Krugman: End This Depression Now!
Posted by Andrew Jackson under deficits, economic crisis, economic thought.
May 20th, 2012
Comments: 2
I am an enthusiastic reader of Krugman’s columns and, especially, his economic blog. And I certainly side strongly with him in the intellectual and political struggle against “the Austerians” and “Very Serious People” who are unnecessarily prolonging the Great Recession in America and in Europe.
That said, Krugman’s latest book “End This Recession Now” (Norton, New York, 2012) is not without its flaws.
The core argument of the book is that the US is caught in a liquidity trap, such that ultra low interest rates alone cannot prompt an adequate recovery. As Keynes argued in the 1930s, the only solution in such circumstances is major fiscal stimulus to close the gap between actual and potential output.
Along the way, Krugman convincingly dismisses fears that stimulus would cause higher inflation or increased interest rates, and assails the many mainstream economists who cannot bring themselves to abandon the discredited macro economic orthodoxies of the pre recession period. He also argues that elites, the top 1%, oppose stimulus since it would legitimate a more active government role and weaken the argument that business confidence and business confidence alone is the key to any lasting recovery.
Krugman’s analysis of the causes of the crisis stresses the importance of the housing bubble and the consequent financial crisis followed by the problem of debt deleveraging. He also argues that rising inequality played a role, most notably by helping fuel overconsumption and the growth of debt and by increasing the power of the top 1% to shape economic policy.
To my mind, however, he underplays broader background forces. He entirely neglects the much weakened power of labour in the run up to the crisis and the consequent breaking of the linkage between productivity growth and real wages. Seen from this perspective, the growth of household debt and the housing bubble postponed a crisis which was inherent in the neo liberal model which has dominated for the past thirty years.
Similarly, Krugman has almost nothing to say about the importance of the US trade deficit with the rest of the world, especially developing Asia, and the consequent leakage of demand from the US domestic economy and the downward pressure on working class wages. The recyling of the developing Asia trade surplus to US household debt also helped set the stage for the crisis.
For Krugman, the problems with the US economy have an obvious and purely technical solution on which economists should agree, namely massive fiscal stimulus. But this underplays the need for major structural changes to the neo liberal labour market and globalization model, as emphasized in Tom Palley’s recent book.
It is also disappointing that Krugman has rather little to say about what a stimulus program should look like. Unlike Stiglitz, he does not stress the importance of public investment as a way to expand demand and “crowd in” private sector investment, thus setting the stage for higher potential GDP growth as the immediate effect of stimulus fades. He shows no enthusiasm for environmental investment, and generally just talks about the need for high levels of spending without specifying details. To my mind, the case for stimulus would be more politically effective if proposed spending increases are targetted to specific purposes which promote structural improvements in the economy and environmental and social justice.
Krugman also offers no convincing argument that a short term stimulus would be self- financing in the longer run. Since he does not consider the case for monetization of deficits, one has to ask if it is really the case that debt financed major spending would stabilize the US debt to GDP ratio given the underlying trade deficit, and given low multipliers for some forms of stimulus such as tax cuts. Again, I think that he is basically right, but he would have been more persuasive if he had put forward a more detailed and focused public investment agenda.
All that said, this book has many fine chapters, not least a succinct analysis of the European crisis and a spirited attack on economic orthodoxy and the vested interests it serves. Hopefully, it will shift the terms of the policy debate to at least some degree.
HRSDC Funded Research Contradicts Key Argument For New EI Policy
Posted by Andrew Jackson under Employment Insurance, labour adjustment, labour market.
May 18th, 2012
Comments: 1
According to today’s Globe, the government says that the major target of pending changes to EI is frequent claimants, who are disproportionately to be found in the high unemployment regions.
This focus seems to reflect the common belief that supposedly “overgenerous” EI benefits stop some people from moving from high to low unemployment regions.
Interesting to note, then, that research commissioned by HRSDC finds that the EI program has almost no impact on inter-regional labour mobility. Here is the summary and link to the full paper, taken from the latest EI Monitoring and Assessment Report.
22. Policy-Induced Internal Migration: An Empirical Investigation of the Canadian Case
Author(s): Kathleen M. Day, University of Ottawa, and Stanley L. Winer, Carleton University
Objective(s): This study investigates the influence of public policy on interprovincial migration in Canada.
Key finding(s) referenced in the report:
- The prime determinants of interprovincial migration were differences in earnings, employment prospects and moving costs.
- EI is not a barrier to mobility, as eliminating regional EI extended benefits and regional EI differences in qualifying requirements would increase the volume of migration by less than 1%.
Availability: This paper can be found through CESifo at http://www.ifo.de/portal/pls/portal/docs/1/1188434.PDF
More on “Labour Shortages”
Posted by Andrew Jackson under Job vacanices, labour market.
May 18th, 2012
Comments: 2
Here are the most recent Statscan job vacancy data by province. There were six unemployed workers for every reported job vacancy in Canada in the three months ending in January, rising to about ten unemployed workers for every open job slot in Atlantic Canada.
Note that there is no information on what wages employers were prepared to offer to fill these “vacant” jobs.
| Number of unemployed, number of job vacancies, and unemployment-to-job vacancies ratio, by province and territory | |||
| Three-month average ending in January 2012 | |||
| Unemployment-to-Job Vacancies | |||
| ratio | |||
| Canada | 6.0 | ||
| Newfoundland and Labrador | 15.4 | ||
| Prince Edward Island | 9.0 | ||
| Nova Scotia | 9.5 | ||
| New Brunswick | 12.1 | ||
| Quebec | 6.1 | ||
| Ontario | 8.6 | ||
| Manitoba | 3.8 | ||
| Saskatchewan | 2.6 | ||
| Alberta | 2.0 | ||
| British Columbia | 8.1 | ||
| Yukon | 4.8 | ||
| Northwest Territories | 6.7 | ||
| Nunavut | 7.6 | ||
Inflation On Target; Exchange Rate Off Target
Posted by Erin Weir under exchange rates, inflation, media, monetary policy, OECD.
May 18th, 2012
Comments: 3
Today, Statistics Canada reported an annual inflation rate of 2%, precisely in line with the Bank of Canada’s target. With inflation under control and renewed risks to the global economy, there is little rationale for the central bank to raise interest rates anytime soon.
In fact, the Bank of Canada should now be more concerned about the exchange rate than the inflation rate. Recent debate about Dutch disease highlights the Canadian dollar’s overvaluation.
While the loonie trades for about 98 U.S. cents on financial markets, the OECD calculates that its real purchasing power is equivalent to only 76 U.S. cents. This discrepancy hurts manufacturing and other industries that export output abroad, but buy inputs in Canada.
An interest-rate hike would aggravate this problem by driving up the exchange rate. On the contrary, the Bank of Canada should help alleviate Dutch disease by intervening in foreign-exchange markets to moderate the loonie to more competitive levels. (Directly managing their exchange rate is, in fact, how the Dutch cured Dutch disease.)
Wages vs. Inflation
The national average hourly wage rose by 2.3%, slightly more than inflation. However, Ontario’s provincial inflation rate of 2.1% is triple the average Ontario wage increase of 0.7%.
UPDATE (May 19): Quoted in The Hamilton Spectator and St. John’s Telegram
Federal jobs cuts: Clarity is always one year away
Posted by David Macdonald under Uncategorized.
May 17th, 2012
Comments: 2
I’ve commented on federal job cuts many times before (here, here, here & here) and in the interests of beating this particular horse good and dead (no animals were harmed in the writing of these reports), the CCPA today is releasing my latest update on the matter: Clearing away the fog: Government Estimates of job losses. It has already gotten some press in the Ottawa Citizen
IRPP: No Denial of Dutch Disease
Posted by Erin Weir under manufacturing, media, NDP, oil and gas, public infrastructure.
May 16th, 2012
Comments: 8
Canadian Press writes, “Mr. Mulcair’s analysis of what ails Canada’s economy is contradicted by a new independent study produced by the Institute for Research on Public Policy.” Really?
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.
Saskatchewan Manufacturing Hits the Wall
Posted by Erin Weir under labour market, manufacturing, Saskatchewan, StatCan.
May 16th, 2012
Comments: none
Premier Brad Wall was Tweeting about today’s Statistics Canada report of an uptick in national manufacturing sales in March. It is an odd report for him to trumpet, given that it found a decline in Saskatchewan’s manufacturing sales that month.
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?
The Stock Market and Canadian Economic Performance
Posted by Andrew Jackson under financial markets.
May 16th, 2012
Comments: 2
Glancing idly at the numbers, I find to my slight surprise that the Canadian stock market (S&P/TSX) is now down about 25% from the May, 2008 peak, whereas the US stock market (S&P 500) is down by only about 10% from its peak in May, 2007. So, since the beginning of the crisis, owners of US corporations have done significantly better than owners of Canadian corporations.
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.
Memo to Ministers: The Issue is Unemployment Not Labour Shortages
Posted by Andrew Jackson under labour market, unemployment.
May 16th, 2012
Comments: 2
The federal government is basing labour market policy on the belief that, as Jason Kenney pithily puts it in today’s Globe, there are “large and growing labour shortages.” Hence moves to bring in even more temporary foreign workers at lower than average wages, and to push EI claimants into supposedly available jobs.
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 unemployed workers for every reported job vacancy. That is actually worse than the previously reported number for September when there 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.)
Why Can’t We Afford What We Used to Have?
Posted by Andrew Jackson under economic growth, inequality, Uncategorized.
May 15th, 2012
Comments: 2
In this age of austerity, we are constantly told by governments that we have to tighten our belts. Tuition fees have to go up; public pensions, Unemployment Insurance and social assistance benefits have to be cut; universal public health care is no longer affordable, and so on ad nauseam.
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%
Tightening the Screws on the Unemployed
Posted by Andrew Jackson under Employment Insurance, federal budget.
May 15th, 2012
Comments: 3
The significant changes to the Employment Insurance (EI) program which are to be quickly implemented through Budget 2012 with very little consultation have not received enough critical attention.
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. Read more »
Defending Green Jobs at the WTO
Posted by Erin Weir under environment, international trade, media, Ontario, public sector procurement, unions, WTO.
May 14th, 2012
Comments: none
As a partner in Blue Green Canada, the United Steelworkers have issued the following news release:
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. Read more »
Energy McCarthyism
Posted by Jim Stanford under energy, exchange rates.
May 14th, 2012
Comments: 7
The high-and-mighty virtiol which greeted Tom Mulcair’s comments last week about the downside of oil-powered currency appreciation is lamentable (repeating the over-the-top reaction to Dalton McGuinty’s similar comments a few weeks ago). Mulcair made two modest and empirically substantiated statements: the loonie is sky-high as a result of the oil boom in Alberta’s bitumen sands (I doubt you’d find a single currency trader on Bay Street who would disagree with that), and that overvaluation is causing negative side-effects on other industries and regions in Canada.
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.
Postmedia’s Ham-Handed Assault on Mulcair
Posted by Erin Weir under manufacturing, media, NDP, resources.
May 13th, 2012
Comments: 3
Postmedia has posted Michael Den Tandt’s latest column, which will presumably appear in print tomorrow. He presents recent comments about Dutch disease as a departure from Tom Mulcair’s previous position:
. . . 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. Read more »
Jobs: Ontario Left Behind
Posted by Erin Weir under labour market, media, Ontario, StatCan, unemployment.
May 11th, 2012
Comments: 1
Statistics Canada reported today that April was another good month for the labour market. The Canadian economy added 58,200 jobs, most of which were full-time and all of which were paid positions rather than reported self-employment.
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
Going to the Wall in Defence of Mulcair
Posted by Erin Weir under exchange rates, manufacturing, media, NDP, oil and gas, Saskatchewan.
May 11th, 2012
Comments: 11
I have the following op-ed in today’s Saskatoon StarPhoenix:
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. Read more »
Temporary Foreign Workers and the Labour Market
Posted by Jim Stanford under immigration, temporary workers.
May 7th, 2012
Comments: 4
Further to recent commentary regarding the Harper government’s dramatic expansion of the Temporary Foreign Worker (TWF) program, consider this shocking factoid:
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. Read more »
Mining in the NWT: Who Gets What?
Posted by Nick Falvo under Africa, Alberta, Canada's North, corporate income tax, GDP, Indigenous people, Nordics, Northwest Territories, regulation, resources, taxation.
May 6th, 2012
Comments: 3
In a recent blog post at Northern Public Affairs, Stephanie Irlbacher-Fox looks at the issue of ‘who gets what?’ when a mine is developed in the Northwest Territories (NWT).
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.
Canada’s Oil: For Sale to the Highest Bidder
Posted by Jim Stanford under energy, exchange rates, foreign investment/ownership.
May 5th, 2012
Comments: 9
Want to know why Canada’s currency is sky-high despite our sluggish recovery, our large and persistent current account deficit, and our lousy export performance?
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 in Context
Posted by Erin Weir under media, StatCan, unemployment, US.
May 5th, 2012
Comments: 3
Professor Miles Corak had a post on The Globe and Mail’s Economy Lab yesterday comparing measures of unemployment in Canada and the U.S. I remember learning in Economics 100 that the official Canadian and American unemployment rates are not directly comparable, in part because Statistics Canada includes 15-year-olds whereas the U.S. Bureau of Labor Statistics starts at 16.
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.
Opting Out of Union Dues
Posted by Erin Weir under media, Sask. Election 2011, Saskatchewan, unions.
May 4th, 2012
Comments: 5
Murray Mandryk’s excellent column today saves me the trouble of writing a lengthy blog post on the Saskatchewan government’s recent musings about labour legislation.
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.
Austerity can be fought !
Posted by Eric Pineault under progressive economic strategies, Quebec, socialism, student movement, user fees.
May 3rd, 2012
Comments: 2
Asked by an anglophone journalist what the Québec students struggle means for the ROC, this is what I had to say.
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.
While You Were Sleeping: Fed Policies Make It Easier to Hire a Cheaper You
Posted by Armine Yalnizyan under democracy, demographics, economic growth, employment, immigration, temporary workers.
May 3rd, 2012
Comments: none
A shorter version of this article appeared today in the Globe and Mail’s Economy Lab
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.
From Financial Crisis to Stagnation
Posted by Andrew Jackson under economic crisis, economic thought, financial crisis, global crisis.
May 3rd, 2012
Comments: none
I am enjoying Tom Palley’s new book – and would post an enthusiastic review except for the fact that I have been unable to find the time to finish it. Certainly a very clear-headed take on the fundamental economic – and political – transformations that will have to take place if we are to escape global stagnation, or even worse.
In the meantime, enjoy this interview with the author.
Meilinomics II: Income from Within
Posted by Erin Weir under Africa, development, health care, inequality, poverty, Saskatchewan.
May 3rd, 2012
Comments: none
The following is another excerpt from Dr. Ryan Meili’s new book, A Healthy Society: How a Focus on Health Can Revive Canadian Democracy, which fellow blogger Greg Fingas has been discussing.
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. Read more »
“Differentiation:” The à-la-carte Way to Hire More Course Instructors
Posted by Nick Falvo under education, fiscal federalism, inequality, Ontario, post-secondary education, privatization, R&D, rankings, Saskatchewan.
May 2nd, 2012
Comments: 4
I’ve written before about attempts in Canada to create more separation between university teaching, on the one hand, and university research, on the other. In 2009, I wrote this opinion piece about an attempt by five university presidents to each acquire a larger share of university research dollars. And last year, I blogged here about a proposal for the Ontario government to create more separation between teaching and research within the university sector.
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.
If You Could Change One Thing
Posted by Jim Stanford under economic literacy, unions.
May 2nd, 2012
Comments: 3
I had a great change of pace last week, when I stayed out at the CAW Family Education Centre at Port Elgin to teach a 5-day course on “Economics for Trade Unionists” through the CAW’s Paid Educational Leave program.
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. Read more »
The Federal Budget and Women
Posted by Andrew Jackson under federal budget, women.
May 2nd, 2012
Comments: 1
(The following is from my colleague Angella MacEwen.)
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:
- 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.
- 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.
- 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.
- 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?
- 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.
- 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.
- 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.
Travels in Harperland
Posted by Bruce Livesey under Alberta, Conservative government, economic crisis, race.
April 30th, 2012
Comments: 1
On my recent book tour to promote “Thieves of Bay Street” I have journeyed to Alberta, Montreal and Ottawa. In so doing, I have gotten a taste of the Canada which Stephen Harper and his merry band of Tories are trying to forge.
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 Big Banks’ Big Secret
Posted by David Macdonald under asset backed commercial paper, auto industry, Bank of Canada, banks, capitalism, corporate profits, economic crisis, economic risk, financial crisis, financial markets, financial regulation, free markets, global crisis, income distribution, inequality, recession, Role of government, Uncategorized.
April 30th, 2012
Comments: 34
The CCPA today released my report: “The Big Banks Big Secret” which provides the first public estimates of the emergency funds taken by Canadian banks. The report bases its estimates on publicly available data from CMHC, the Office of the Superintendent of Financial Institutions, US Federal Reserve, the Bank of Canada, as well as quarterly reports from the banks themselves.
