Economy

Wages in Canada and the other advanced economies are about as flat as left-over champagne in the glass on New Year's Day. This poses a major threat to a sustained economic recovery.

During the four years from 2009 through 2013, average hourly wages adjusted for inflation rose by a grand total of just 2.3%, or by about one half of 1% per year. Real wages rose by a total of only 0.9% in Ontario and 1.1% in Quebec over those four years, though by a healthier but still unimpressive 4.8% in Alberta.

The Conservative government ended the 2014 Parliamentary session with another attack on Canada’s democratic institutions with Tuesday’s passage of Bill C-525 in the Senate.

The intention of the private member’s bill by backbench Conservative MP Blaine Calkins is to make it harder for workers in federally regulated workplaces to unionize and easier for a minority of workers to decertify unions.

Twenty-five years ago, the House of Commons unanimously passed Ed Broadbent's resolution to abolish child poverty by the year 2000. We are far from that goal.

Child poverty as measured by the Statistics Canada Low Income Cut Off has fallen since 1989, meaning that the proportion of families forced to spend a well above average share of their budgets on food, clothing and shelter has diminished somewhat. 

But it is a different story if we use the low income measure, which looks at the gap between poor children and the middle class, calculating the number of children who live in a family which has less than one half of the income of a comparable middle income family.

One of the perks of the position of the Governor of the Bank of Canada, going back to at least the days of David Dodge, is that it provides a bully pulpit to weigh in on economic issues of wider public interest than monetary policy. This is appropriate given the broad context within which the Bank operates, but, as Stephen Poloz now knows, the ability to gain widespread public attention comes with a downside.

Governor Poloz was widely criticized recently for his suggestion that unemployed young people should volunteer or consider working for free in order to improve their longer term prospects in a poor job market. Outraged youth rightly noted that it is only the children of the affluent who can afford to work for free, and that unpaid internships are often highly exploitative.

The recent collapse in the price of oil begs the question of whether Canada, yet again, is going to enter the bust phase of a classic boom-bust resource cycle. There is much to fear.

Earlier this year, the Canadian Centre for Policy Alternatives released a collection of essays marking the fiftieth anniversary of the publication of a Canadian economics classic, “A Staple Theory of Economic Growth” by Mel Watkins.

The Harper government’s tax package released Thursday is a throwback to the family policies of a bygone era. It turns its back on the pressing need for affordable, high quality child care; introduces a new tax measure which will mainly benefit traditional families with a stay at home spouse; and brings back the old family allowance in a modified form.

The government’s token response to calls for a national child care program is to modestly increase the Child Care Expense Deduction – representing a tiny fraction ($395 million) of the government’s package exceeding $26 billion. This will hardly make child care any more affordable, and will do nothing to create badly needed new spaces. The deduction has to be claimed by the lowest earning spouse and the increase of $1,000 per child will translate into just $150 per year for those in the bottom tax bracket.

With the federal budget set to return to balance this fiscal year, we can once again debate how to deal with future surpluses. Priority could be given to paying down the debt, cutting taxes, or re-investing in public services and social programs.

These options should be judged on how much they contribute to a stronger economy as well as a fairer and more inclusive society.

The gloomy view that the global economy faces a prolonged period of slow growth and high unemployment holds increasing sway among mainstream economists.  A new eBook from the Centre for Economic Policy Research (CEPR), “Secular Stagnation: Facts, Causes, Cures” edited by Coen Teulings and Richard Baldwin includes interesting contributions from such luminaries as Paul Krugman, former US Secretary of the Treasury Larry Summers, and the International Monetary Fund chief economist Olivier Blanchard.

While the authors look at the issue from diverse perspectives, it is striking that the solutions offered by many are more radical than those commonly discussed in Canada.

There is a lot of talk about the need to build a “knowledge-based economy” if we are to retain and create good jobs in a world where production is shifting in a major way to lower wage developing countries.

To compete, Canada must indeed produce high value-added goods and services commanding a price premium in world markets because they are sophisticated and unique. But, there are few signs of a sustained transition to a more innovative economy in Canada. Indeed, we are moving in the wrong direction.

Bill Scarth is a highly respected mainstream Canadian economist at McMaster University. In a piece just published by the C.D. Howe Institute, a generally conservative think-tank, he argues that the pace of federal deficit reduction should be slowed in order to lower unemployment.

His key point is that the economy still has a lot of slack which will not be quickly closed just by maintaining interest rates at their currently very low levels.