Wednesday, July 06, 2011

Wednesday Afternoon Links

Miscellaneous material for your mid-week reading.

- David Green nicely explains the basic choice to be made in determining what type of economy we want to pursue:
(T)he basic tenet of the new policy regime – that any increase in wage costs kills jobs and growth – means that the regime cannot deliver good jobs to workers by definition. When demand conditions in the oil patch start pushing wages up, the government responds by bringing in large inflows of temporary workers to keep them down. In the late 2000’s, the priority list for speedy processing of TFWs in BC and Alberta included food counter workers. There is no argument about economic growth that implies a need to staff fast food counters quickly. Clearly the government bought into an argument that all wage increases are bad.

More recently, we have learned that firms in the oil patch are training workers in Mexico in order to get ready to bring them in as TFWs. Is this the policy direction we want? Is investing in training for workers elsewhere rather than here in order to make it easier to keep wages in Canada low really the path to a healthy economy and society?

The response on the other side, of course, is that we have no choice. Any increases in wage costs will kill growth.

Is this really true? In recent work with Paul Beaudry from UBC and Ben Sand from York University, we found that a 10% increase in wage costs in an economy implies a 3% reduction in the employment rate. This is not zero – there are tradeoffs – but it’s a long way from what the Harper government seems to believe.

This highlights a need for a debate on a key question: do we really want Canada to be a low wage society? Do we really believe, as the American approach embodies, that the only legitimate goal of labour and social policy is employment? Policies that focus on generating good jobs with good wages and stability are possible without generating economic stagnation. We need to find the balance that is right for Canada. The low-wages-above-all approach of the Harper government needs to be challenged.
- Keith Horner weighs in on the need for pension reform - and the best model to use:
In a study I published with the Institute for Research on Public Policy, I compared three different options for a government-sponsored pension plan: a mandatory defined benefit plan, and two defined contribution plans, one mandatory and the other voluntary. The defined benefit plan I propose entails a modest expansion of the CPP/QPP that would raise the benefit rate from 25 per cent to 40 per cent of earnings up to $48,300 and from 0 per cent to 25 per cent earnings between $48,300 and $96,600.

Based on my analysis of the effects of the three plans, I concluded that a defined benefit plan would provide higher benefits per dollar of contribution than either of the defined contribution plans. By enabling risk-pooling among age cohorts, defined benefit plans can achieve higher returns through longer investment horizons and slightly greater exposure to risk.

A national, government-sponsored, mandatory defined benefit plan would also provide participants with more secure and predictable retirement income than defined contribution plans. And it would not suffer some of the drawbacks of existing single employer-registered pension plans, which tend to hamper labour mobility and encourage early retirement.
- And lest there be any doubt, plenty of workers recognize the problem - as David Doorey notes:
(Linda) McQuaig noted that a majority of workers in Canada would vote for a union if given the chance.

That was taken from a blog entry I did last year. In it, I noted a study that found that over 85% of union members in Canada would vote to remain in the union if given a choice, and that 33% of nonunion workers in Canada would vote to join a union if given the chance. Interestingly, for my university students, the study found that over 58% of Canadian nonunion workers between age 15-24 would vote for a union. These stats refute the commonly heard assertion in the business media that Canadians have no interest in unions, and that union members are trapped against their will by forced unionism that they cannot escape. Hogwash. As I’ve noted before, under our “majority rules” model in North America, 50 percent of workers might want to be unionized, yet they would be denied that right. In my earlier post, I asked whether it is a failure of the legal model if greater than 50% of workers want collective bargaining, yet only about 30% presently have it?
- Derek Abma surveys some of the scandals currently facing Canada's corporate sector. But perhaps the most interesting part of his article is the theory as to why Canadian firms are embroiled in so many issues:
Christopher Wilson, a lecturer and researcher at the University of Ottawa's school of management, says some scandals involving Canadian business interests are indicative of a corporate culture that puts its emphasis on the immediate appeasement of shareholders, often at the expense of other stakeholders, such as workers, customers and affected communities.

"The orientation is to see the profits in the next quarter as opposed to the long-term health of the organization and the long-term value addition to society," he says.

Wilson says English-speaking countries tend to have a business culture that emphasizes short-term needs of shareholders over other considerations.

Canada, he says, is perhaps even more so this way than the United States, because the relatively small pool of significant shareholders in Canadian companies limits the diversity of opinion that goes into shaping corporate policies.

"It makes it really, really difficult for Canadian companies to make a change because everybody sort of thinks the same way," Wilson says.

"Whereas in the more diverse, less closely held environment of the United States, there's so many other perspectives that come into play."
- And finally, Frances Russell is the latest to call out the Cons' politics of envy as a roundabout means of justifying handouts to the wealthy:
The Air Canada and Canada Post labour disputes triggered a wave of media commentaries and editorials trying to stir up class envy among the private sector's largely non-unionized taxpayers because they're being "forced" to pay the "bloated" salaries of public-sector union "fat cats" and "aristocrats."

This bait and switch steers everyone away from the real issue, the massive upward wealth shift occurring in Canada, the U.S., and, to a lesser extent, Europe.
This top 0.1 per cent have more than doubled their share of the national income pie, something not seen since the 1920s.

"By 2009, the worst year of the recession, the wealthiest 3.8 per cent of families had captured a stunning two-thirds of all financial wealth in Canada," says Bruce Campbell, executive director of the Canadian Centre for Policy Alternatives. "Since 2000, they have persuaded governments to cut taxes and shrink the federal treasury by a mind-boggling $420 billion."
The bulk of Conservative tax initiatives direct even more wealth to that same 0.1 per cent.

The media abound with stories on how to bundle up the value offered by the new tax-free savings accounts with RRSPs and RESPs. But you need at least $100,000 to get maximum value from doing so, says CCPA economist Armine Yalnizyan.

That excludes 80 per cent of Canadian households. Even before the last recession, 3.3 million Canadians already fell below Statistics Canada's low-income cutoff and 10 per cent of Canadian households lived on less than $16,000 annually.

Income splitting is another Harper bonanza for the rich. A 2006 Library of Parliament study showed fully half of all Canadian families, those with incomes of less than $60,000, would realize just eight per cent of the benefit. The rest goes to the wealthiest families. The poorest, single-parent families, get nothing at all.

Elderly benefits follow a similar pattern. Compare the Conservatives' pension-splitting scheme for rich seniors to its meagre increase in the guaranteed annual income supplement for the poorest. The former costs the treasury over $920 million, the latter just $300 million.

Given this cornucopia of rewards for the richest Canadians, trying to foment class envy against postal workers and other public servants should be seen for what it is -- an attack on democratic values and democracy itself.

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