo members have embarked on a program of economic development. With the help of Canadian partners and a group of young people called Zambo ni Zambo (Xitswa for step by step), they have begun a machamba and a carpentry work shop and have recently started to raise chickens. With help from CIDA (the Canadian Internation- al Development Agency), they have built a new “centre of competencies” for meetings related to the economic projects and storage of related materials. Proceeds from the project go to a common account to continue development, with a portion going to individuals involved, depending on the work they contribute. Zambo ni Zambo also works with another of the centre’s partner communities, Basso, on a sewing project and a bakery. The underlying idea is to increase the capacity of the community to sustain itself economically. This allows local people to have more access to gainful employment and income for necessities such as travel for hospital care and medications, simple household goods like blankets, and more varied food than what they can grow themselves. It allows them to find this income closer to home, decreasing the disruption to family life and community health brought by migrant work. This goes step-by-step with the health promotion and disease prevention activities of the núcleo, as rather than waiting for help from outside, the people of Tevele start to take charge of their own development. In the long run, these efforts may prove to be what makes a real difference, helping people like Senhor Ronaldo and his family to do better economically and live healthier, longer lives as a result.

Stories like that of Senhor Ronaldo’s bring home just how important economic opportunities are for health. From Mozambique to Canada and everywhere in between, economics is the primary practical human activity. The exchange of goods and services governs much of our everyday life. The economic success of individuals has the greatest influence on their health, far above biology, access to health services, or culture. That success is also a significant source of social stature.

I mentioned earlier that health care is always at or near the top of the list of public priorities. Its main opponent in vying for public concern is the economy. People recognize how important economic success is for physical, mental, and social wellbeing. The list of determinants of health is topped by income and social status, with the position in the economic hierarchy being the single largest factor affecting health. Income also determines many of the other determinants: the ability to afford child care or higher education, safe housing and good nutrition, leisure and exercise, and in many places access to health services. It is little surprise, then, that those at the top of the scale for wealth are there for health as well.

Nor is it surprising that economic success, such a key tool for reaching our goal of health and wellbeing, can get mistaken for the goal itself. This is a dangerous mistake. When a tool for reaching our goals gets confused with the goals themselves, we lose sight of the end and chase the means. Our political structures seek not to improve economies in order to improve our lives, but simply to improve economies regardless of the effect on people. In this sort of environment, measures of aggregate success such as GDP growth, rather than finer-tuned tools directed to true wellbeing, are used to measure our success as a society. And in such an environment, where the inequality of the distribution of ill health and poverty is not considered, a small number of people may grow very wealthy and well while a far greater number languish.

A recent proposal in Saskatchewan adds another dimension to the debate; apparently it’s possible for a university to create such separation within itself. According to CBC News, the proposal would

split the College of Medicine at the University of Saskatchewan into separate teaching and research arms…Under the proposed restructuring, full-time faculty would spend most of their time on research, while doctors from outside the university would do most of the teaching.

The logic of “differentiation” appears to be as follows:

-It is in everyone’s best interest to see high post-secondary enrollment. (If nothing else, it makes government look good…)

-Historically in Canada, a great deal of teaching has been done by professors who also do research. (In Ontario, it’s typical for a university professor to be expected to teach two courses in the fall, and two in winter term.) When professors are not teaching, they are expected to do a combination of administrative work and research.(It is often said that a professors should spend 40% of their time teaching, 40% doing research, and 20% doing administrative work.)

-Some policy wonks believe it would be more cost effective to have a smaller proportion of teaching done by those who also engage in research. Under the status-quo model, a professor could get $100,000/yr. to teach four courses (…and to do administrative work and research). But under a different model, perhaps $100,000 could buy instruction for eight courses (but without the research).

It’s like an à-la-carte way of ordering new course instructors, the notion being that we’ll pass on the potatoes (i.e. the research), but have a double-order of meat (i.e. the teaching). Put differently, we’ll pay more people to teach courses (which is indispensable), but we could do with a bit less research (which is relatively expendable).

The quest to find cost-savings is certainly one of the stated motivations here.  I think that’s what led to the arguments in Clark et al’s 2009 book and in Clark et al’s 2011 sequel (both of which appear to have the blessing of the McGuinty government in Ontario).

But I think another piece of this is prestige. When the so-called “Big Five” presidents made their pitch, I think they were largely motivated by the possibility of bringing more notoriety to their respective universities. They wanted to party with the big boys, like Harvard and Princeton and Yale. They wanted to win Nobel Prizes.

My main fear with this emerging trend is that I think that, for someone to be a good course instructor, they need to be actively engaged in research. Suggesting that teaching doesn’t suffer when the instructor hasn’t published more than three or four articles in the past decade, in my mind, is exceedingly naive.

If “differentiation” moves ahead, I think the teaching-only components of the system will start to look an awful lot like community colleges.  Most of the best professors will try to avoid them like the plague, and students who graduate from them will have a relatively difficult time getting into graduate school.

I think such a system would move us towards a two-tier system, creating one wedge between “professors” and “course instructors,” and another between students who study at real universities and students who study at fake ones.

While I have guest lectured many times at Port Elgin, I have never actually taught a course there, so this was a great opportunity for me to experience first-hand how our PEL system trains and inspires hundreds of rank-and-file union activists and local leaders every year, through a wide range of peer-taught courses.  The Centre was bursting at the seams with about 250 students in a range of courses – including toxic substances, pride, collective bargaining, and training to be women’s advocates.

My course included 28 willing guinea pigs (first time it’s ever been taught), and naturally we used Economics for Everyone as our textbook.  My illustrated lectures were based on curriculum material I developed for the e4e website (at www.economicsforeveryone.ca); I test-drove most of this material in a series of shorter courses I taught in 2009-2010 for our sister unions in the Antipodes: the Australian Manufacturing Workers’ Union and the Engineering Printing and Manufacturing Union (in New Zealand).

I was just thrilled with the PEL course, mostly thanks to the passion, engagement, and commitment of the students.  We never lacked for Q&A; I didn’t get to finish most of the lectures (which is fine, we all learned more through the discussion).  Group exercises (including analyzing your own collective agreement through the lens of capitalism’s “labour extraction” problem, analyzing corporate financial reports, and developing “alternative budgets” for an imaginary country) broke up the lectures.

Each student had a culminating project to prepare and present to the class, titled “If You Could Change One Thing.”  (In the interests of both academic honesty and continued marital bliss, I must acknowledge my partner Prof. Donna Baines for that title, which she originally used in an academic article she published in 2006!)  Each student had to choose one policy initiative, with any broad connection to the economy, that they believe would make an incremental positive difference to the lived experience of working people.  It could deal with any policy field.  The students were asked to conduct some background research, summarize their arguments on a bristol-board poster, and then present their case to the class.  These presentations occupied the final sessions of the course.

Collectively, these 28 proposals constitute a pragmatic, compelling agenda for progressive change.  Here is a listing of the topics presented:

• Regulate temp agencies to prevent them from skimming wages from precarious workers
• Public pharmacare program to ensure access to medicines and reduce costs
• Financial and organizational support for the formation of workers cooperatives
• Recognize that overall taxes must rise with income levels to pay for needed public services
• Maintain public ownership of hospitals (instead of P3s) to save money, deliver better care
• Proportional representation to ensure a better expression of democratic will regarding economic policy
• Social justice education program in the schools to sensitive students to broader social issues and problems
• Legalize marijuana to reduce policing/prison costs, and collect tax revenues on the legal trade
• Require de-concentration of private media, and better funding for public media
• Support the family unit through better tax credits, better EI & family leave measures
• Mandated expansion of wind power, with Canadian content rules for equipment
• Government program to maximize circular spin-offs from the “economic cycle of life”
• Introduce mandatory ethics education courses in all business schools
• Restore corporate taxes so corporations pay the same share of total taxes as they used to
• Expand public transportation, and reduce fare prices
• Extended producer responsibility laws to mandate & incentivize recycling in all industries
• New regulations limiting the creation & sale of derivatives (following the example of India)
• Provide tax incentives for new business investments, rather than across-the-board tax cuts
• Value teachers as much as we value professional athletes; have a “draft” to recruit the best teachers
• Government funding to pay people for their current unpaid labour (performed in the home & the community)
• Eliminate the temporary foreign worker program; give full labour rights to migrant workers
• Expand permanent immigration so newcomers to Canada have full rights as all of us, and contribute to a growing economy
• Restore corporate tax rates, and implement targeted corporate tax credits for socially beneficial behaviour (like providing workplace child care)
• “Use it or lose it” corporate tax policy: companies must reinvest 90-95% of their profits in Canada, or pay uninvested funds in taxes
• Free tuition for university and college for any students with 70% average or higher
• Legalize sports betting at Ontario casinos to collect revenue lost to illegal betting
• Impose maximum ceiling on CEO compensation relative to average wages
• “Buy local” strategy to educate residents about benefits of buying locally-made products

If 28 engaged union members can come up with a credible, pragmatic reform agenda like this, why can’t our governments?

The only mention of either men or women in the 400-odd page 2012 Budget Implementation Bill is with regards to the appropriate use of donated sperm and ova.

In analysis and discussions of the proposed omnibus bill, differential impacts for women, Aboriginals, racialized persons, newcomers, and *the poor* are frequently left out. It’s hard to blame anyone, there’s a lot to talk about in this whopper.

Still, it’s important to take a moment to ask not only what are the costs and benefits, but who benefits, and who pays the costs. The cumulative effect of regressive policy change adds to growing inequality.

What specifically in this budget impacts women? Here are a few issues that I noticed:

1. Rolling back the age of eligibility for OAS.  OAS & GIS is the only income for many women where they are guaranteed to receive the same amount as men, regardless of their labour force history. For women between the ages of 65 and 69, OAS & GIS make up about 38% of their total income. For men of the same age, it’s 26%. For women between the ages of 65 and 69, OAS & GIS reduce poverty by 21 percentage points. For men of the same age it’s 15 percentage points. It’s clear that rolling back the age of OAS is NOT gender neutral.
2. Working While on Claim EI Pilot Project. The most recent version of the Working While on Claim pilot project allowed claimants to earn either $75 / week or 40% of weekly benefits, whichever was greater. This project had the greatest effect for women, single parents, part-time and temporary workers.This is markedly different from changes announced in the 2012 Budget, which eliminates the option of keeping all of the first 40% of weekly benefits in earnings, and instead only allows claimants to keep 50% of any earnings. For example, under the previous pilot project, a claimant could work about 1 day a week and keep those earnings on top of their weekly benefits. Under the new rules, a claimant would have to work for about 2 days /week to earn the same amount of money, but if they are able to work more, they get to keep half of that too.

   When you consider that claimants may have to pay for childcare or eldercare to return to work, it becomes much less likely that this change will be an incentive for low wage women to take available temporary employment while on claim.

3. Public Sector Cuts. Public sector cuts disproportionally affect women as both employees and as users of public services. Public service cuts are a particular issue for low-income women, aboriginal women, persons with disabilities, recent immigrants, and rural women. In Canada, public services play an important role in reducing inequality, and cuts to public services are bound to result in increasing levels of inequality for women and other vulnerable groups.
4. Research and Advocacy for Women’s Issues. Budget 2012 eliminates the National Council of Welfare and the Centres of Excellence in Women’s Health, and places significant pressure on Statistics Canada. The resources that charities devote to political advocacy are to be more closely monitored, silencing dissenting voices.

What’s left out?

1. Access to EI. Only 37% of unemployed women were able to access regular benefits in 2011, compared to 45% of men. Women’s work patterns are still very different from men’s. Women are far more likely to work part-time, and still have a wage ratio of about 71-74% when compared to men with the same level of education. While half of men still work a standard 40-hr week, women are more likely to work 30-39 hrs, even if they are employed full-time. This means it takes longer for most women to qualify, and when they do qualify, their benefits are lower. There is nothing in this budget that addresses the reality of precarious work and the numbers of workers that are unable to access benefits. A national uniform entrance requirement of 360 hours would reach more vulnerable workers.
2. Childcare. Reviews of Quebec’s affordable childcare program show that it results in women returning to the labour force, and that governments benefit from this increase in income tax revenue. There are benefits to children, mothers, families, and communities. This is compared to the UCCB, that has no demonstrable benefit whatsoever.
3. Violence against women. Economic inequality makes women more vulnerable to violence. You might think I’m stretching here, and I’m not saying that pay equity will eliminate violence against women. But my point is that economic equality has far reaching implications, and ones that you might never have considered if you didn’t sit down and explicitly employ a different lens.

In Calgary, I arrived in time for the final weekend of the Alberta provincial election. The Wildrose Party was poised, given the polls and political scuttlebutt, to become the new government, toppling the long reign of the PC Party. Wildrose is very much a Harper proxy, run by the same political consultants that guided him to power. And quietly backed by the powerful oil patch. Wildrose also had wrapped itself in bigotry, reflected by a couple of its wannabe MLAs who condemned gays and made tactless remarks about people of colour. The immature party leader, Danielle Smith, refused to condemn or dump them, which made Albertans come to their senses and vote back into power the moderate PCs. Still, the whole exercise reflected the alarming rise of the right-wing corporatist, pro-privatization and bigoted elements that is stalking the land.

In Montreal, the city felt a little under siege as a 10-week-old students’ strike dominated the news. You didn’t have to travel far to find demonstrators and the ubiquitous cops on street corners. The strike is our first flame of a fightback against the austerity, downloading and cutback agendas of the neo-liberal governments we are saddled with. The Charest government tried to split the students’ movement by refusing to negotiate with its more radical faction. By this past weekend, the students had refused to back down from its demands to freeze student tuition fees and had rejected Charest’s offer to settle the matter.

In Ottawa, I visited local media outlets, including the CBC, Sunmedia, The Hill Times and CFRA. And the news was not good. People were still bitter about the demise of Nortel, while the Harper government’s draconian cuts were sending tremors through the civil service. I came across a great column in the Times by Susan Riley entitled “Standing up for the rich” that listed how the Harper Cabinet “cannot be faulted for turning their backs on the wealthy. On the contrary, upper middle class, and even the very rich, Canadians have been protected at every turn from recent economic upheavals and the envious grumblings of the lower orders. Their taxes are not going up as the income gap grows. Their pension options are multiplying rather than shrinking.” In the same issues of the Times, another article documented the fears of PSAC that the layoffs of food inspectors might cause another repeat of the 2008 listeriosis outbreak. Meanwhile, my friends at the CBC told me about the impact of the latest rounds of cuts to the once venerable institution.

On my flight back to Toronto and then onto Miami to attend a conference on offshore banking, West Jet lost my luggage (and then took more than a day to deliver it to me) revealing how the private sector’s so-called efficiencies are mythical as they work with undertrained and understaffed and underpaid workforces.

The conventional narrative about the performance Canada’s big banks during the financial crisis goes as follows: while American banks bet heavily on sub-prime real estate and had extensive shadow bank holdings, Canadian banks did not.

However, the details of exactly how much each Canadian bank received, when they received it, and what they put up as collateral, has remained locked away at CMHC and the Bank of Canada.  Not even Access to Information requests have been able to free this information.

In this study I estimate that, at their neediest, Canada’s banks had received $114 billion in support, a figure equal to 7% of the size of Canada’s economy in 2009.

This is equivalent to $3,400 for every man woman and child in Canada.

It is almost 10 times more than the auto bailout for which Canadians put up $14 billion and for which the loan portion has been repaid.

During the financial crisis, Canadian banks accessed three separate programs from both the Canadian and U.S. governments. Canadian banks received $33 billion dollars (converted to $CDN) through the U.S. Federal Reserve programs. At the same time, they also accessed $41 billion at the peak of the crisis through a nearly identical Bank of Canada loan program. Finally, they received $69 billion selling mortgages to CMHC for cash.  These peaks occurred at different times.

Canada’s Big 5 banks drew on government support programs for an extended period from October 2008 through June 2010.  In other words, Canadian banks continued to rely on government supports for one and a half years, well after the financial crisis had subsided.

The largest recipients of aid were Scotiabank, Royal bank and TD Bank. They received an estimated $25-26 billion at their peak.  CIBC received somewhat less money: an estimated $21 billion at peak.  BMO received an estimated $17 billion.  Most of these peaks, except for TD occurred in the early months of 2009.  TD peaked much later in September 2009. (See charts below)

The banks are very different sizes in terms of market capitalization.  Royal is the biggest and BMO is about a third the size or Royal.  So I’ve also adjusted the figures for the size of the banks.

On the relative side, three of Canada’s biggest banks, Scotiabank, Bank of Montreal and CIBC, received estimated peak support that at some point was equal or greater than the value of the company itself.  That is to say that at some point during the financial crisis, it would have cost less money for the Canadian and U.S. governments to have bought every single share in these companies rather than providing them with support. (see charts below)

CIBC in particular received estimated aid worth at peak 1.5 times the value of the company, it spent the better part of the first three months of 2009 underwater.

The federal government claims it was offering the banks ‘liquidity support’ but it looks an awful lot like a bailout to me.  Whatever you call it, government aid for the country’s biggest banks was far more substantial than the official line would suggest.

It is worth noting: Over the entire aid period, Canada’s banks remained profitable, reporting $27 billion in total profits between them and the CEOs of each of the big banks were among the highest paid Canadian CEOs. Between 2008 and 2009, each bank CEO even received an average raise in total compensation of 19%.

In the U.S., they called these sorts of programs: bailouts, in Canada we call them backstops.  In the US, they have released the full details of the support, in Canada those details remain secret.  It is time for the government to come clean with the actual figures of how much support each bank received, when they received it and what they put up as collateral.

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Oil and gas extraction as well as hard-rock mining decreased due to temporary shutdowns. However, the most dramatic decline was in potash production, down 19% due to mine closures in Saskatchewan. The provincial government, which is budgeting a substantial increase in potash revenue for the coming fiscal year, must hope that this slowdown proves to be temporary.

Manufacturing had been a bright spot in the otherwise lacklustre economic news of recent months. There were signs of a nascent recovery driven by the auto sector. But in February, manufacturing declined by 1.2% after five consecutive monthly increases.

There was also a striking revision of previous data on durable-goods manufacturing. Last month’s release had indicated that durable goods expanded by 0.8% in January. This morning’s release changed that figure to a decline of 0.2% while also reporting a further decline of 0.9% in February.

The apparently positive trend in Canadian manufacturing is now in doubt. Weak manufacturing makes Canada’s economy even more dependent on inherently volatile extractive industries.

February’s drop in resource and manufacturing industries was cushioned to some extent by stability in the public sector. That may not be the case in future months as government austerity takes hold.

While I encourage readers to read his full post, I do want to use the present space to make mention of three important points he makes:

-On a per capita basis, Quebec spends more on government programs than most other Canadian provinces.

-Residents of Quebec pay more personal incomes taxes than any other province.

-Quebec’s debt-to-GDP ratio is significantly higher than that any other Canadian province.

He argues that, in light of the above, “Quebec is in a bind, stuck between a rock and a hard place.”

While I believe Luan makes an extremely important contribution to the debate, I think it’s crucial to make mention of the role of the federal government.  I would argue that successive federal governments have in fact brought on this so-called crisis.

When Paul Martin was federal finance minister, he brought in several tax reductions.  One was the $100-billion tax-cut package he brought in with the 2000 federal budget; he also brought in important reductions to capital gains taxes.  By the time Chretien/Martin left office, the federal government’s fiscal capacity (annually, and assuming a balanced budget over the business cycle) had been reduced by approximately $30 billion.  After the Harper government came to power in 2006, this trend continued, as the Harper government continued what Chretien/Martin had started (including a reduction in the GST).

It therefore won’t surprise many readers to learn that, while the federal government at one time covered 80% of a typical Canadian university’s operating budget, today the federal government covers just 50% of a typical university’s operating budget. If you’re a federal government, it seems you can’t have your cake and eat it too!

Thus, I would argue that the current “crisis” in Quebec over tuition fees has been largely created by successive federal governments that have defunded Canadian universities, indeed putting provincial governments “between a rock and a hard place.”

And if successive federal governments have taken us in one direction on taxation levels, they also (if they so choose) have the option of reversing course. What goes up can also go down, and vice versa.

Finally, I feel it would be irresponsible for me not to point out that there are schools of thought (ones that are becoming somewhat more prominent in light of the financial crisis) that do not accept a lot of the limits and boundaries of neoclassical economics. Some economists have argued, for example, that if a central bank keeps real interest rates low (but positive) over the long term and allows for moderate inflation, a country with its own currency can increase spending very substantially over the long term without increasing taxes.  PEF Blogger, Arun Dubois, has blogged extensively about some of these other perspectives.

Climate change will shape BC in 2035, one way or another

We live on a different planet from the one our parents grew up on, says environmentalist Bill McKibben. Climate change from our rampant combustion of fossil fuels has pushed the world into a new era of bizarre weather anomalies.

In BC, warming has been greater that the global average, with costly consequences, including the pine beetle epidemic, downtime for ferries and highways, raging forest fires and flooding.

The big question is whether carbon emissions can be stabilized at some level by human collective action, or whether we will soon pass critical thresholds that will trigger a runaway climate change scenario.

Canada has recently thumbed its nose at global negotiations, in favour of digging ever deeper into the hole of extreme energy that is causing the problem. Even though climate costs are mounting – in Canada and especially in poorer and more vulnerable countries – the immense profits from our exports of coal, gas and oil dominate Canadian politics.

British Columbians in 2035 will be facing a variety of climate-related challenges to a decent quality of life. Food supplies from California will dry up; storms will be more devastating; animal and plant species will be threatened. Even if we are lucky, climate impacts in other parts of the world could lead millions to our shores.

High and growing inequality undermines trust in our fellow citizens, and threatens to erode the social foundation of this future. As federal and provincial governments tear page after page from the social contract, we are moving to a society where you are on your own.

Our current period of official denial cannot last much longer. It may, tragically, take another Katrina-scale disaster, or two or three, but sooner or later, the realities of climate change will catch up to Canadian and US politics.

BC should not get caught flat-footed, but instead the province needs to be proactive to address our share of carbon emission reductions. The good news is that in doing so we can seize new economic opportunities offered by the transition to green jobs and sustainable production. BC’s baby steps on climate action are a plus, and we have the smarts, the technology and institutions to re-write this story.

BC is ideally poised to show the rest of the world what a 21st century sustainable economy can look like. A wealthy part of the world, blessed with abundant resources, BC has a moral obligation to take a leadership role. But it’s also good economics — despite brash claims about job creation, mining and oil and gas only employ about 1% of BC’s workers. There are far more jobs to be had in green alternatives.

Putting climate action at the heart of BC’s industrial and employment strategy requires that BC rapidly shift off fossil fuels. By 2035 we could be very close to zero carbon. But that means having the political will to say no to the proposed Enbridge pipeline, to shale gas fracking and liquid natural gas terminals. And unlike the current “BC Jobs Plan”, it means aspiring to be more than a peddler of fossil fuels in global markets.

The great transition also requires we break out of a mindset based on individual green consumption towards collective action and structural changes.

First, public control over (largely renewable) electricity infrastructure is a vital advantage for BC in a shift to a zero-carbon future. Conservation and major efficiency gains are low hanging fruit, supplemented by district energy systems and small-scale renewables (like solar hot water systems). Retrofitting BC’s housing stock and commercial buildings will also support thousands of jobs.

Second, we must redesign urban spaces into “complete communities” where people do not have to travel very far to get to work or to meet day-to-day needs, making it possible to walk, bike and use high-quality public transit. These communities include a mix of housing types (including affordable housing options), decent jobs, public services and spaces, and commercial districts.

This way of designing communities levels the playing field for seniors, youth, people with disabilities, and low-income families so they can live and move easily, even if they are not able to drive or cannot afford a car. It also means families are not forced to choose between long commutes by car and even longer commutes by transit.

Building retrofits, public transit and so forth will not be cheap. But there is a logical and obvious revenue source to make it happen: a carbon tax. At $200 per tonne by 2020, this would close the gap between BC and European gas prices, and raise billions per year. A portion of the revenues should be transferred back to low- to middle-income households to ensure none are left behind.

Importantly, we face a political problem not a technological one. We will still have to deal with the fallout of climate change, but done well, a bright green future would go hand in hand with better health, stronger communities, and improved quality of life.

According to the article:

In the last few days, Quebec’s student protests have received coverage in French news outlets like Le Monde and Agence France-Presse, in Australia, in New Zealand, and in the U.S., including on CNN.

A New York Times blog suggested tuition fees and student debt could become a key theme in President Barack Obama’s bid for re-election as the president tries to energize young voters. The “French-Canadian students” were cited as an example in the tuition debate, as part of an international outcry against the high price of education.

He points out that, when one adjusts for inflation, Quebec tuition fees are headed into uncharted territory. Indeed, contrary to some recent spin from the Charest government, Tremblay-Pepin makes two important observations:

1. When one takes an average of Quebec tuition fees over the past45 years (using constant dollars), current Quebec tuition fees are significantly higher than the 45-year average.

2. The tuition-fee increases being proposed by the Charest government would bring Quebec’s tuition fees to their highest levels ever.

The above observations call into question what the Charest government actually means when it asks today’s generation of Quebec students to “pay their fair share.” Or, as they say in French, “faire leur juste part.”

I should note that Mr. Green is the author of several books, including:

-How the Granola Crunching, Tree Hugging Thug Huggers are Wrecking our Country;

-Mayday Mayday. Curb Immigration. Stop Multiculturalism Or It’s The End Of The Canada We Know;

-Here’s Proof Only We Conservatives Have Our Heads Screwed On Straight 

(Rest assured that Mr. Green is no more subtle on-air than when choosing titles for his books.)

You can listen to the 24-minute audio clip here.

Points I raised during the show include the following:

-Senior levels of government in Canada used to cover 80% of the operating grants of Canadian universities. Today, the figure is 50%.

-The percentage of Canadian post-secondary students who work during the academic year has doubled since the mid-1970s.

-Quebec has the lowest tuition fees in Canada. It also has substantially lower student debt than many other provinces. The average fourth-year undergraduate student in Quebec who holds student loans has $11,000 less student debt than their Ontario counterpart.

-Newfoundland and Labrador, which has invested substantially in post-secondary education in recent years (and now has tuition fees that are almost as low as in Quebec), is seeing positive outcomes.  In the late-1990s, 20,000 persons in Newfoundland and Labrador had student debt. Today, just 8,000 of them do.

-Two years ago, Leger Marketing conducted a major survey of Quebec university students; more than 12,000 undergraduates were surveyed. Findings include the fact that more than 50% of Quebec’s undergraduate students live on less than $12,000/yr. (this includes funding from all sources, including scholarships, government grants/loans and money from family); 40% of Quebec undergrads receive no financial assistance whatsoever from their family members; and more than half of full-time undergraduate students in Quebec receive no financial assistance whatsoever.

-I made two points about household debt as well.  First, it’s grown very significantly in Canada over the course of the past two decades. Second, those carrying  the most household debt are persons aged 25-44, precisely the group that also faces the largest amounts of student debt. Ergo: if we want to get household debt under control, increasing student debt levels is not going to help.

I’d point readers of this blog particularly to page 2 where the impact of budget cutbacks, both federally and provincially, are aggregated, not only in their real GDP impact, but also in their employment impact.  That is to say that when governments cut spending, jobs are lost as a result and those jobs are not only government workers, but also private sector workers.  The PBO estimates that the aggregate employment impacts of federal and provincial cutbacks will be over 100,000 jobs by 2014 and 2015.

The outlook also points out the historic lows in both program spending and  budgetary revenues.  Program spending will hit 5.5% by 2016, we have never seen such a small federal government footprint on Canada’s economy in the post-war period.  Budgetary revenues are no better off sitting at or below 15%, again an historically low tax rate severely limiting the federal government’s ability to create positive change.

Last but not least, on page 27, the PBO now appears to be including three measures of inequality in its boiler plate reporting.  You won’t find that in the federal budget even if the PBO places it on the second last page.  Putting inequality on the same plane as GDP projections continues to highlight its importance as a central part of any Canada’s economic state.

Mr. Carney’s remarks had an obvious underlying motivation:  one important concern restraining any future interest rate tightening by the Bank is its concern over a subsequent upward shock to the loonie (which would further batter our already-weak trade performance).  By encouraging currency traders to interpret the dollar’s value more broadly, Carney is trying to short-circuit that kind of reaction.

Moreover, I would argue, there are deeper questions regarding the nature of the “transmission mechanism” by which changes in the oil price would indeed impact the exchange value of our loonie.  The statistical correlation between the two variables seems undeniable: a simple first-difference regression finds that oil prices explain 86% of the variation in the dollar (as described in the CAW’s recent paper on auto policy, “Rethinking Canada’s Auto Industry“, p. 15).  But what explains this link in behavioural terms?  That’s a question that is rarely asked.

Many analysts explain the link simply as reflecting “strong world demand for the things Canada produces.”  This is not directly true.  Canada’s exports of petroleum and a few other staples have boomed, it’s true (both because of growing real quantities and rising unit prices).  But Canada’s overall trade balance has sagged badly during most of the last decade’s energy boom.  The decline in non-resource exports of all kinds (both goods and services, undermined by the overvalued currency) has far outweighed the expansion in resource exports.  In sum, we presently run a current account deficit worth some $50 billion at annualized rates.  That’s a much bigger deficit than the federal government deficit (and much more dangerous, I would argue), yet it gets a fraction of the public attention.  If the world really wanted more of Canada’s output, we wouldn’t be experiencing this contractionary deficit.  (Arthur Donner and Doug Peters recently shone some badly needed light on the current account deficit in this Globe and Mail op-ed.)

The link between real FDI flows (in and out) and the level or change in the dollar is a more realistic possibility, but still not fully convincing.  To be sure, many petroleum companies and projects have been acquired by foreign companies and investment funds, and more are on the shopping list.  In total, however, Canada has been a significant net exporter of FDI since 2007 (after the completion of the extraordinary wave of foreign takeovers that year), which should imply a lower demand for loonies (and hence a lower exchange rate).

I think the link between oil prices and the dollar is experienced more broadly in the form of enhanced foreign appetite for Canadian assets (and especially resource assets) more generally.  That doesn’t require actual FDI flows, or capital flows of any kind, since forward-looking currency traders will build those expectations of value into their judgments and portfolio decisions.  Petroleum super-profits have made Canadian resource companies attractive assets for investors of all nationalities.  Substantial corporate tax cuts reinforce this unique profitability.  Meanwhile, Canada is unique among major oil-exporting countries in having virtually no limitations on foreign ownership of the non-renewable resource itself.

I recently wrote a “primer” on the determinants and effects of the Canadian dollar for Relay (the journal published by the Socialist Project).  There (and elsewhere) I have argued that the link between the price of oil and the currency could be broken by measures aimed at slowing and more carefully regulating the pace of energy developments (especially in the oil sands), reducing the profitability of those projects (through higher taxes and royalties), and by restricting foreign ownership of petroleum assets.  Structural measures like that would be more effective in the long-run, I suggest, than traditional central bank interventions (selling Canadian-dollar-denominated assets in international markets), and certainly than “jawboning” by the central bank.

The Centre for Spatial Economics concludes that the Liberal budget presented last month would subtract 0.6 from provincial GDP growth and eliminate 105,000 jobs (65,000 public and 40,000 private) in 2015. Removing over $20 billion from Ontario’s economy would in turn reduce annual provincial tax revenues by over $2 billion.

It’s worth noting that the economic cost of provincial austerity would be in addition to federal austerity, which is already having a visible effect in Ontario.

The New Democrat proposal would actually produce a top combined marginal rate of 49.5%. (Reynolds got this figure right in his prior column on the subject.)

As far as I can tell, Reynolds arrived at $247,000 by multiplying $500,000 and 49.4%, treating a top marginal rate as though it were a flat or average rate. In fact, the New Democrat proposal would apply only to income in excess of $500,000. Taxes on the first $500,000 would not change.

One has to wonder whether similarly fuzzy math underlay Reynolds’ previous claim: “People who make more than $500,000 already work full-time for the state (federal, provincial and municipal) for perhaps eight months a year.”

An Ontarian with $500,000 of taxable income and only the basic personal credits in 2011 would pay $133,325 of federal income tax (($500,000-$128,800)*29%+$27,256-$10,527*15%), $52,273 of basic provincial income tax (($500,000-$75,550)*11.16%+$5,364-$9,104*5.05%), $26,578 of Ontario surtax (($52,273-$4,078)*20%+($52,273-$5,219)*36%) and $900 of Ontario health premium.

So, the maximum income tax payment on $500,000 is $213,076. Of course, Reynolds’ claim of eight months of servitude also includes property tax and HST.

If our imaginary rich guy owned a $5-million mansion in Toronto, he would pay property tax of $39,646 ($5,000,000*0.7929218%). If he somehow managed to spend all of his after-tax income on goods and services subject to HST, he would pay $28,448 of HST ($500,000-$213,076-$39,646 =$247,278=$218,830*1.13; $247,278-$218,830=$28,448).

These extreme assumptions would bring his total tax payments to $281,170 ($213,076+$39,646+$28,448). That’s 56% of taxable income, which corresponds to below seven of twelve months.

The same calculations for an Ontarian with a million dollars of taxable income and a $10-million mansion produce a total tax bill of $579,129 ($445,124+$79,292+$54,713). That’s 58% of taxable income, which is still below seven months.

The New Democrat proposal would not affect the first rich guy. But it would increase the even richer guy’s taxes to $592,935 ($460,724+$79,292 +$52,918), 59% of taxable income or just over seven months.

There’s a family that comes frequently to the West Side Clinic; we’ll call them Lucas and Annie. Hardly a week goes by that I don’t see them in for a medical visit or just hanging out in the waiting room. They both have chronic medical conditions; he’s had some trouble with the law; they’ve struggled with addictions. They can be friendly and charming, and they can be absolute pains. One of their daughters, Jaelynn, got sick a couple summers ago. Nothing too serious, but it required some specialist visits and more frequent follow-up with our clinic.

That was the summer we first started to see a new kind of homelessness in Saskatoon. The shelters at the YWCA and the Salvation Army were always full. There were more tents in the parks by the river. And in the mornings at West Side there was a line-up for the waiting room because people needed to have a place to hang out all day when they weren’t welcome in the shelter or at the house where they were couch-surfing. Lucas got picked up for missing parole and had to spend thirty days behind bars. With him unable to contribute, and rent getting raised, they lost their apartment.

Annie would get a room for a week at the Y, or they’d convince a cousin to let them stay on the couch for a few days. Despite being hobbled with arthritis, she’d walk for hours with Jaelynn each day in search of an apartment. When Lucas got out, they tried going to his home reserve, but the housing there and in the town nearby was full as well. Despite all this transience, they kept up pretty well with their own medications, didn’t end up using again, and got Jaelynn to all her appointments. She was improving quickly, and didn’t need any serious treatment. However, after a few months back and forth in temporary housing, Social Services decided that they were not doing a good enough job of parenting and Jaelynn was apprehended into foster care.

Aside from the madness of trying to help children out of poverty by taking them away from their parents, this story illustrates an essential point. While the newspapers were talking about Saskatoon’s housing boom, many families were going bust. The truth is that when the tide rises, especially if it does so quickly and wildly, the littlest boats get swamped.

This type of story is distressingly common. Economic growth across Canada has not been equally distributed. The gap between the rich and poor continues to grow, with the top forty per cent of earners experiencing real increases in wealth, and the bottom sixty per cent actually losing income relative to thirty years ago.Canada’s income inequality is worsening more quickly than it is in our historically less equal neighbour, theUnited States. This has happened in Saskatchewan as well, with the wealthiest ten per cent of families earning more than the bottom fifty per cent combined. With prices rising along with wealth, the purchasing power of the average family is falling despite economic growth.

This is not fair. It also costs way too much — in social services, in lost productivity, in lost lives. The question isn’t whether we can afford to do something about it. We can’t afford not to. The question is, what can be done? How can a government act to change this? It’s hard for political leaders, caught up in the glitter of boom times, to put on the brakes. This is especially the case when the prevailing orthodoxy is that since growth is good, then more growth, faster growth, is ideal.

Opening the Toolbox

There is a vocal group of economic thinkers who claim that what must happen is for government to get out of the way. If we simply allow the rational behaviour of people seeking their own interests to run free, then we will all benefit. The invisible hand will sort it all out. It’s a pleasant notion, this idea that if people simply follow their own desires everyone’s lives will improve. Unfortunately, that is like trying to reach your destination by heading in the opposite direction. People following their own wants cannot meet everyone else’s needs. Growth, unless deliberately directed, results in the concentration of wealth among the few and increasing poverty among the many. The hand of the marketplace is not only invisible, it is also blind. It needs the guidance of our goals as a society.

We need to change the way we talk and think about the economy. A shift away from measuring our societal success by purely economic criteria could allow us to do so. The economy is an essential tool for reaching our goals of full health for all, but it is not the goal itself. Once we realize that, once we put the economy in its proper place as a tool, once we treat it as neither a force of nature beyond our control nor our ultimate goal, then we can start to use it wisely. That opens up all sorts of possibilities.

Economic management has been characterized, with great variation in the degree of each, by two main approaches, laissez-faire vs. state-involved. The former is characterized by a lack of regulations and minimal taxation, the idea being that economies function best unhindered and that external corrections are inherently damaging; somehow, if trade were truly free, if the invisible hand was given full rein, all would be well. The latter assumes that, since the purpose of the economy is its usefulness as a tool to reach societal goals, society should take control; if we plan and design well, all will be well. It is characterized by subsidies and regulations, often determined less by economic purposes than by political ones as politicians seek re-election. In such a system where supply, demand, and consumer choice lose their corrective force, we see stultification of growth and innovation, rampant corruption, and economic decline.

As tends to be the case, when we are presented with polar opposites, the truth is somewhere in between. The worst systems have been those in which either approach was taken as dogma.

The principles to preserve here are:

1. allowing space for innovation and growth (and failure and rebuilding) in a way that encourages entrepreneurship and hard work.

2. creating a system that is fairly and usefully regulated, allowing for citizens and companies to participate confidently in the economy.

3. identifying goals for the economy beyond its own proliferation. This returns us to the notion of meaningful outcomes. Just as in patient care, if we are looking to build a healthy society, we must know what that means.

The economy is not just any tool. It’s the principal form of interaction in public life, and much of private life. But it is not that life. The first suit jacket I ever owned was a hand-me-down I wore to my med school interview. It didn’t fit me very well and still doesn’t. But in the pocket is a piece of paper with a quote from the Renaissance physician Paracelsus that I hoped, and still hope, would guide me in my decisions as a doctor:

If the physician understands things exactly and sees and recognizes all illnesses in the macrocosm outside man, and if he has a clear idea of man and his whole nature, then and only then is he a physician. Then he may approach the inside of man; then he may examine his urine, take his pulse, and understand where each thing belongs. This would not be possible without profound knowledge of the outer man, who is nothing other than heaven and earth.

Just as we are so much more than the mere workings of our organs, our lives are so much more than the workings of our economy. The World Health Organization definition of health as full social, mental, and physical wellbeing seems to me an apt description of what our real goals are our meaningful outcomes.

Having understood that we have health as our goal, the question is, how do we work with the economy to reach that goal? The economy is a tool to make our lives better. If it fails to do so, we’re not using it right. How can we use it more wisely?

The evaluation of any economic strategy (be it intervention or observation) must include not only the question, “Will it work?” but also, “For what (and whom) will it work?” In what way will it affect the economy, and will that effect be in line with our real goal, a healthy society?

This allows government to take the most important step: to see the economy as the vehicle we use to reach our goals, and economic policy as the toolbox that is key to maintaining the vehicle. We must not be the proverbial men with hammers to whom every problem resembles a nail. This is where you get into trouble — when tax cuts or tax increases, privatization or nationalization, become the approach taken to every problem. The appropriate role of government in different industries at different times is one of active intervention or benign neglect. What is needed throughout is not a fixed ideology, but attention and intention, especially in times of growth. If we understand what we want out of our economy, then we’ll know how to manage it. If we use the tools wisely and appropriately to produce meaningful outcomes for the needs of the time, then that management will be effective. If not, the vehicle begins to drive us.

I am glad to learn that Mr. Murphy does not feel inhibited when it comes to expressing himself.  However, I think his analysis would be stronger if it included a bit of nuance.

I would urge Mr. Murphy to consider the following:

First, as recently as 1979 in Canada, government grants covered 80% of a university or college’s operating budget.  Today, they cover approximately 50% of a university or college’s operating budget.  Times have certainly changed.

Second, indicators gathered from reliable survey data paint a troubling picture of living conditions for post-secondary students in Quebec.  Relatively recent data suggest the following:

-50% of full-time undergraduate students in Quebec live on less $12,200 per year.  This includes any funds from internal and external scholarships, money from co-op programs or internships, government grants or loans, money from family and child support.

-40% of undergraduate students in the province receive no financial assistance whatsoever from their family members.

-More than 80% of Quebec’s full-time undergraduate students are gainfully employed.  Of those who are gainfully employed, roughly half work more than 15 hours per week.

-Two-thirds of full-time undergraduate students in the province do not live with their parents.

-20% of Quebec’s full-time undergraduate students over the age of 24 have at least one child of their own.

-More than half of full-time undergraduate students in Quebec receive no financial aid whatsoever.

-57% of Quebec’s full-time undergraduate students pay more than 30% of their income on housing. (Note: Canada Mortgage and Housing Corporation considers a household to be in “core housing need” if it cannot find suitable, adequate housing in the local market without paying more than 30% of its income on housing.)

Third, Quebec’s lower tuition fees appear to bring about positive outcomes.  Though Quebec does have the lowest tuition fees in Canada, it also has higher post-secondary participation rates than in the rest of Canada.  It should also be noted that students in Quebec typically graduate with considerably lower student debt than their counterparts in Ontario, which has the highest tuition fees in Canada.

What’s more, in Newfoundland and Labrador, where the provincial government has increased funding for post-secondary education in recent years and reduced tuition fees such that they are now among the lowest in Canada (almost as low as Quebec), enrollment has increased quite substantially, and student debt has decreased very substantially.

Clearly, there is more to the Quebec student protests than meets the eye.  One can choose to condemn them.  One can also seek to understand them.

Higher interest rates are not warranted to combat already low inflation, but could derail Canada’s fragile economic recovery by increasing borrowing costs and driving up the overvalued loonie. The latest OECD data on purchasing power parity indicates that the loonie should be worth 76 American cents.

The fact that financial markets price Canadian exports at a far higher exchange rate is producing a huge trade deficit. Higher interest rates would aggravate this imbalance, which the Bank of Canada has identified as a drag on economic growth.

Accommodative monetary policy will also be needed to cushion the effect of tightening fiscal policy. With both federal and provincial governments cutting back, Canada’s economy is not well positioned to also absorb higher borrowing costs and an even higher exchange rate.

The only seemingly legitimate rationale for higher interest rates would be to curtail household debt. However, consumer borrowing can be addressed through financial regulation rather than monetary policy.

A positive feature of today’s Consumer Price Index figures is that Canada’s average hourly wage has finally increased more than inflation (2.6% versus 1.9% in March). But Ontario wages continue to lag behind provincial inflation (1.8% versus 2.2%).

UPDATE (April 20): Interviewed on CityNews and BNN (video)

UPDATE (April 21): Quoted in today’s Financial Post and other Postmedia newspapers

A recent CBC News article  underlines how perilous such recruitment of post-secondary students from abroad can be, and why it is important that lines of accountability be clear.  The article reports on how a “University of Winnipeg recruitment agent” overcharged students who had recently been recruited from China.  The students were charged as much as $3,000 per month for room and board.

The students in this case attended the University of Winnipeg Collegiate, which appears to be the high school equivalent of a pathway college.  It is located on the campus of the University of Winnipeg, and the CBC article states that it is “part of the University of Winnipeg.”

Two quotes from the article really struck me.  The first is from the senior adviser to the President of the University Winnipeg.  In reference to the overcharged students, he said: “Their parents entered into a relationship that was outside of the purview, and a contract outside of the institution’s awareness and purview—and in that sense, legal responsibility.”

The second quote is from Elizabeth Saewyc, a University of British Columbia professor who has done research on students in similar ”homestay” arrangements.  In reference to the issue of who’s responsible for the overcharging in this case, she says: “This lack of sort of figuring out who’s in charge really creates the opportunity for kids to fall through the cracks.”

I think this story underlines the importance of clear lines of accountability when Canadian universities recruit students from abroad, especially when it’s done on a for-profit basis.  When private actors enter into such “partnerships” with Canadian universities, who—if anyone—is accountable?

I interrupt your regular blog viewing to bring you one of my infrequent posts, this time by a guest contributor — Alan Milner — who for reasons of job security, must remain anonymous.  With no further ado:

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A  Bank for the Taxpayer’s Buck?

The Canadian tax system provides a variety of incentives meant to support the productive players of our economy. But what if a particular type of tax incentive such as the dividend tax credit, initially intended to encourage investment and risk taking, became misused by Canadian banks to design riskless or unproductive operations? And what if these operations were engineered with the sole aim of making a profit at the expense of the public purse?

On April 2, 2012, the U.S. Commodity Futures Trading Commission (CFTC) filed a lawsuit against the Royal Bank of Canada (RBC). The U.S. CFTC alleges that a small group of RBC executives carried out hundreds of millions of dollars of “wash trades” between “at least” June 2007 and May 2010 in countries and tax havens where RBC maintains operations in a bid to claim dividend tax credits from Canada’s Revenue Agency (CRA) without financing productive activities.  According to the U.S. CFTC lawsuit, a few executives from RBC’s “Central Funding Group” based in various geographical locations worked to design schemes that took advantage of Canadian dividend tax credits related to common stocks.

In addition to the “wash trades” allegations, the U.S. CFTC alleges that these RBC executives set prices for the future contracts “internally”, which means the contracts were not subject to competitive market pricing as required by U.S. regulations, charges that the bank denied.

RBC did not deny that it took advantage of Canadian tax benefits associated with Canadian and U.S. stock dividends. But it was done at the expense of the real economy and is perfectly legal under the current Canadian regulatory regime.

Interestingly enough, the same week, on April 3, 2012, Terry Campbell, the head of the Canadians Bankers Association requested a “pause” on global financial reforms. These reforms were aimed at avoiding a repeat of the 2008 global crisis, which was triggered by elaborate derivatives trades very likely not too dissimilar in complexity from the alleged tax schemes for which RBC executives are now being sued by a U.S. regulator. Mr. Campbell cited the “unintended consequences” of those reforms, because “no one knows what impact the comprehensive reforms would have on the system”

In a stern and rather swift rebuttal to Mr. Campbell, Bank of Canada Governor Mark Carney stated in an interview with the Canadian Press in reference to the 2008-2009 global credit crisis:

“It was a good thing we didn’t press pause when we provided over $30 billion of liquidity to the Canadian banking system. It was a good thing the government of Canada didn’t press pause when it provided [ ...] very timely and effective term liquidity to the Canadian banking system[...] Ottawa purchased tens of billions of dollars of mortgages from banks in an effort to free up cash to keep credit markets active.”

Governor Carney stated clearly that, during the global credit crisis, “Ottawa” (i.e. the Canadian middle class) subsidized the funding of Canadian Chartered banks to the tune of “tens of billions of dollars” by purchasing mortgages from Canadian Chartered banks and by engaging in a number of financial transactions to help them out. Governor Carney reiterated that banking reforms should continue until the structural changes needed to eliminate “irresponsible risk-taking” are completed.

In sum, the subsidized funding provided by Ottawa occurred in 2008 and 2009, a period that falls within the 2007 to 2010 timeline during which, according to the US CFTC, RBC’s executives allegedly funded hundreds of millions of dollars worth of trading schemes whose purpose was to profit from Canadian dividend tax credit.  In other words, at the height of the global credit crisis, executives working for a Canadian bank profited from the very same Canadian taxpayers who were throwing them a lifeline.

The Conservatives have been conspicuously silent on the matter since the U.S. CFTC filed against RBC the agency’s largest “wash trading” lawsuit in its history. No one expects a Canadian government official to comment on lawsuit allegations. But one should expect the Conservative government to address the genesis of the lawsuit on which no one can disagree: the fact that any large Canadian financial institution can enter into hundreds of millions of dollars of riskless transactions that span across several tax jurisdictions, including several tax havens, in order to take advantage of Made in Canada tax loopholes.

The U.S. CFTC seems to be better informed, more efficient and up to the job than the Canadian government at deciphering and exposing Canadian tax schemes executed on a global scale. If only Canada’s Chartered banks deployed their ingenuity, precious capital and attractive funding available to them thanks to their quasi-protected retail market in Canada to support the real needs of the Canadian economy rather than devising unproductive “riskless” schemes aimed inflating their bottom lines as well as their CEOs’ and traders’ bonuses.

It is high time that the Conservative government shuts down the tax loopholes that give Canada’s banks the incentive to move away from their privileged mandate and seek Canadian tax benefits by designing schemes that the U.S. CFTC describes as “riskless” and “a financial nullity”. Ironically, it should be obvious to the Prime Minister, a former president of the National Citizens Coalition. This dividend tax credit, when it is not transferred to either Canadian companies or Canadian individuals but is instead used by a Canadian bank to pad its bottom line, and that of its traders around the world, is a pure waste of taxpayers’ money. The middle class, which is footing the bill, ends up being the ultimate looser.

Alan Milner

The C. D. Howe Institute arguing for looser financial regulation is nothing new. On the eve of the global financial crisis, it released a paper presenting more securitization as the antidote to financial risk.

But Andrew Hepburn draws my attention to the byline under last week’s op-ed: “Jim MacGee is a Bank of Montreal Professor and Associate Professor of Economics at the University of Western Ontario.”

So, the Bank of Montreal Professor does not want stronger consumer-credit regulations applied to banks. What’s next? The Enbridge Professor endorsing the Northern Gateway pipeline?

There is a chorus singing the praises of the oil industry and its vast economic benefits — from the boardroom of pipeline company Enbridge to the office of the Prime Minister. They advocate rapid expansion and export of crude oil resources as a panacea for our economic future. They cite big numbers from numerous studies.

The reports are used like quantitative billy clubs to beat back public inquiry and drive the discussion away from a thorough examination of macroeconomic implications. Instead, we have a forced narrative — industry financial gain must take precedence over environmental risk and First Nations’ rights. This is a false dichotomy.

The reports include Enbridge’s Application to the National Energy Board in support of Northern Gateway pipeline; Canadian Energy Research Institute’s (CERI) studies No. 122, 124, 125 and 128; the University of Calgary’s School of Public Policy paper, Catching the Brass Ring; and the Wood Mackenzie report prepared for the Government of Alberta.

The benefits range from hundreds of thousands of jobs and trillions of dollars in Gross Domestic Product (GDP) in CERI’s studies, $270 billion from Enbridge, $132 billion from the University of Calgary, and $72 billion from the government of Alberta.

These studies suffer from serious weaknesses which render the results not only unreliable, but unusable.

1. Input-Output Model: All the studies calculate a benefit without sensitivity analysis and develop a single long-term scenario. No board of directors would accept this approach when making an important investment decision, particularly when the rosy picture is forecast to continue for decades. All but Wood Mackenzie use this information as input into an Input Output (IO) model to further expand their case.

An IO model presents results as GDP, person years of employment, labour income and government revenues. Using these indicators of economic well-being gives the illusion that the model has measured macroeconomic impact, when the model has not — because it cannot.

IO models have severe limitations, over-estimate benefits and ignore economic costs. They do not perform a cost-benefit analysis. The underlying math constrains the models — they are static, linear, partial equilibrium representations of a sector of the economy at a point in time.

The models have no feedback mechanism so do not incorporate price, exchange rate, interest rate, or other input cost changes on the oil industry or the broader Canadian economy.

All the studies assume higher oil prices — rising to as much as $200 per barrel—but do not consider their impact on consumers as they cut back spending and saving, or businesses as they postpone investment, cut wages, and layoff employees.

IO models tell us the Vancouver Canuk riot was a wealth generating opportunity and — if jobs really matter — forget oil spill prevention and response. More person years of employment are created — per dollar — spilling oil than safely transporting it.

2. Exchange Rate: It is generally understood rising oil prices put upward pressure on the Canadian dollar. The studies ignore this. They assume a fixed and relatively low dollar over the long forecast period which inflates the benefit. Enbridge, Wood Mackenzie and the University of Calgary assume an 85 cent Canadian dollar. Their U.S. dollar revenues automatically receive an 18 per cent increase when translated to Canadian dollars.

An appreciating dollar hurts the Canadian economy. When the Canadian dollar goes up, the price of exports increase, foreign demand falls, and slower growth with job losses, follow. This phenomenon — when due to the expansion of the resource sector — is symptomatic of the Dutch disease. By holding the exchange rate fixed, the studies pretend a continued hollowing of our manufacturing sector does not occur.

Mention the Dutch disease and the oil industry and its proponents get defensive. However, even the oil sands are not immune to petro-fever. A rising dollar fundamentally affects profit performance of oil producers.

Crude oil sales are denominated in U.S. dollars while production costs are paid in Canadian. An increasing dollar squeezes profitability. For example, if the dollar is at par and oil sells for $100 U.S. per barrel, gross revenue is $100 Canadian. If the dollar rises to $1.05, that same barrel is worth $95.24 Canadian — a decline in gross revenue of 4.76 per cent.

Unless this relationship is included, estimates of financial returns, investment, and future supply, will be exaggerated. These unrealistic supply forecasts are then used to support the need for new pipelines to service the U.S. and China.

3. Oil Prices: Not only do the studies depend on rapidly rising oil prices, a number also require higher oil prices in Canada with new pipelines than without them. This perverse market outcome occurs because access to the higher priced markets in the U.S. Gulf Coast and Asia will allow producers to charge higher prices for the oil they sell in Canada.

Enbridge assumes the price lift with Northern Gateway is $2 – $3 U.S. per barrel, on every barrel — conventional to bitumen — every year for 30 years. The Brass Ring assumes $7.20 U.S. to $13.60 U.S. from 2016 – 2030 while the Wood Mackenzie Report assumes an $8 U.S. per barrel price increase on heavy oil sands production from 2017 – 2025. These price increases are on top of the studies’ anticipated doubling of oil prices over the next 30 years.

Refineries pass higher prices on and if they can’t, suffer reduced margins and may shut down. When refineries close, the price on petroleum products rises anyway because of lost production. Either way, Canadian consumers and businesses pay more because of new pipelines, and this needs to be incorporated into a macroeconomic discussion of their impact.

These deficiencies render the studies unusable. Their benefits should not be cited to expedite environmental review as they were in the Federal Budget 2012, demonize concerned citizens as Minister Joe Oliver has done on numerous occasions, or silence discussion of economic development challenges facing Canada as Alberta Premier Redford recently succeeded in doing in an open conversation with Ontario Premier McGuinty.

Economic growth in all parts of Canada is needed to ensure national progress. To realize this progress requires a courageous look at economic reality along with sound analysis — not a reliance on studies that enable the economics of deception.

Admittedly, I am not a regular viewer, although I have seen enough of Kevin O’Leary to recognize he embodies the worst of 2010s capitalism: Arrogant, caustically right-wing, and generally unpleasant.

Lang joined the CBC a few months before I left the Corp. and I had occasion to meet  her a couple of times. To me she represented the new CBC that Richard Stursberg, the head honcho of the network at the time, had been busy molding: corporate, flinty, cold, fast-paced and nakedly ambitious. The daughter of former Trudeau cabinet minister Otto Lang, Amanda is a liberal who can mix it up with the big boys of corporate Canada. She is smart and moxie but as icy as they come.

Of all the interviews I was going to do for the book, this one gave me some trepidation. I figured that if either of them bothered to read Thieves, they would hate it. Especially O’Leary. They are also smart people and know the financial world. So they would not be sympathetic interviewers.

I was led out from the greenroom and asked to sit on a small couch at the side of the studio as I waiting to be led to the raised glass-plastic desk where Lang and O’Leary carry out their jousting. And right away I got the tenor of the show. Everything was rapid-fire reports and the two of them bickering at high volume. He would leaven his remarks with nasty conservative asides. At one point I could hear him talking about Spain and the need to kill off socialism and wait for a new generation of Spanish to be born who would embrace capitalism.

One of the appalling things about how the CBC has changed is the fact that O’Leary would be given so many platforms on the public tab. He is a “Dragon” on “Dragon’s Den”, he has his own show (Lang & O’Leary), and now he has a reality program “Redemption”. And yet O’Leary also runs an investment fund, O’Leary Funds, which he promotes on the CBC, our national public broadcaster. Meanwhile, shows like Marketplace have been reduced to half a season of episodes every year. It’s all so bloody awful.

Finally, a commercial break, and I was ushered up to the desk. As I sat down, Lang and O’Leary were engaged in a heated low-level discussion. “Oh f— off Kevin” Lang finally snapped at him in irritation. O’Leary, apparently, had offered the view that the next US election would be about whether Obama was really an American. I could imagine Lang must find dealing with O’Leary’s Glenn Beck insanity a bit trying after awhile.

Neither of them bothered to look up from their Blackberrys to greet or acknowledge my existence. Finally, Amanda said with no warmth, still engrossed in her cellphone, “Hello Bruce”.

The commercial ended. You can watch the result here at the 49:20 mark:

http://www.cbc.ca/video/#/News/Business/1239849460/ID=2222008936

It lasted a mere five minutes and we never really broke out into fisticuffs as I sort of hoped it would. And then another commercial and I left.

The elimination of the National Council of Welfare in the Budget means that we will no longer be getting Welfare Incomes, a more or less annual publication which allowed one to compare provinces with respect to social assistance benefits by family type.

Good luck pulling that information together on your own from provincial web sites.

While one can still quite readily get data on the incidence, depth and duration of poverty from StatsCan, we no longer get regular analytical reports on low income of the kind which used to be published by the National Council of Welfare and by the now virtually defunct Canadian Council on Social Development.

I am a bit behind the curve here, but just learned that HRSDC has recently stopped  making available on their web site “Social Security Statistics: Canada and Provinces” , a formerly annual huge compendium of statistics on expenditures and beneficiaries of  a wide range of income support programs. (Go to Gilles Seguin’s invaluable web site for more detail and archived reports.)

Deep cuts over at Statscan will almost certainly mean far, far fewer analytical reports on social issues, and the elimination of even more surveys.

So, look forward to even more fact free policy debate.

The argument – with parenthetical comments – is as follows.

1) Employment rates of older workers, including those over age 65 have been rising rapidly, and this trend can be expected to continue “without any policy action” (p.20). Indeed, employment rates can be expected to rise significantly higher and future retirees can be expected to work at least five years longer on average.  (A convincing case is made that current base case scenarios under-state the degree to which older workers will retire later.)

2.) The rise in employment rates has already been keeping pace “more or less” in line with increasing life expectancy. (True, p.3. The implication is that we are already set for an increase in expected proportion of the life course spent in paid work compared to the bottom reached about a decade ago.)

2) While not the whole story, an important part of the reason for later retirement is eroding employer pension coverage, low returns to savings and inadequate retirement savings for future senior age cohorts. (True, pp 8-9.).)

3) Later retirement will reduce cost pressures on public pensions and increase the supply of labour, greatly reducing the anticipated costs of population ageing.

Therefore, we should raise the age of eligibility for both the Canada Pension Plan and Old Age Security. (!!!)

The policy conclusion is a complete non sequitur. The problem of costs from ageing is exaggerated. There is a growing retirement income security problem.  Therefore, we should restrict access to public pensions even though they do not mean that people have to stop working, and even though the costs are manageable.

Even the author is unable to come up with a very convincing rationale, beyond saying that reforms are needed to “convey the message that it is no longer appropriate for public policy to include provisions that could distort people’s life course decisions in a way that favours people spending shorter periods of their lives in work.” (Note the last part of the sentence is contradicted in his own analysis in point 2. above.)

But what is the cost of “conveying a message”? Hicks concedes in passing that not all workers remain healthy well into old age, and that many of us still work in very physically demanding jobs and will not as older workers have skills which employers want. He hints vaguely at future adjustments to public pensions to deal with these problems.

But,  he says, we need to wave a stick even when it is not needed.

Giorgio, a hard-working, smart-as-a-whip University of Toronto student, asked me a great question after a recent guest lecture: What if the biggest challenge facing Canadian businesses and governments in the coming years isn’t an aging society but the economic and fiscal drag of hundreds of thousands of young people who can’t find meaningful work?

Like many young adults, Giorgio and his friends plunged into graduate school at the recession’s start to duck unemployment, up-skilling to boost their chances of cracking a market littered with experienced boomers. Lucky Giorgio got a job in construction for the coming summer. It ’s not h is intended career, but it will help pay off student debts. His friends are not so fortunate. Most are doing unpaid internships to enhance resumés while relying on barista and other minimum-wage work to keep on keeping on. None of them see anything but short-term jobs, at best, in their future.

The odds of developing a career and a full-fledged adult life are getting longer for this crowd. Three years ago, the global economic crisis triggered the worst nine-month spate of job-shedding in Canada since the Great Depression. And while overall numbers have rebounded, young people are locked out of the recovery.

Canadians under 25 lost just over half of all the jobs that evaporated between October 2008 and July 2009. Since then, the head count of job holders has surpassed the pre-recession level by 1%—but not among young people. There are 25,000 fewer of them working paid jobs today than in July 2009.

They haven’t given up. At last count, 414,000 young adults were looking for work. And, in truth, there is always more unemployment among youth than in the rest of the labour force. They’re still figuring out how to sell themselves to prospective employers, and are likelier than others to leave a job in search of a better one. But at 14.7%, the unemployment rate for those under 25 is now double the national rate—a first since StatsCan began annually tracking the data in 1976.

Ironically, this growth in unemployment stems largely from the type of jobs that have been created since the downturn: four out of five are temporary. The vast majority of the new permanent jobs, meanwhile, have gone to workers aged 55 and older, partly because employers get more immediate value out of staff with experience.

So what did the kids do? They went back to school. About 150,000 people under 25 left the labour market between the fall of 2008 and 2009—a time during which post-secondary institutions registered almost as many new students, the single biggest increase in enrolment (save for Ontario’s double-cohort year).

Young people are trying every trick in the book, but talking with Giorgio and others reveals a quiet anxiety. It’s echoed in a recent Ekos poll, which found that among those younger than 42—the median age of Canada’s population—59% believe the quality of life for the next generation will be worse than that enjoyed by today’s. Some are calling it the end of progress.

This erosion of confidence is neither inevitable nor necessarily self-fulfilling. In 25 years, the boomers who want to work or have to work will have vacated the job market, and Giorgio’s age group may see their survival instincts and sheer ingenuity rewarded with previously denied prosperity.

But any smart business can see what’s around the corner. Today, the world is chasing capital, trying to get investors to put money into their idea, their community. Tomorrow, the global hunt will be for labour. Emerging and developed economies alike are facing aging workforces and shrinking pools of skilled and unskilled labour. Attracting youth and cultivating new talent now could put your company ahead in the upcoming competition for people. That’s how you ensure your markets and profits grow, not shrink. But i f we wait too long to invest in giving the next generation a fair try, instead of a grey tsunami we may be facing the revenge of the temps.

The government claims that the program is too costly. But Katimavik’s numbers show that their $16 Million annual budget generates some $14 Million per year in community benefits, and that is before taking any account of benefits for the participants themselves. They gain valuable work and civic engagement experience and a real sense of our very diverse country.  The cost per participant is only $77 per day, and the administrative overhead is just 8%.

It turns out that the federal government is not only reneging on their multi year commitment, they are also pulling the rug from under the nearly 600 incoming volunteers who were expecting to begin their 6-month program in July 2012.  Most will have great difficulty filling in a big gap in a planned break between high school and post secondary education.

A couple of tax changes from the recent Saskatchewan budget are worth examining through this prism of intergovernmental relations. Much has already been written about Wall’s bizarre decision to axe the Film Employment Tax Credit and partial climb-down.

Despite the inconsistency of zeroing in on this one relatively inexpensive measure amid the province’s myriad of other tax expenditures and business subsidies, the Sask. Party had a point. The main rationale for continuing the Film Employment Tax Credit is that every other competing jurisdiction offers similar credits.

The Sask. Party may well be correct that the world would be a better place if all jurisdictions dropped their subsidies and film locations were chosen based on factors other than tax preferences. That’s hardly an argument for unilateral disarmament, but it could have been an argument for intergovernmental cooperation.

If Wall was willing to eliminate Saskatchewan’s Film Employment Tax Credit and keen to cooperate with neighbouring jurisdictions, why didn’t he first try to negotiate a simultaneous withdrawal of their film tax credits? He could at least have thrown down the gauntlet.

If the New West Partnership is to serve any sensible purpose, surely it is to prevent member provinces from using preferential policies to poach economic activity away from each other. On the contrary, my impression is that the Alberta and BC governments have already begun luring movie production out of Saskatchewan.

The other tax change is a matter of accounting. The Saskatchewan Low-Income Tax Credit, like the federal GST/HST credit, rebates about $80 million annually through the income tax system to compensate the poor for the regressive provincial sales tax (PST).

The Saskatchewan government will start subtracting this credit from reported PST revenue rather than from reported income tax revenue (see page 37 in the Budget Summary). As a result, PST is the only major source of tax revenue projected to drop in 2012-13 from 2011-12 (page 76).

Interestingly, Wall’s much-vaunted Municipal Revenue Sharing is calculated as one-fifth (one point out of five) of officially reported PST revenue. This year’s amount is based on the 2010-11 Public Accounts (page 19). Taking $80 million out of 2012-13 PST revenue implies taking $16 million (i.e. one-fifth of $80 million) out of revenue sharing, but not until 2014-15.

Political columnist Murray Mandryk suggests, “What [municipal leaders] might have missed is the move by government to deduct the low-income tax credit from the PST, which might result in municipalities foregoing $16 million from next year’s revenue-sharing pool.” The timing is such that they will take this hit shortly before the next provincial election, unless Wall orchestrates a delay as he has with the Film Employment Tax Credit.

Stay tuned for a post on the Saskatchewan budget’s corporate tax rebate for new rental accommodation . . .

This could indeed be the case. However, the Standard Error for the national estimate of employment is 28,600 – much lower than the total increase.   

I thought the jump could be due to some combination of normal seasonal adjustment and an exceptionally warm March in much of the country, but the non-seasonally-adjusted jump in employment was 84,000.

So it seems chances are that we did indeed see a pretty big jump in jobs in March. Whether it lasts is an entirely different question.