Wednesday, April 25, 2018

On unequal treatment

With the Trans Mountain pipeline dominating as much news coverage as it has, it's inevitable that we'd see the usual debate as to the relative desirability of different types of economic paths come to the surface. And I'll point out just a couple of the which look to signal a distortion of the actual impact of different economic options in favour of oil (and at the expense of the public interest).

Let's start with Kevin Milligan's Globe and Mail column which has been thrown around repeatedly as a definitive statement that oil is a solution to inequality.

Unfortunately, Milligan's assertion isn't founded in any data addressing inequality in particular, but instead treats overall income as a proxy for equality without apparent explanation. So let's take a look at some data on the point which is supposedly being addressed.

In fact, for the approximate time period used by Milligan, inequality increased slightly in Canada as a whole. And the most obvious increase in terms of both before-tax and after-tax inequality in the broader time period when we've shifted toward reliance on natural resources occurred in Alberta, which Milligan singles out as an example of resource revenue reducing inequality:

The relationship between economy type and inequality does look to be ambiguous. (In particular, Saskatchewan reduced its inequality while also seeing a resource-based boost in incomes in the 1990s and 2000s.)

But there's certainly no basis to suggest that Canada's shift toward a resource economy in recent decades actually reduced inequality as a rule, either on a national scale or within any particular province. And Milligan's position is particularly jaw-dropping in minimizing even the possible results of redistributing the unequal wealth normally found in resource-dependent jurisdictions (including the ones charted above), while instead asking us to assume that "oil = equality!!!".

Meanwhile, the usual foil for resource development is a focus on value-added manufacturing. So let's turn to Kevin Carmichael's admonition that we shouldn't focus unduly on manufacturing jobs when "only about five per cent of employed Canadians work at a factory".

On its own, that's a fair statement. And Carmichael does note that the real implication of the composition of Canada's economy is that we should be more focused on services.

But if we're going to apply that raw-job standard to manufacturing with no allowance for spinoff effects, surely we need to do the same for the resource sector - which leads us to Statistics Canada's data on employment by sector. And that shows manufacturing providing 1,508,942 jobs in 2017 - compared to 199,780 for "Mining, quarrying, and oil and gas extraction" combined.

The effect of singling out manufacturing for minimization is to create more space for the even more obviously-flawed argument to prioritize resource extraction above both competing sectors and the public interest - at a time when we're seeing far too many governments eager to do exactly that.

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