Monday, April 08, 2013

On changed incentives

Steve has already pointed out RBC's status as the leading beneficiary of corporate tax giveaways in the context of its outsourcing of Canadian jobs (using temporary foreign workers as an intermediate step). But it's worth highlighting that there's much more than a coincidental connection between the two.

After all, a tax system which includes meaningful rates on corporate profits and high-end individual earnings will implicitly increase the cost of prioritizing those ends over investment in an actual business. Which means there's less reason to let dead money accumulate within a corporation rather than investing, and also less to be gained by individual executives pursuing a dropped-watermelon strategy rather than trying to build a business which can sustain both employment and profits in the longer term.

Conversely, a system which facilitates a get-rich-quick approach for current executives serves as an incentive to do exactly what RBC is doing. And indeed, the public policy decision to encourage businesses to treat employees as disposable only highlights that executives will likely be seen the same way - which only exacerbates the change in incentives resulting from a lower tax rates applied to a cash-out-now approach.

In sum, RBC's outsourcing doesn't represent a betrayal of some public good which might have been expected to result from the corporate tax cuts carried out by the Libs and Cons. Instead, it's a logical consequence of their underlying philosophy - meaning that there's plenty of blame to go to Canada's corporatist parties as well as to RBC.

(Sean has more from a municipal perspective.)

(Update: See also Will McMartin on B.C.'s experience.)

1 comment:

  1. AFL Advisory :

    A list of fast-tracked temporary foreign worker applications shows that scandals at Royal Bank and HD Mining are just the tip of the iceberg.

    The document, which the Alberta Federation of Labour will release at a press conference on Tuesday, April 9, lists all approved TFW applications in the first eight months of the new Accelerated Labour Market Opinion (ALMO) process. Thousands of ALMO guest worker permits – which are supposed to be reserved for highly-skilled employment – have been granted to fast-food restaurants, convenience stores and gas stations.

    "You look down this list, and it's McDonalds, Tim Hortons, A&W, Subway sandwiches. Are we supposed to believe that these are 'high-skill' employment opportunities?" Alberta Federation of Labour president Gil McGowan said. "These permits are being used to replace Canadian workers with people who will have reduced bargaining power."