Posted by NationBuilder Support · December 23, 2013 6:35 PM
Apart from scandal, Parliament didn’t produce much in the just completed fall session – a grand total of three bills. But there was one ray of light, a Finance Committee report last week on one of our most serious problems, the growth of income inequality. The Committee was mandated to study the problem and propose solutions, paying particular attention to the federal tax and income support system.
The Committee heard from dozens of academic experts and public interest groups, and I was pleased to present a brief on behalf of the Broadbent Institute. This built on our own major report on inequality on what I believe to be one of the defining political issues of our time.
The Committee's report falls well short of being ideal. But it does represent a step forward, and provides some interesting insight into how the issue of inequality may play out in terms of partisan and public debate leading up to the 2015 election.
The report lays out the evidence of the growth in economic inequality in Canada, confirming the sustained rise of the income share of the top 1 per cent, and describes some of the key underlying causes, including changes in the labour market. But most experts cited seemed to agree that government policies have also worked to exacerbate the problem.
A major disappointment in the report, reflecting the views of the Conservative majority, is that it fails to underline why the rise in income inequality should be of pressing concern to all Canadians. Almost everyone else on the planet, from the World Health Organization to the OECD and the IMF, stress this reality: high levels of inequality have negative social and economic consequences for everyone, rich and poor alike.
The opposition parties were much better. The NDP supplementary report states that “high levels of income inequality slow growth, destroy communities, and prevent millions of Canadians from reaching their full potential.” The Liberal Party states that “if Canada does not address its growing levels of inequality, it faces costly economic and social consequences, from decreased productivity to poor health outcomes.”
In a more encouraging vein, the majority report cautiously endorses some positive proposals. Given stated support from both of the opposition parties, these could, and should, move to the top of the government agenda as we approach the 2014 federal Budget and the 2015 federal election.
The Broadbent Institute and other witnesses highlighted the need to increase the Working Income Tax Benefit (WITB) which supplements the incomes of working poor families, thus raising earned income from low wage jobs and helping offset unnecessary barriers to moving from welfare to work.
The majority report calls on the federal government to “formally review the WITB to determine how it could be expanded or modified to further benefit Canadians.”
The majority report, again accompanied by stronger statements from the opposition parties, further calls on the federal government “to make early childhood education and child care more accessible and affordable in all areas of the country, including through increased support for affordable early childhood and education and care programs.”
Such programs are key to removing barriers to work by single parents, mainly women, and are also important to expanding lifetime opportunities for low income children. However, the key question to ask of the Conservatives is whether they are actually prepared to fund income supports for the working poor and early childhood programs. After all, their stated priorities, following elimination of the deficit, are to cut income taxes by introducing family income splitting and by raising contribution limits for Tax Free Savings Accounts.
It is encouraging that both of the opposition parties, with only guarded support from the Conservatives, place a strong emphasis upon importance of addressing the needs of Aboriginal Peoples, especially in the area of education.
The NDP also stressed the importance role of collective bargaining in achieving more equality and opposed recent changes in EI that compel workers to take jobs at much lower wages.
Both of the opposition parties call for some limited measures to make the tax system more fair, but neither endorses higher income tax rates for the very affluent, one source of funding new social investments.
The NDP alone condemns the Conservative proposal to extend income splitting to families with children, a measure that would cost some $2.7-billion per year in lost revenues, provide no extra support at all for single parents and lower income working families with children. It would primarily benefit the most affluent. The question for the Liberals is how can they support new social initiatives if they also support the loss of funding brought about by this income splitting proposal and oppose new tax increases.
While the issue of the growth in income inequality has now been put on the table by all parties in this report, it is clear that there will be plenty to debate about possible policy solutions leading up to the next election.
Finance Minister Jim Flaherty says the economy is too weak to support a modest, phased-in increase in Canada Pension Plan (CPP) premiums divided between employers and employees.
This is disputed by experts, and also contradicts Conservative messaging in two important ways.
First, in every other context, from the Speech from the Throne, to the recent Economic and Fiscal Update, the Conservatives have bragged about Canada's economic performance and highlighted the chances of a strong recovery. Except when it comes to the CPP debate, "the land is strong."
The standard view in economics and in policy circles is that wage increases come at a cost that impacts individual firms negatively. According to this view, wage increases also lead to losses in a firm’s competitiveness in foreign markets. Thus, until the advent of the global financial crisis, mainstream authors paid little attention to the fact that wage growth had lagged behind the sum of productivity growth and inflation, in most countries and for several decades, and that as a result wage shares had fallen. There was also little concern with the rise in wage dispersion— the gap between the income share of the top 1% and the rest that became a part of the lexicon during the Occupy Wall street movement.
There is broad agreement across the political spectrum that we need to create more 'good middle-class jobs', especially for young people leaving the educational system, recent immigrants to Canada, and aboriginal persons.
Middle-class jobs can be seen as those which provide decent pay, working conditions, and benefits; a measure of employment security; and, above all, opportunities to build skills and progress over time in a career. In today's labour market, these kind of jobs generally require a professional or advanced technical qualification acquired through postsecondary education.
The Parliamentary Budget Office has come out with a report suggesting that the Conservatives will likely balance the budget ahead of schedule. But, and it’s a big but, they also found there would be no balanced budget in 2016 if there were no Employment Insurance (EI) surplus.
The Conservatives' use of the EI surplus to pay for a balanced budget deserves closer scrutiny.
In October, 2011, two leading U.S. economists, Nobel prize-winner Paul Krugman and Lawrence Summers, squared off in Toronto in the high-profile Munk Debates. At issue was the question of whether North America faced a Japan-style era of prolonged economic stagnation.
Mr. Summers, former Treasury secretary under president Bill Clinton, a key White House economic adviser in President Barack Obama’s first term, former president of Harvard University, and for a time a highly paid adviser to a leading hedge fund, is as close to an establishment economist as one can get. He was widely reported to be President Obama’s personal choice to replace Ben Bernanke as chairman of the Federal Reserve Board, and probably would have been nominated if not for strong opposition from the many Democratic senators who saw him as too close to Wall Street.
The wrath of the biblical prophets was often directed at those who enjoyed the inequality of their riches while ignoring the needs of the vulnerable at the other end of the economic scale. One of the earliest of such prophets was Amos, who condemned those who oppress the poor and crush the needy. According to biblical scholar Walter Bruggeman, Amos was protesting against the “self-indulgent economy of the urban elite.” In statements made both before and after he became Pope, it is clear that Pope Francis sees the prophetic tradition as integral to his understanding of what it means to be a good pastor of the flock.
Two major recent studies – from Derek Burleton and his colleagues at Toronto-Dominion Bank, and from former senior federal government official Cliff Halliwell published by the Institute for Research on Public Policy – provide excellent overviews of recent developments in the Canadian job market, and an informed framework for thinking about our future skills needs.
This message seems to have finally got through to the Harper government. In a speech to the Vancouver Chamber of Commerce on November 14, Employment and Skills Development Minister Jason Kenney told employers to stop complaining and to stop relying excessively upon temporary workers. Instead, he said, employers should “put more skin in the game” by increasing wages in high-demand occupations and by investing more in the training of Canadians.
In 1939, the United States and much of the world were still struggling to exit the Great Depression that had begun a decade earlier. In that context, Alvin Hansen – the prominent economist and disciple of John Maynard Keynes – famously argued before the American Economic Association that the underlying problem was not cyclical, but rather “secular stagnation.”
Mr. Hansen anticipated an extended period of sluggish growth and high unemployment, due to a structural shortage of demand compared with already existing productive capacity. Under such circumstances, there were few profitable investment opportunities for business, resulting in excess savings and idle resources.
Renowned lawyer Clayton Ruby’s intervention into the Rob Ford spectacle got me thinking about the ways in which this civic mess has unfolded. Namely, it has brought into focus how privilege continues to be accrued unfairly to certain individuals and communities and not others in Canadian society.
Toronto Police Chief William Blair’s announcement concerning the recovery of the infamous video came just as a judge’s ruling on disclosure of the warrant became public. Some of what has been revealed in those documents is more damning than the reality of the video. The video vindicates the reporters and the Toronto Star in particular. However, the documents raise a whole other set of issues and concerns, ones that are bigger than Rob Ford and the specifics of his actions and represent a far more troubling, systemic scandal.