Budget Cuts Could Worsen Rising Unemployment
Posted by Erin Weir under budgets, labour market, StatCan, wages.
February 3rd, 2012
Comments: none
It was not a happy new year for Canadian job seekers. Statistics Canada reported today that unemployment rose for a fourth consecutive month in January. Overall employment remained flat as Canada’s population and labour force grew at a normal pace, leaving more workers without jobs.
The good news in today’s report is that 39,200 more Canadians reported being paid by an employer while 37,000 fewer reported self-employment. Another bright spot was an increase of 10,100 in manufacturing employment, suggesting that the recent rebound in manufacturing output is beginning to translate into jobs. However, manufacturing employment remains near the lowest level ever recorded by the Labour Force Survey.
Many of January’s gains in manufacturing and other goods-producing industries were offset by a loss of construction jobs, highlighting Canada’s vulnerability to a slowdown in housing. Employment plummeted by 44,800 in professional, scientific and technical services, the segment of the service sector that provides the highest weekly earnings. While we do not know precisely which positions disappeared, this substantial loss of jobs in a well-paid area is troubling.
The average hourly wage rose by 2.0% over the past year, not enough to keep pace with inflation of 2.3% (as of the latest Consumer Price Index). Wages edged up by a meagre 1.0% in Ontario, leaving workers in Canada’s largest labour market well behind the rising cost of living.
This uneven data comes as federal and provincial governments are formulating austere budgets. Laying off public-sector workers and cutting public spending that supports private-sector jobs threatens Canada’s soft labour market. Four months of rising unemployment mean that the priority should be job-creation rather than cutbacks.
I tip my cap to Andrew, who beat me by a mile this month.
Is The OAS/GIS Program Unaffordable?
Posted by Andrew Jackson under federal budget, pensions.
February 3rd, 2012
Comments: none
No. Of course not. Even if the government waves around scary large increases in nominal dollar terms.
As has been widely reported, the most recent OAS actuarial report shows that total program expenditures will rise from $38.8 billion in 2011 to $107.9 billion in 2030. However, the dollar figure reflects, not just an increase in the number of OAS beneficiaries (from 4.9 million to 9.3 million), but also inflation. And the economy will grow over the same period.
As a share of GDP, the program cost is forecast to increase from 2.36% in 2011, to a peak of 3.14% in 2030, after which year the cost will fall. In other words, the cost of the program as a share of national income will increase by 33% from 2011 to 2030, even though the number of seniors will increase by 90% over that period. Growth of costs is slowed by the fact that benefits are indexed to inflation rather than to average wages, which are soon expected to rise at a faster pace than has been the case over the past twenty years and more.
Despite claims that OAS costs will be “unaffordable,” [sic] the Parliamentary Budget Officer has just reported that the federal government’s fiscal position is – admittedly following the new cap down the road on the Canada Health Transfer – sustainable in the context of an ageing society. In fact, they project that the federal government is now on track to eliminate the federal debt and to start running a surplus, all in the context of an aging society. The size of the underlying surplus is put at o.4% of GDP.
It also has to be borne in mind that OAS (but not GIS) benefits are taxable, so the federal government recoups a significant share of what is paid out. In most cases, even GIS recipients will pay some modest income tax on their OAS income. The amount of OAS recouped by the federal government through income taxes can be estimated to be about 20%. And, of course, retirees pay consumption and other taxes as well.
(OAS benefits are also clawed back above a high income threshold, currently $69,562, and OAS benefits are completely taxed back above an individual income of $112,772. But this recovery applies to only 6% of OAS beneficiaries, and just 2.3% lose all of the benefit.)
Revenues from income tax on OAS may increase moving forward as a rising proportion of relatively affluent seniors have earnings from employment. The labour force participation rate of persons aged 65 to 70 more than doubled from 11.4% to 23.9% between 2000 and 2011. This is partly due to inadequate pensions and retirement savings, but also to the fact that some persons over age 65 want to work and are able to do so.
Statistics Canada recently reported that, while life expectancy has been rising, the average number of years spent not working has been stable since the mid 1990s due to the fact that more and more seniors are staying in the workforce longer.
It can be noted that the widely touted option of raising the age of eligibility from 65 to 67 would not, in and of itself, save a lot of money. Average life expectancy at age 65 is 20 years (18.3 years for men and 21.5 years for women) meaning that the average new OAS beneficiary will receive benefits for twenty years. Raising the eligibility age from 65 to 67 would reduce the cost by 10%, and by even less if life expectancy continues to rise.
The CLC proposal to phase in an increase in CPP benefits, supported by many pension experts and by most provinces, would reduce GIS benefits down the road. While an expanded CPP would take forty years to fully mature, it would still have a significant impact when we hit the peak retirement years of the baby boomers, the majority of whom are still in their early 50s.
Job Market Continues to Weaken
Posted by Andrew Jackson under labour market.
February 3rd, 2012
Comments: none
Canada’s job market continued to weaken in January as employment rose by a meagre 2,300 jobs, much less than the growth in the number of workers in the labour force. As a result, the national unemployment rate rose from 7.5% to 7.6%.
The unemployment rate has been steadily climbing from 7.1% last September, since which time we have lost a total of 67,000 full-time jobs.
The youth unemployment rate jumped from 14.1% to 14.5% in January, and there were significant increases in the unemployment rate in Atlantic Canada and in Ontario (where the unemployment rate rose from 7.7% to 8.1%)
We lost 3,600 full time jobs in January, with the losses concentrated in construction (down 13,700) and in professional, scientific and technical services. (down 45,000.) Many of these lost service jobs are probably linked to activity in the construction industry.
These dismal numbers clearly reinforce the case for a federal Budget focused on jobs rather than cuts.
Federal cuts could push unemployment to 8%
Posted by David Macdonald under deficits, economic growth, federal budget, public services, unemployment.
February 2nd, 2012
Comments: 5
Now that the government is planning for an $8 billion cut, the potential job losses could drive job losses to between 99,000 and 108,000 full time positions across Canada. At this much higher level, the federal government could be single-handedly responsible for pushing national unemployment from its current 7.5% to 8.0%. About half of those losses would be federal public servants and half would be in the private sector (crown corporations, non-profits and government contractors).
The full post is available here
Raising The OAS Eligibility Age Would Raise Poverty in Old Age
Posted by Andrew Jackson under older workers, pensions, population aging, poverty.
February 2nd, 2012
Comments: none
Canadian Press have put out a story based on a research paper by Richard Shillington which was commissioned by HRSDC from Informetrica, and obtained by the CLC through an Access to Information request.
Receiving OAS is required to makes seniors eligible for the GIS top up, which provides one in three seniors with a supplement which ensures they have a minimally adequate income in old age.
Raising the retirement age from age 65 to age 67 or higher would impact all future seniors, but would especially impact those who would qualify for the GIS supplement. Many older workers, especially the single, near elderly, already face very high rates of poverty.
As shown in Table 1, the OAS now contributes about one quarter of the incomes of Canadians aged 66 and 67, and the OAS and GIS in combination contribute about one third. The proportion of income replaced by the OAS/GIS is much higher for women and seniors with low incomes, about 70% for those with individual incomes of less than $15,000.
| Table 1: OAS/GIS Contributions to the Income of Seniors (2006) | ||
| OAS | OAS / GIS / Allowance | |
| Age 66 | 26% | 34% |
| Age 67 | 27% | 36% |
| Women 65-69 | 29% | 38% |
| Men 65-69 | 19% | 26% |
| All Seniors | 26% | 36% |
| $5-$10,000 | 59% | 71% |
| $10-15,000 | 37% | 66% |
| $15-20,000 | 31% | 49% |
| $20-25,000 | 25% | 28% |
| $25-30,000 | 20% | 21% |
| $50-55,000 | 10% | 10% |
| $95-100,000 | 1% | 1% |
| Source: Evaluation of the Old Age Security Program: Summary Report based on the LAD. Prepared for Human Resources and Skills Development Canada by Informetrica Limited, March 2009. Tables 24 and 25. | ||
As shown in Table 2, the OAS/GIS makes a huge contribution to the reduction of poverty in old age. OAS/GIS reduces the low income rate (defined by the LIM Before Tax measure) from about 30% to about 12% (more for women than men).
| Table 2: OAS/GIS Contribution to the Reduction of Poverty | ||
| Before | After | |
| Age 66 | 30% | 12% |
| Age 67 | 32% | 12% |
| Women Age 65-69 | 35% | 14% |
| Men Age 65-69 | 27% | 11% |
| Poverty Measure is Low Income Measure Before Tax (below one half of median adjusted for family size). | ||
| Source: Evaluation of the Old Age Security Program: Summary Report based on the LAD. Prepared for Human Resources and Skills Development Canada by Informetrica Limited, March 2009. Table 42. | ||
Raising the age of eligibility for OAS/GIS would require future seniors with low incomes — those who would qualify for the GIS — to either save more, work much more hours, or to live in poverty. Saving more is not a realistic option for low income workers. And working longer is not a realistic option for many low income seniors who are in poor health, have a disability, or are providing care. About one in four current retirees retired due to ill health.
Raising the age of eligibility for OAS/GIS would also mean that non-working, low income seniors on provincial social assistance and disability programs would have to wait to transition to OAS/GIS, raising social assistance costs for provincial governments. Costs of providing drugs and essential services to low income seniors unable to pay on their own would also increase
GDP Turns Negative
Posted by Erin Weir under budgets, GDP, media, StatCan.
January 31st, 2012
Comments: none
Statistics Canada reported today that the economy shrank in November for the first time in six months.
This decline was driven by reduced energy production, which partly reflected maintenance shutdowns in the oil patch and unusually mild weather. While those factors may not affect future economic growth, their ability to turn it negative in November underscores how much Canada’s economic recovery depended on just one industry. Our petro-economy is now vulnerable to any temporary drop in energy production.
A bright spot in today’s report is the pickup in durable-goods manufacturing. For a third consecutive month, manufacturing output accelerated.
It remains unclear whether this nascent manufacturing recovery will translate into jobs. Manufacturing employment decreased in all three of those months, but bounced back in December.
November was the third consecutive month in which Canada’s overall economic growth rate decreased. The revelation that we fell into negative territory should prompt governments to rethink planned budget cuts. Sharply reducing public investment could push our fragile economy back into recession.
UPDATE (January 31): Interviewed on the Business News Network
UPDATE (February 1): Quoted by the Canadian Press
Low Income and the Age of Eligibility for OAS
Posted by Andrew Jackson under pensions, population aging, poverty.
January 30th, 2012
Comments: 2
To reprise a now topical earlier blog, hiking the age of eligibility for OAS will have the biggest impact by far on future seniors who are in low income. Many if not most of this group are unable to work due to disability or ill health.
If the age of eligibility for OAS and GIS is raised, low income seniors on social assistance will see the transition from deep poverty to a bare bones income on GIS postponed accordingly.
And those working but in low income will lose a hefty portion of the OAS/GIS benefits that would otherwise have been paid to them.
It is all too often forgotten that, notwithstanding rising longevity, many of those in lower income groups still die relatively young.
As shown in the Table below, there is a big difference of probability of survival to age 75 by income group, and also by aboriginal status. Those who die at age 75 will receive 10 years of OAS benefits.
Hiking the OAS/GIS eligibility by two years, to take one number that has been speculated about, would eliminate one fifth of the use of OAS/GIS by the bottom 20% of men. There is also a big gap in life expectancy between the aboriginal and non aboriginal population.
| Probability of Survival to Age 75 | ||
| Men | 64.6% | |
| Bottom Quintile | 50.1% | |
| Top Quintile | 72.8% | |
| Women | 78.1% | |
| Bottom Quintile | 69.5% | |
| Top Quintile | 83.4% | |
| Registered Indian | ||
| Men | 48.0% | |
| Women | 58.8% | |
| Statistics Canada Health Reports 22/4 |
The Davos Speech
Posted by Andrew Jackson under Europe, financial crisis, fiscal policy.
January 27th, 2012
Comments: 8
The Prime Minister’s speech at Davos was, I would bet, written by Stephen Harper himself. It bore the stamp of his long standing contempt for the European welfare state.
He all but said that the Europeans had brought the crisis on themselves through trying to live beyond their fiscal means:
As I look around the world, as I look particularly at developed countries, I ask whether the creation of economic growth, and therefore jobs, really is the number-one policy priority everywhere?
“Or is it the case, that in the developed world too many of us have, in fact, become complacent about our prosperity, taking our wealth as a given, assuming it is somehow the natural order of things, leaving us instead to focus primarily on our services and entitlements?
“Is it a coincidence that as the veil falls on the financial crisis, it reveals beneath it, not just too much bank debt, but too much sovereign debt, too much general willingness to have standards and benefits beyond our ability or even willingness to pay for them.
Canada, of course, is different. And he proceeded to reinforce the difference before his top 0.01% audience by promising cuts to public pensions.
But – does he have a case that the fiscal crisis of the advanced economies, especially the Euro crisis is due to fiscal profligacy and indifference to growth?
No.
Per capita growth in Canada over the past decade has been no faster than in the EU. As Jim has just noted, growth under Harper’s recent watch is no better than the OECD average.
Much of the Euro crisis – as is the case with the US – is due to the socialization of bad bank debt by governments which had been reducing public debt as a share of GDP before the crisis.
The weak US fiscal position is hardly due to above average spending on social programs and public services, but rather due to recession and pre recession tax cuts
Japan has been able to finance a truly massive public debt because they borrow it from themselves .
Many countries with much larger public debts than Canada – the US, Japan, the UK – do not pay higher interest rates than us, for the key reason that they have independent central banks able and willing to backstop the debt.
The Euro crisis is not a crisis of fiscal profligacy, but a crisis mainly caused by the absence of a European central bank prepared to guarantee the debt of weaker members (and even that seems to be changing.)
There is no significant correlation across OECD countries between per capita growth and unemployment rates on the one hand, and the ratio of public spending to GDP on the other.
Odious profits and the Enbridge pipeline
Posted by Marc Lee under Alberta, BC, climate change, oil and gas.
January 27th, 2012
Comments: 2
Two obvious but generally unstated details about the Enbridge Northern Gateway Pipeline are climate change and that oil and gas companies stand to make mega-profits. An honest appraisal of the project would be something like, “yes, putting in the pipeline will facilitate even more greenhouse gas emissions from the Alberta oil sands, but our buddies stand to make bucketloads of cash.” Of course, proponents cannot say that so they have to resort to bullying and name-calling to disguise the indefensible.
The two, climate and profit, are very much related. The gains from doing this are “odious profits” that exist only because of massive costs externalized onto third parties (I’m riffing off the term “odious debt” — that incurred by dictators, usually for military hardware, for which the people are forced to pay even after the dictator has been deposed). Anyone who advocates well-functioning markets, as opposed to unbridled capitalism, should see the logic of ensuring that all costs of production are captured in the market price. The huge negative externality associated with fossil fuels is what prompted Nicholas Stern to call climate change the biggest market failure in history.
How much are we talking here? The pipeline itself is a $5 billion investment so it will have to make back a decent annual return. Enbridge’s estimates for toll structure and throughput imply revenues of just under $900 million per year. Based on financial statements in Enbridge’s 2010 Annual Report, profits from pipeline operations (after-tax earnings plus dividends) averaged 34% of revenues over the past three years. At this rate, profits from NGP would be over $300 million per year. These are not trivial amounts, and they do not include “costs” such as lucrative executive compensation – for example, Patrick Daniel, the CEO of Enbridge, made more than $6 million in 2009, and several other executives had more than $1 million in compensation.
Beyond the pipeline itself, we can also include the gain in profits to oil sands producers from higher market prices in Asia, estimated to average $3.6 billion per year by Wright Mansell, a consulting firm whose report is included in the application. So call it $4 billion in annual profits and you can see why a government with no morals would want to cozy up to the pipeline and start calling it ethical oil.
But at what environmental cost? There is a certainty of oil spills from the pipeline itself and tankers on the BC coast. Enbridge pipelines had 800+ oil spills on its pipelines over the past decade and a bit, and the record of other pipeline companies is no better with 5,600 incidencts in the US alone gong back to 1990.
But I’m more interested in the climate impacts. The Northern Gateway Pipeline would transport 525,000 barrels of diluted bitumen per day. The carbon content of this fuel is translates into annual global emissions of approximately 70 Mt CO2e. In addition, there are emissions associated with extraction of the resource (6.5 Mt CO2e, according to Pembina) and emissions associated with the energy needed to run the pipeline and ship bitumen to Asia. Finally, there are emissions from upgrading and refining bitumen into oil and other petroleum products (8-9 Mt CO2e per year, although this emissions-intensive process would happen in the importing country). All in, annual emissions associated with the pipeline could be in the range of 90-100 Mt CO2 per year, and this is not counting emissions associated with construction (manufacturing and transport of steel pipe, and machinery and equipment on-site).
So what is the damage — the negative externality — from all of that carbon? The most credible recent study estimating a range of values for the “social cost of carbon”, with most estimates in the range of $150-500 per tonne of CO2, but possibly as much as $893 per tonne. To put this in more recognizable terms, BC’s $25 per tonne carbon tax translates into less that six cents per litre. Internalizing the external costs of the pipeline into market prices would require a mix of regulation, carbon pricing and removal of any caps on liability in relation to spills. Indeed, the corporate form in practice limits liability to the initial investments made by owners of stock, which could be exceeded in the form of massive clean-up costs for a catastrophic spill.
Based on the numbers above, a low estimate of 80 Mt of CO2 into the atmosphere per year with external costs of $50 per tonne would imply $4 billion per year in externalized costs. Using a higher estimate of 100 Mt at $200 per tonne, external costs reach $20 billion per year. These numbers assume that bitumen would stay in the ground in the absence of the NGP, which may not be realistic given other options, but the point is that the NGP would facilitate the combustion of large volumes of fossil fuel, and doing so imposes very large costs on third parties from future climate impacts.
Bottom line: the Enbridge pipeline makes odious profits and they must be weighed against the costs of GHG emissions and oil spills. Privatize gains, socialize losses. Which is why the industry and their government make no reference to either the profits to be gained or climate change. While there will be some jobs created along the way, they are very small in number. Governments get a cut, too, through royalties and taxes (though the latter are being phased out for people fortunate enough to be corporations), but these are like the royalties on export of blood diamonds.
So thanks to Natural Resources Minister Joe Oliver, who unintentionally shone a massive spotlight on this project. The Conservatives would have been better off had he just shut up (though I’m figuring his letter came from central command and he was forced to sign his name to it). Let’s follow the money and have a real debate about the impacts of this pipeline from Alberta to China.
Canadian Triumphalism Increasingly Bizarre
Posted by Jim Stanford under global crisis.
January 27th, 2012
Comments: 1
Prime Minister Harper went to Davos yesterday to sing Canada’s praises. No sooner had he finished reciting a long list of our national achievements, however, then he launched into a list of the sober, realistic, inevitable things that must be done in Canada to ensure “sustainability” in the long term. Top of the list is rolling back our universal public pension system (especially targeting the OAS and the GIS), which is one of our genuine national achievements. Harper plans to use his majority power and adept use of “shock doctrine” ideology to try to do what others (including Mulroney and Martin) failed: roll back this most important component of our sadly-inadequate pension system. I hope that everyone with a stake in this — seniors, labour, anti-poverty groups — are ready to fight him on it. This could be the issue where Harper over-reaches, majority and all.
But the obvious question is this: if Canada has been so wonderfully successful, why must we take money away from Canada’s pensioners (let alone all the other blood that’s clearly going to spilled with this 2012 budget)? Read more »
Hiking the Retirement Age is the Wrong Answer to the Retirement Crisis
Posted by Andrew Jackson under older workers, pensions, poverty.
January 27th, 2012
Comments: 7
Raising the age of eligibility for Old Age Security/Guaranteed Income Supplement (OAS/GIS) benefits is the worst possible way to deal with the retirement income security crisis facing Canadians.
Experts such as former Assistant Chief Statistician Michael Wolfson project that one half of all middle income baby boomers face a severe cut to their living standards in old age. This is due to falling employer pension coverage (down to 25% in the private sector), rising household debt combined with low savings, and the big hit to “fend for yourself” RRSPs which comes from high fees and low investment returns.
The right way to deal with this looming crisis is to expand the Canada Pension Plan now to raise incomes for seniors in the future.
The wrong way is to raise the retirement age for OAS/GIS.
Raising the retirement age will cut a basic building block of retirement security, the OAS pension of $540.12 per month which now goes out to 4.9 million Canadians aged over 65. Almost all citizens qualify.
Receiving OAS also makes seniors eligible for the GIS top up, which provides one in three seniors with a supplement which ensures they have a minimally adequate income in old age.
Raising the retirement age from age 65 to age 67 or higher would impact all future seniors, but would especially impact those who would qualify for the GIS supplement. Many older workers, especially the single near elderly, already face very high rates of poverty.
It is often argued that we have to raise the retirement age because Canadians are living longer. But raising the retirement age by 2 years will especially impact low income older workers. People in the bottom 20% of the workforce pass away 5.6 years earlier than those in the top 20%. Half of all low income men will collect an OAS/GIS cheque for only 10 years.
Raising the retirement age would also have a negative impact on those persons age 65 who are in poor health, and cannot continue to work.
What about cost? The latest actuarial report on the OAS/GIS projects that the number of recipients will increase from 4.9 million today to 9.3 million in 2030.
But the increase in total costs that is projected is much more modest, from 2.4% of GDP to a peak of 3.2% in 2030. That is because our economy will continue to grow.
Well under 1% of GDP is a small price to pay to maintain a basic retirement income for all Canadians, and especially the one in three seniors who have low incomes.
The Race To The Trough: What Did Corporate Tax Cuts Deliver?
Posted by Andrew Jackson under corporate income tax, corporate profits.
January 25th, 2012
Comments: 10
The CLC today celebrated Corporate Tax Freedom Day – defined as the day on which corporations have paid their share of all government taxes. It featured a race of mechanical pigs to a trough full of cash – with the pigs wearing the colours of leading Canadian corporations with large cash reserves. Watch the video.
(Update – The Global TV video.)
The winner? Potash Corporation of Saskatchewan with over $5 Billion of surplus cash on its books at the end of 2010 (and that was after a $2 Billion purchase of their own shares.)
The background paper was written by David Macdonald and myself. The summary follows. And there was an op ed from CLC President Ken Georgetti in the Toronto Star today
Here is the Summary:
Due to ongoing corporate tax cuts, corporate income taxes make up a falling share of all government revenues. In fact, by the end of January, corporations will have fully paid their share of taxes.
The general federal corporate income tax rate stood at 28% in 2000. It was cut to 21% under the Liberals, and then cut in stages, from 21% to 15%, under the Conservatives. The most recent cut was from 16.5% to 15%, effective January 1, 2012.
Each one percentage point cut to the corporate income tax rate costs the federal government about $2 billion in annual revenues.
The argument for corporate income tax cuts has been that increased after-tax corporate profits would be re-invested in company operations, boosting economic growth, productivity, and jobs. However, studies have shown that rising corporate after-tax profits have not resulted in increased real investment.
This study looks at the profits and investments of Canada’s largest companies, those listed on the S&P/TSX Composite Index, from 2000 to 2010.
In line with cuts to the statutory federal and provincial tax rate, the effective tax rate (that is, taxes actually paid by Canada’s largest companies to the federal and provincial governments as a share of pretax profits) has fallen from one third in the early 2000s (35% in 2000), to between one fifth and one quarter (24% in 2010).
Companies have used increased after-tax profits to boost dividends paid out to their shareholders. Dividends as a percentage of after-tax profits have risen from 30% in 2000 to over 50% in recent years.
Companies have also chosen to retain higher after-tax profits as financial assets, as cash, and as longer term assets, not counting investments in capital stock.
The study looks at the change in the assets of Canada’s largest non-financial companies. (Financial companies and conglomerates are excluded because they typically hold large financial investments as part of their ongoing business.)
The Top-10 Corporate Hoarders have collectively accumulated $30.7 billion in extra short- and long-term assets between 2000 and 2010, since 2000. The leading cash hoarder has been Potash Corporation of Saskatchewan, which accumulated over $5 billion in assets over this period.
The Appendix lists Canada’s top Corporate Hoarders.
Cuts to corporate taxes have resulted in a major loss of government revenues, without the anticipated result of higher corporate investment in machinery and equipment, new plants, and other areas of company operations. Instead, we have seen a big increase in dividend payouts and in financial assets.
The IMF and Austerity
Posted by Andrew Jackson under fiscal policy, IMF, public services.
January 24th, 2012
Comments: 1
Today’s IMF economic update further downgrades growth projections, including here in Canada where growth in 2012 is forecast to be just 1.7%, down from the IMF’s September forecast of 1.9%. That is well below the just released Bank of Canada forecast of 2.0%, and clearly implies rising unemployment.
On fiscal policy they say:
Countries should let automatic stabilizers operate freely for as long as they can readily finance higher deficits. Among those countries, those with very low interest rates or other factors that create adequate fiscal space, including some in the euro area, should reconsider the pace of near-term fiscal consolidation. Overdoing fiscal adjustment in the short term to counter cyclical revenue losses will further undercut activity, diminish popular support for adjustment, and undermine market confidence.
Canada has record low interest rates and the lowest net debt to GDP ratio of the large advanced industrial countries. Maybe we should reconsider austerity.
Job Vacancies vs. Unemployment
Posted by Erin Weir under Alberta, labour market, Saskatchewan, StatCan, unemployment.
January 24th, 2012
Comments: 5
Progressive economists have advocated expansionary fiscal and monetary policies to boost demand and create jobs, given the high rate of unemployment. By contrast, employers and conservative commentators complain of unfilled vacancies and labour shortages, emphasizing policies to increase labour supply and labour mobility.
Today’s new Statistics Canada survey of job vacancies sheds fresh light on this debate. The finding that “there were 3.3 unemployed people in Canada for every job vacancy” confirms that the main problem is a lack of jobs, not alleged disincentives to work or barriers to labour mobility. In other words, policymakers should focus on the demand side rather than on the supply side.
In Alberta and Saskatchewan, provinces supposedly plagued by labour shortages, there were three unemployed workers for every two vacancies. Even in mining, oil and gas – the sector with by far the highest rate of job vacancy – unemployment exceeded vacancies. These figures debunk the view that the solution is simply to prod workers to move west.
UPDATE (January 25): Quoted in The Globe and Mail, Toronto Star, Montreal Gazette and other newspapers. The Victoria Times Colonist had my favourite headline.
Corporate Taxes and Investment in Ontario
Posted by Erin Weir under corporate income tax, investment, Ontario.
January 23rd, 2012
Comments: 2
Last week, Ontario’s Ministry of Finance released the Ontario Economic Accounts for the third quarter of 2011. As The Globe reported, business investment was less than impressive:
. . . investment in machinery and equipment fell slightly by 0.2 per cent between June and September, 2011, prompting Ontario Finance Minister Dwight Duncan to fire a shot across the bow of corporations.
Mr. Duncan said Ontario has the most competitive tax system in North America thanks to reforms introduced by the governing Liberals that have eliminated capital taxes and reduced the corporate rate to 11.5 per cent from 14 per cent in 2010. The rate is set to decline further, to 11 per cent this June and 10 per cent in June, 2013.
“I expect businesses to invest and create jobs,” Mr. Duncan said. “They’ve got to step up to the table and invest here in Ontario.”
As Duncan waits impatiently for a deluge of investment following his recent corporate tax cuts, he should consider that corporate tax rates have been falling for more than a decade. The Ontario Economic Accounts show that we are still waiting for the promised pickup in business investment.
Last week, I presented the following table to the Commission on Quality Public Services and Tax Fairness. It displays Ontario’s provincial corporate income tax rate, the combined federal-Ontario corporate income tax rate, and business investment in machinery and equipment as a share of provincial Gross Domestic Product at market prices. The 2011 figure covers the first three quarters.
|
Year |
Ontario CIT |
Combined CIT |
Investment / GDP |
|
1999 |
15.5 % |
44.6 % |
8.3 % |
|
2000 |
14.5 % |
43.6 % |
8.0 % |
|
2001 |
14.0 % |
42.1 % |
7.6 % |
|
2002 |
12.5 % |
38.6 % |
6.8 % |
|
2003 |
12.5 % |
36.6 % |
6.6 % |
|
2004 |
14.0 % |
36.1 % |
6.5 % |
|
2005 |
14.0 % |
36.1 % |
6.7 % |
|
2006 |
14.0 % |
36.1 % |
6.8 % |
|
2007 |
14.0 % |
36.1 % |
6.3 % |
|
2008 |
14.0 % |
33.5 % |
6.4 % |
|
2009 |
14.0 % |
33.0 % |
5.5 % |
|
2010 |
12.0 % |
30.0 % |
5.6 % |
|
2011* |
11.5 % |
28.0 % |
6.0 % |
The Harris government enacted a schedule of deep corporate tax cuts in 2000, but the Eves government delayed further cuts in 2002. In 2003, the McGuinty government legislated a partial reversal of these cuts as of 2004. In budget 2009, it announced a new schedule of corporate tax cuts, starting in 2010. Read more »
When Management Locks the Doors
Posted by Jim Stanford under unions.
January 23rd, 2012
Comments: 4
Quick: what do U.S. Steel, Rio Tinto, and Caterpillar all have in common?
They’re all enormous, flexible global companies, given carte blanche by the Canadian government to purchase important long-standing profitable assets here with few if any conditions, who promptly locked out their Canadian workers in an effort to extract historic concessions in compensation and security.
Seems to be a trend. Read more »
Wall Strikes Out on Fiscal Federalism
Posted by Erin Weir under Employment Insurance, equalization, fiscal federalism, health care, media, Saskatchewan.
January 21st, 2012
Comments: none
Saskatchewan’s Brad Wall recently issued a statement exhorting his fellow Premiers to blaze largely unspecified new trails on healthcare, Employment Insurance and Equalization. Unfortunately, he misses the ball on all three issues.
Greg Fingas and Verda Petry have already refuted Wall’s call for further healthcare privatization.
On Employment Insurance, Wall implies that eastern Canadians are collecting excessive benefits funded by western Canadians. He goes even further than the old Lotto 10-42 stereotype, alleging that people can work for just over 10 weeks and collect almost 52 weeks of benefits.
The number of benefit weeks available depends on the regional unemployment rate and on how many hours the unemployed individual had paid EI premiums. As far as I can tell, Wall or his staff picked out the minimum number of insurable hours and the maximum duration of benefits from the highest-unemployment regions. Of course, as I point out in today’s Regina Leader-Post, someone with just the minimum hours would not get the maximum benefit:
No labour shortage
As reported in the Jan. 11 story “Wall wants health innovation cash,” Premier Brad Wall stated that federal Employment Insurance (EI) “discourages Canadians from moving here” despite “a serious labour shortage.”
Far from a labour shortage, Saskatchewan has thousands of job seekers who cannot find work. The provincial unemployment rate has jumped to 5.2 from 4.1 per cent since October.
Wall inaccurately claimed, “In some regions, a person can work just over 10 weeks and receive almost a year’s worth of EI benefits.” In regions with the highest unemployment rates, including northern Saskatchewan, the minimum threshold to qualify for benefits is 420 insurable hours (10.5 full-time weeks). But someone with just this minimum could not collect benefits for the maximum of 45 weeks.
Most unemployed workers do not get EI. The percentage receiving benefits is 34 in Saskatchewan and 39 nationally. Read more »
The Political Roots of Inequality
Posted by Andrew Jackson under democracy, inequality, party politics, unions.
January 21st, 2012
Comments: 2
Last Thursday I was at an event on the issue of rising income inequality, sponsored by Canada 2020. It featured one of the authors of the recent OECD report on inequality, who highlighted the “skills biased technological change or SBT ” hypothesis so favoured by mainstream economists who desperately avoid discussion of inequality as a political as well as economic phenomenon.
I find this interpretation pretty unconvincing for the same reasons as Hacker and Pierson in their recent book on the political determinants of soaring income inequality in the US. (Jacob S. Hacker and Paul Pierson, Winner Take All Politics, Simon and Schuster, 2010.) Any rising pay gap between the college and non college educated in the US cannot possibly explain the huge wage gap between the top 1% and top 0.1% on the one hand and the many highly educated workers to be found below the extreme top end of the income distribution. And SBT cannot explain the hyper inequality of the US as compared to many European advanced capitalist countries similarly exposed to the big economic forces of globalization and technological change. (The US top 1% now grab 16% of income vs 13% Canada, 6% in Sweden and 10% in Germany.)
Hacker and Pierson argue that the key underlying cause of the winner take all US economy has been winner take all politics – the growing political power and then ascendancy of the very rich, dating back to about 1980 precisely when the income share of the top 1% began to rise. Economic policies have increasingly reflected their interests and their interests alone, and have not counteracted any structural economic forces increasing inequality.
As they argue, it is far too narrow a view of the role of government to look just at changes to tax and transfer policies which directly shape the distribution of income (and which have indeed contributed to growing inequality, especially through tax cuts for the rich.) Even more important is what governments have done, or not done, to counter increased inequality of wages and soaring returns to capital.
One key example they cite is the huge impact of the decline of US unions, which represented one in four workers in the private sector in the late 1970s compared to one in fourteen today. Declining union density and bargaining power not only led to stagnant wages for middle class workers, but also to a much weakened political voice for the middle class.
Unions were, of course, a key force behind the New Deal and remained a major force in Washington until the early 1980s, championing pocket book issues and supporting Democratic dominance of the House and Senate. But labour was unable to secure labour law reform even with Democratic majorities in Congress, laying the basis for the frontal attack on union rights and influence which began under Reagan and then gathered pace.
Unions brought their members into sustained engagement with politics. Ordinary voters, Hacker and Pierson argue, need narratives to interpret day to day political issues. The decline of labour eclipsed class based narratives for the middle class. And no organized force has replaced unions as grass roots organizations pressing for equality increasing policies and acting as a counterweight to the strongly organized interests of the rich. The new social movements which have become increasingly influential in the Democratic party did not replace the organizational muscle of labour on the ground, and do not focus on pocket book issues, leading much of the working class to become alienated from politics (and allowing the Republicans to gradually capture the South and the social conservative vote on cultural rather than economic issues.)
Hacker and Pierson document the rising power of US business in politics, especially in terms of ideological influence, lobbying, and campaign finance. With that rising power, corporate elite interests more or less completely captured the Republican Party, and all but neutered the Democratic party as a counter-weight. While somewhat less beholden to the top 0.1%, Democrats did little or nothing to counter the forces of rising inequality by, for example, regulating the rise of finance or taxing the stock options and capital gains of the corporate elite. Wall Street Democrats continue to determine the economic agenda of the Obama Administration.
Hacker and Pierson make a pretty convincing case that dominant class interests have captured the US political system, and ensured that economic policies respond to their interests rather than middle and working class economic interests. Call it the class politics hypothesis. Search for it in vain in the mainstream economic literature.
Lower Inflation Frees Carney’s Hand
Posted by Erin Weir under housing, inflation, media, monetary policy, StatCan.
January 20th, 2012
Comments: 8
Statistics Canada reported today that consumer prices decreased in December, lowering the annual inflation rate to 2.3%. The Bank of Canada’s core inflation rate declined to 1.9%.
Tame inflation leaves room to lower interest rates. If unemployment continues to rise, the Bank of Canada should reduce interest rates to boost the economy and create jobs.
The modest inflation rate still exceeds the 2.2% average increase in hourly wages. Sluggish wage growth is another sign of a weak labour market, which calls for stimulative fiscal and monetary policy.
Although the overall price level decreased, shelter costs rose in December. Statistics Canada noted that higher electricity prices powered the increase in shelter costs, especially in Alberta.
These figures could generate more debate about regulating electricity prices in that province and removing the HST from electricity costs in Ontario. Broader discussions about housing affordability are also needed across Canada.
UPDATE (January 21): Quoted by Postmedia
Austerity: Making the Same Mistake Again?
Posted by Andrew Jackson under economic crisis, economic thought, heterodox economics.
January 19th, 2012
Comments: 1
There is a special, free on line, issue of the Cambridge Journal of Economics with what look to be very interesting contributions from the progressive side of the spectrum.
Tax Shifting
Posted by Toby Sanger under corporate income tax, income tax, taxation.
January 19th, 2012
Comments: 2
Earlier this week, the Globe and Mail’s Economy Lab published a piece by Stephen Gordon arguing that high income and corporate taxes won’t generate much revenue. Gordon used used the metaphor of Jean-Baptiste Colbert’s (finance minister to the Louis XIV, the “Sun King”) that the art of taxation was like plucking feathers from a goose: “ obtain the largest amount of feathers with the least possible amount of hissing.”
It’s a quaint and vivid description, but it’s not appropriate. Money is fungible—it can be shifted around with relative ease—while feathers in a goose are not.
And it’s this shifting around of money between forms of income and between countries that explains a lot of the “elasticity of taxable income”.
Globe columnist Neil Reynolds also frequently uses the Laffer curve argument—when tax rates are lowered, revenues sometimes increase—and attributes this to the unleashing of entrepreneurial activity. But most of this is due to the magic of tax accountants rather than the magic of the marketplace.
Studies found that after top personal income tax rates were cut in the United States in 1986, most of the increase in reported individual income of high-income households was due to timing and particularly shifting of income—for example, from the corporate tax base to the individual tax base—and not from additional labor supply.
The opposite has happened in Canada. With federal corporate income tax rates at 15%, almost half the top federal personal rate of 29%, it’s profitable for those with the means to channel and retain income through a corporation instead of through personal income. Viola! It appears corporate revenue has increased as a result of tax cuts, but much of it is merely shifting of income.
Money isn’t just fluid, it’s also got a sense of gravity, seeking out lower tax rates. This is why a fundamental principle of good tax policy is that income from different sources should be taxed at relatively similar rates and loopholes should be minimized. “A buck is a buck”, as the Carter commission put it forty years ago. Unfortunately, this principle was too often ignored as governments became infatuated with supply-side economics. As a result, much effort goes in tax shifting and tax accounting, which may profit a few but are deadweight economic losses to society.
Of course there are limits to how high tax rates can go. If taxes are too high, opportunities are available, and taxes are considered unfair, avoidance will become widespread. Inequitable tax rates and turning a blind eye to tax havens undermines the credibility of a fair tax system, encouraging more avoidance.
A recent paper by Nobel-prize winning economist Peter Diamond and Emmanuel Saez, The Case for a Progressive Tax, acknowledges the phenomenon of tax shifting, distinguishing between elasticity of taxable income and elasticity of economic activity. Using data from the United States they estimate an optimal marginal tax rate for the top 1 percent in the 48 to 76 per cent range, higher than the top marginal rates in much of Canada.
But just who are these 1 percent or 0.1 percent who have acquired an outsized share of income gains over the past decade? If tax rates are increased, will they really start working much less? Will millionaire hockey players play fewer or lower quality games?
As Laura D’Angelo Tyson, Clinton’s former chief economic advisor, and Paul Krugman recently pointed out, a majority of the 1% and about 70 percent of the top 0.1 percent are finance professionals, executives, lawyers or in real estate“: corporate suits”, essentially.
If higher tax rates lead to less resources going into high profit mergers and acquisitions on Bay Street and more into productive investments on Industrial Avenue, and less money going into CEOs salaries and more into workers’ wages, is that really a bad thing?
Are There Labour and Skill Shortages in Canada?
Posted by Andrew Jackson under Job vacanices, labour adjustment, labour market, skill shortages.
January 19th, 2012
Comments: 1
Further to my earlier post on this topic, whether or not we are or will soon be experiencing labour and skills shortages is a question of critical importance to the development of sound public policy. Next week, we will get some new Statistics Canada data on job vacancies which will help support a more informed discussion.
Given projections of very weak economic growth and a real unemployment rate which is much higher than before the recession and still stands at over 10%, it is hard to support the case that we face generalized labour shortages anytime soon.
Demand for workers can be readily filled from the ranks of the unemployed, discouraged job seekers, and the involuntarily part-time and self-employed. Unemployment and under employment are especially high among the echo baby boomers entering the work force, recent immigrants trapped in jobs well below the level of their qualifications and experience, and aboriginal Canadians.
Despite a slack overall job market, many employers claim that there are significant shortages of at least some kinds of workers across the skills spectrum. Accordingly, they have pressed successfully for a major expansion of the temporary foreign worker program which now accounts for the majority of entrants to Canada, and also for changes to the regular immigration program which would much more closely align immigrant intake with the perceived needs of employers and the job market.
Do employers have a point?
It is not hard to be skeptical. Many employers want to increase labour supply via the immigration route, especially the temporary worker route, rather than raise wages, improve working conditions, and increase woefully low levels of Canadian investment in training of the current work force.
On the other hand, there is fairly compelling evidence of some specific skills shortages by occupation and region, such as skilled trades workers for major construction projects in Alberta, and some health care professions in many parts of the country. And we know from the detailed work of sector councils that some occupations will be hit much harder and earlier than others by the aging of the current workforce.
It is crucially important to get a handle on these kinds of current and emerging shortages so that we can respond through education, training and active labour market programs as well as through our immigration program. (To be clear, filling labour market needs is not the only purpose of our immigration programs, but it is certainly an important component.) Young people deserve to know what education and training programs are likely to lead to employment in good jobs, and unemployed and under employed workers need to be retrained in the skills which are demanded by employers. A good labour market information system would also allow workers to change jobs in an informed way. Read more »
The Focus of the Federal Budget Must Be Jobs, Not Cuts.
Posted by Andrew Jackson under federal budget, fiscal policy, labour market, Uncategorized.
January 19th, 2012
Comments: 2
The Mark have published a pre Budget commentary from yours truly.
EI Benefits Decline Amid Rising Unemployment
Posted by Erin Weir under Employment Insurance, unemployment.
January 19th, 2012
Comments: 1
Today, Statistics Canada reported that the number of Canadians receiving Employment Insurance (EI) benefits fell for a third consecutive month in November. This decline would be good news if it reflected an improving labour market. Unfortunately, unemployment has also increased for three consecutive months.
The trend is a dwindling number of beneficiaries among a growing pool of jobless workers. An implication is that EI recipients are exhausting their benefits without finding jobs.
The proportion of unemployed Canadians receiving EI benefits fell to 38.6% in November (i.e. 539,010 beneficiaries out of 1,394,700 unemployed workers). Statistics Canada reported an especially large decline in Ontario, where just 27.0% of unemployed workers received benefits (i.e. 156,330 beneficiaries out of 579,800 unemployed workers).
The administration of EI has recently attracted negative attention. While administrative improvements are undoubtedly warranted, more substantive policy changes are needed to increase the accessibility and duration of benefits for workers unemployed due to global economic factors beyond their control.
Deregulation: A Bad Idea Crosses the Atlantic
Posted by Erin Weir under Conservative government, OECD, regulation.
January 18th, 2012
Comments: 2
The Harper government announced today that federal “regulators will be required to remove at least one regulation each time they introduce a new one that imposes administrative burden on business.”
At the risk of imposing a proofreading burden on communications staff, that sentence is missing the word “an.”
I first heard this idea at a meeting of the OECD’s Regulatory Policy Committee, where the British government representative was touting the “One-in, One-out rule.” Canada’s Conservatives have just renamed it the “One-for-One Rule.”
At best, this rule is a gimmick. At worst, it will delay or prevent the implementation of needed public-interest regulation.
The issue is not, of course, the sheer number of regulations. It obviously makes sense to review existing and proposed regulations. But an honest review should be open to the possibility that more regulations are warranted, if that is what the evidence indicates.
The One-for-One Rule will create perverse incentives for federal regulators. They will maintain and husband unnecessary regulations so that they have something to remove when they need to introduce new regulations.
For your reading pleasure, here is what I and others submitted to the OECD.
UPDATE (January 21): This letter is in today’s Globe and Mail (page F8):
Regulation roulette
It obviously makes sense to review existing and proposed regulations (Tories Seek To Cut Red Tape Wrapped Around Businesses – Jan. 19). But an honest review should be open to the possibility of increasing regulation, if the benefits outweigh the costs.
Requiring the elimination of an existing regulation for each new one creates perverse incentives. Regulators will husband unnecessary regulations so they have something to eliminate when new ones are required. If not, the “one-for-one” rule could impede needed public-interest regulation.
Erin Weir, economist, United Steelworkers
“Real” Youth Unemployment Rate Close to 20%
Posted by Andrew Jackson under labour market, young workers.
January 17th, 2012
Comments: 1
Statistics Canada’s “real” (R8 supplementary) unemployment rate adds to unemployed persons some labour force dropouts (discouraged job seekers who have given up looking for a job in the belief that no work is available) and the hours of work lost by part-time workers who would rather have worked full-time.
In 2011, the “real” rate averaged 10.6%, up significantly from the pre recession low of 8.6% in 2007.
The increase in the “real” rate for workers aged 25 to 54 has been fairly modest, up 1.6 percentage points from 7.2% to 8.8% compared to 2007.
But the increase in the “real “rate for young workers compared to 2007 has been stunning: up 4.3 percentage points from 15.4% to 19.7% (from 16.2% to 21.0% for young men, and from 14.4% to 18.2% for young women.) The “real” youth rate has slipped only a touch from the high of 20.3% in 2009.
So, to state the blindingly obvious, we are very, very far from a meaningful recovery for young workers.
The “Job Seekers Allowance”
Posted by Andrew Jackson under Employment Insurance, income support.
January 17th, 2012
Comments: 2
Michael Mendelson has posted a long comment on my earlier post regarding the Mowat Report on EI.
He defends Caledon’s proposal for temporary non EI income support for the unemployed as a clear improvement over welfare , and stresses that it is not intended to undermine EI as a social insurance program.
I read the Caledon paper – there is a link in Michael’s comment – after commenting on the Mowat Report. Their proposal is certainly worthy of discussion given that a lowering of entrance requirements would indeed still leave many unemployed workers out of the EI system.
I continue to find it unfortunate that the Mowat Report made no recommendations on the basic parameters (the entrance requirement; the duration of benefits) within the single national EI system they call for to replace the current grid based upon local unemployment rates. Such vagueness reasonably leads many people to suspect what Mowat have in mind is an erosion of the EI system in at least the higher unemployment regions. And people will look at the Job Seekers proposal in that context.
A prescription for health care reform: think integration & collaboration
Posted by Iglika Ivanova under BC, health care.
January 16th, 2012
Comments: 2
This morning the CCPA released a new report (co-authored by yours truly) that looks at the thorny issue of health care reform in BC (and Canada) and identifies some practical, evidence-based strategies that have been successful in improving quality of care and controlling costs in other jurisdictions.
The papers comes out at a time when all Canadian provinces face significant pressure to reduce the rate of growth of health spending while continuing to improve access and quality of care but when there is no agreement on the specific changes needed to ensure that public healthcare dollars are more efficiently utilized. As a result, individual provinces are experimenting with a variety of reforms. In BC, the two major policy options being introduced are an activity based funding (ABF) model for hospital surgical procedures; and an integrated model for caring for people with chronic conditions and complex needs in the community. Though both of these are formally priorities of the Ministry of Health, ABF is receiving the vast majority of the financial resources and technical expertise.
Our paper raises serious concerns that the current preoccupation with reforming hospital funding is simply too narrow to effectively address BC’s most pressing health care challenges, many of which have roots outside the hospitals (in our inadequately funded community care system). This is why we titled our report Beyond the Hospital Walls: Activity Based Funding Versus Integrated Health Care Reform.
The current focus on ABF is a reflection of the conventional, hospital-centric model of health care that our system was built on. While this worked well to meet the health care needs of Canadians in the 1960s, it’s outdated in the 21st century when chronic disease management — which is better handled in the community, not the hospital — is increasingly becoming a pressing concern.
But what’s worse is that ABF is not just a distraction from the real problems in our health care system: it may actually reinforce the silos and fragmentation within the health care system, hindering efforts to improve overall system integration and coherence (this stand in the way of priority #2). This is why jurisdictions where ABF has been in place for a number of years are increasingly looking to move away from it towards funding mechanisms that incentivize integration across the system (among hospitals, family doctors and community care services like long term care and home support).
The paper outlines a strategy for health care reform that is timely, practical and evidence-based, and that will address the root causes of problems in our health care system.
Our review of the international evidence on health systems reform suggests that the best performing systems are the ones that have developed mechanisms to collaborate and share accountability across services and providers. The key to their success is understanding the patient experience across the continuum of diverse health services the patient needs at any one time. High performing health systems are organized in a way that allows providers to be jointly accountable for providing cost-effective care in whichever venue is medically appropriate – the patients’ home, the family doctor’s office or the hospital. There are many examples of how this can be done, both internationally and from our own backyard (Northern Health Authority is a leader in this area). All that’s needed is for the BC government to show leadership, look at the evidence, and actually implement the initiatives that have proven successful province-wide.
We hope that Canada’s Premiers’, who are currently meeting to discuss health care in Victoria, find a way to avoid getting bogged down into narrow issues like hospital funding reform and engage in a broader discussion of how to improve quality, increase access and ensure the cost effectiveness of the overall health care system.
—
Originally posted on PolicyNote.ca.
Wall of Silence on Canpotex
Posted by Erin Weir under big business, potash, Saskatchewan.
January 13th, 2012
Comments: 1
Saskatchewan’s newspapers reported today that BHP Billiton intends to sell the province’s potash outside of Canpotex, the marketing board that helps to maximize the price for which Saskatchewan potash is exported offshore.
BHP executive Tim Cutt stated, “We will not market through Canpotex. We talked to the premier (Brad Wall) about that. He understands that.”
Concerns that BHP would undermine Canpotex were a major objection to its takeover bid for the Potash Corporation of Saskatchewan. Indeed, Premier Wall’s speech rejecting BHP’s proposal invoked “Canpotex” ten times in eight pages, as a source of pricing power for Saskatchewan’s resource and of jobs in British Columbia’s ports (as opposed to BHP’s plan to use the port of Vancouver, Washington).
It seems strange that Wall would now be happy to accept BHP’s plans to circumvent Canpotex. Maybe BHP is willing to develop the Jansen Lake mine only if it can bypass this agency? Perhaps the benefits of developing this new mine outweigh the costs of eroding Canpotex’s pricing power? If Wall has come to that conclusion, he should say so rather than allowing BHP to speak for him.
Rising Inequality Spooking the 0.0001%
Posted by Toby Sanger under income distribution, inequality.
January 13th, 2012
Comments: 8
Contributors to this blog–and CCPA experts–have been warning about the negative economic and social consequences of rising inequality for decades.
Now the even the 0.0001% are getting concerned. Experts polled for the Global Risks Report for this month’s meetings of the World Economic Forum in Davos –one of the most eleite gatherings of the powerful in the world — selected severe income inequality as the most likely global risk to manifest in the next ten years.
The report notes that “shrinking tax revenues have deteriorated the fiscal position of governments and reduced their ability to ease social hardship with welfare and counter-cyclical spending”. It acknowledges that the “growing sense that wealth and power are becoming more entrenched in the hands of political and financial elites”. It warns that a lack of social mobility and hope, especially for youth, could feed more social unrest as we’ve experienced from the U.S. to the Middle East. If not addressed, it could feed a vicious cycle and “potential slide into dystopia”.
Scary prospects prospects indeed, even for the elite–including Prime Minister Stephen Harper–gathered in the rarified confines of Davos.
In Washington, Alan Krueger, Chairman of Obama’s Council of Economic Advisors delivered a speech yesterday highlighting the real problems of the Rise and Consequences of Inequality in the United States.
There’s some interesting material there: he makes the strong point that rising inequality has hampered economic growth. He says ”there’s no sign.. that the tax increases in the early 1990s had an adverse impact on growth” and “there is little empirical support for the claim that reducing the progressivity of the tax code has spurred income growth, business formation or job growth.”
He cites studies showing that “a more fair distribution of wages would be good for business because it would raise morale and productivity”. Krueger also highlights some of the excellent work by Ottawa professor Miles Corak and his “Great Gatsby Curve” showing that rising inequality is associated with lower intergenerational mobility. Horatio Alger no more.
These issues and concerns certainly aren’t new to Krueger, who did ground-breaking work on the impacts of minimum wages, but they may start to spook the Davos crowd. The question is: what are they going to do about it?
Krueger has some decent though modest suggestions aligned with his his boss’s policies. The solutions suggested for Davos are even more self-serving and far out to sea: “equipping youths with the skills to succeed and enable them to move to where their labour labour is most needed through safe well-managed migration channels” (!)
Time for them to man the lifeboats!
