[Bruce_the_vii]

I've posted my ideas on how Canada could move forward in the next ten years several times. However I work at these ideas like a dog working a bone and I've rewritten them again. I'm working on better and punchier phrasing. Once again:

...................A Political Platform for Canada
...............(Within the restraints of debt and deficits)

Good jobs have been part of Canada’s New World mythic; part of our purpose, for a very long time but it’s been a couple of decades since a good job or even a reasonable job was an easy catch. Now days when there isn’t unemployment these are problems with part-time work, temporary jobs and contracting out and the whole economy is significantly low wage run. Outsourcing and offshoring have been the other problems. With the current world downturn any job is the problem but should there be a recovery, and most everyone has a stake in that there will be one, there will be jobs once again. It’s is notable that pre-world turn down there was a surplus of jobs in the main Canadian cities and Canada was considered a major immigration destination. This fact was often clouded by the quality of the jobs available, so people were still pessimistic. Growing good jobs has always been difficult and there’s world competition now with the Global Economy. In this essay I discuss the possibility of growing good jobs but suggest optimizing the other approach as well, minimizing the number of bad jobs. There are tools to do all this, some of them unsung by main stream economists, the cost is not that high and the political advantages many. We can manipulate the de facto minimum wage as well as the number of people in the work force, an allied idea to the jobs problem, with judicious immigration – Just-In-Time immigration (JITi). With people moving to were the jobs are, the coming retirement of the baby-boom making jobs available to youth and an emphasis on businesses doing training on the job, the finishing training of an educated graduate, the Canadian job market could be significantly remodeled in the next 10 to 15 years. The low hanging fruit is gone but a more equitable Canadian job market than present is in sight. We could still be world social leaders with enlightened labour management by business and government and a “Work, always” attitude by the people. These do not require major changes, the people are there already, but we do need to harness management. I cover the ins and outs of a set of ideas here – maybe some 30% of worker’s jobs could be improved a little to a lot in the next ten years. That would be enough to affect most families in Canada. Working with jobs is an alternative to more nanny state interference, a problem with which the funding of is at its limit world wide.

The Canadian national economic strategy has always been pretty much to maximize growth with low interest rates, inflation permitting. However the nut of this is growth had been maximized in a immigration country and growth didn’t quite work out as it started to produce low wage jobs. For the last two decades immigration has been at a constant rate and adjusting it prudently for unemployment is an alternative economic strategy. The thing of it is this would have several major ramifications to which main stream economists pay little to no attention. So examining immigration is a core of an alternative economic strategy.

The constant rate of immigration has produced some unemployment and this has had the effect of suppressing the de facto minimum wage in the destination cities. Immigration is bureaucratic and will always produce a little unemployment. The lower minimum wage has encouraged growth of low wage businesses. In fact normally you see economic growth increasing the de facto minimum wage and causing worst businesses to downsize or go bankrupt altogether. Normally economic growth in the capitalist system sees movement by society to higher value added jobs at the expense of the worst jobs, as people move around to better opportunity. A prime example of this is Japan in the 1960’s and 1970’s. It’s the traditional knowledge economy and the goal of all emerging economies. That is the strategy is to develop in low tech first and then to move up. In a developed country driven by immigration this movement up to better jobs is cut off, specifically in the growth cities.

The alternative of this is to cut immigration and endure more frequent recessions, shorten the business cycle. This is the economics of growth without immigration, although immigration reform advocates don’t articulate it. An alternate, technical fix for Western countries which would have trouble moving the whole nation up to better jobs en masse these days is possible. This would be to compensate for the suppression of the de facto minimum wage in growth cities with an artificial legislated minimum wage. That is to legislate just the growth city areas that have the economy to withstand the lose of jobs from the higher minimum wage. This would promote movement to higher value added jobs in the city area without resorting to the business cycle, a strategy which would happily keep the rest of the country growing. The de facto minimum wage in immigration cities is $8 to $10 an hour and in cities that out grew immigration, the oil patch, is $10 to $12. A growth city should have a legislated minimum wage of $12 by this information. This would cost jobs and slow growth, but you adjust immigration accordingly.

Note that the inflation is minimal because of the low base. Note also that this is a technical fix to the immigration program, not a nanny state program for the worst off worker. The raise the worst off gets is formerly an indirect tax by the immigration department on the poor, a very unfair situation to say the least, and unsung by mainstream economists.

A $12 wage is not very good but represents a 20% increase over $10. This is money to the worst off, which is spent carefully and makes a difference. While not many adults make less than the de facto minimum wage, make the actual legislated minimum, those that make $8 would get a $4 raise. This scheme puts money in the worst off hands and in an efficient manner.

The plan is to fix the better cities but over time to expand the program to most cities.

The problem with modern job creation is it produces low wage jobs as I said. Cutting the bottom would skew the profile of the average job upwards as well as the profile of the average job being created. This improving jobs is the alternative to trying to improve the country with ever higher taxes and more nanny state spending. A target would be to get the number of jobs with pensions going upward rather than downward, which is what it is doing at present.

There is another major fix that can be done and that has to do with labour force levels.

In the modern situation many people have money while the labour markets are softened by low wages and stiff competition for anything better. In such situations the number of people willing to work varies considerably. In Canada, the USA, the UK, Australia and New Zealand the best cities have labour markets levels above what economists consider full employment. If the economy tightens to full employment people with the option to not to work tend to go back into the labour force. This suggests getting immigration right will get more people working. A Just-In-Time immigration program also on city-by-city basis would be a simple fix for this. In such a program immigration would be reduced to a base level, which would still be substantial, but when a city reached full employment, say 4% unemployment, the government could give out some extra foreign worker visas to businesses. These would be for permanent workers and typically to businesses reporting labour shortages. The international data, in the countries I mentioned, indicates there are some 7% more workers than is known officially in Canada in 2011 while in the USA it’s 10%. Note that getting more people working is a way of getting more government tax revenues without additional costs; it’s a government holy grail. You could get maybe 3%-4% more government revenues in this way. More people working will translate into higher family income for some. Keeping the labour market tight is analogous to keeping the national debt being paid down in the good times as insurance against the bad times. The 21st Century is bound to be economically challenging and doing this is strategic. It’s a political platform for Canada in challenged times. Figures indicate the suppression of family income by aggressive gradual immigration amounts to a second deficit in Canada at this time. A second deficit; it’s that pressing.

A third key to jobs is moving people to where the jobs are. This is an effective means of dealing with unemployment but has declined in recent years. Statistics show that people will move to where the economy is known to be good, say to the Canadian Oil Patch. However the number of people that move from the depressed regions to the major cities has gone to near zero, presumably partly because the main cities of Canada were reporting unemployment and growing social problems because of it. The main cities of Canada have had strong job growth all along but the labour markets were kept soft by the aggressive gradual immigration. In the five years to 2005 net interprovincial migration in Canada, excluding the hot oil patch, went down to 1,500 families a year – basically zero. Interprovincial migration was basically cut off by immigration. If the economy in the main cities was strong you might have moved 2% of the population over five years, that’s 2% off the unemployment totals. A higher minimum wage would make it easier for people at the bottom to move as well.

So far we have talked about moving people up to better jobs is the traditional Knowledge Economy, the wobble in the labour force level due to soft labour markets and moving people to where the jobs are, the Canadian growth cities. The advantages of doing such are several. These are major macro economic improvements.

At the $12 minimum wage people on welfare would be encouraged to take the work option. Welfare in Canada is very mean at this time and statistics indicate recipients will take the work option to escape if conditions are better than terrible.

The $12 minimum wage would shave the level of working poor in Canada. This would just be a shave but the poverty numbers are very high and the government can’t deal with them with more transfers.

An increase in minimum wage would improve productivity in three ways. One is it would close the worst businesses outright. A second is it would encourage mechanization. A third, very interestingly, is it would encourage the many small businesses at the bottom to consolidate. There are too many small businesses that duplicate services and these are not efficient of taxes, rent, capital, management and in some industries labour. Economists are always talking about productivity but the low productivity at the bottom is a drag on the national figures and some market pressure to improve it would be appropriate. All those strip malls and small retail outlets along the arterial roads are not busy and a drag on national productivity.

Another advantage of a tight labour market it is would produce better management relations. Management would be more willing to hire people with disabilities, do the training on the job to fit someone in, and offer benefits. Currently management is becoming more abusive and a popular solution to any problem on the job is just to fire someone. Management has had a buyers market for decades and really had it too easy for all that time.

A higher minimum wage reduces the transfers within the family as low income earners tend to be supported by the others.

A high minimum wage and tighter labour market, less unemployment, would have social benefits. These would act as a social net, take pressure off of youth who are the shock absorber of labour market problems, and help women’s causes. Women are still vulnerable; there’s the issue of the high divorce rate, the fact that women are still largely given to child rearing rather than career and the problem that women live longer than men and need better pensions. Women’s issues are just below the surface at this time, are in need of official support.

A final advantage of a minimum wage increase is it would avoid social unrest. This is even in Canada. In Quebec in the May 2, 2011 federal election the left leaning NDP went from 1 seat to 59 of a possible 75. This is political unrest and it’d certainly be significantly economic. Canada is about good jobs, unionized jobs and well paid government jobs have broad support, and the very mean conditions at the bottom today are causing unease in the population. Dissatisfaction with the status quo is everywhere and some protesting and civil disobedience could be in our future. The quality of jobs is part of social order but has been backsliding for decades, leaving more and more people insecure.

I have detailed how moving people to jobs should be considered a form of job creation. There are two outstanding anomolies in this regard that I should point out. These are Montreal and Vancouver. Both of these cities should draw in Canadians but both have soft labour markets that deters this. Vancouver has it’s beautiful setting and climate, everyone thinks of moving there, but currently it’s growth is being fueled by high immigration and Canadians have stopped moving to Lotus land it seems. While housing costs are high my understanding is apartments are still affordable. The poverty rate in the interior of BC is above the national average but people don’t see any advantage of just moving to the city.

The other anomally is Montreal which similarly should be attracting internal immigrants from the depressed regions of the province of Quebec. It is the main destination of unemployed French speaking citizens but it’s growth has been fueled by immigration for a long time. It has a soft economy. It’s a sad thing, the franco-phone youth of Quebec have been trapped by their government.

The cost of the program I am outlining is inflation from the minimum wage increase. I have noted that increase wages put upward pressure on productivity and this would help cover the costs. More complexly the ability to get more people into the labour force and working would more than cover the costs from inflation. In addition the minimum wage increase boosts family income and over a life time most families would have some one working at minimum wage for a spell so this would make the transfer within family over time. Finally the minimum wage is partly tax and this would be immediately returned to the common good. The price for a minimum wage increase is some 30% off due to this.

Studies indicate taxes are nearly flat in Canada such that the tax on the minimum wage earner is some $9,000 a year less than the tax on the average worker. We have built a system that subsidizes worst employers to that level. The prevailing attitude that a minimum wage job “is a job” has overlooked this huge subsidy. It makes sense to work towards better jobs rather than just more jobs because of the heavy subsidy. The present high subsidies in the nanny state mean that the fix is in and low wage jobs are an expense to everyone. You can pay directly or through the nanny state. Paying for it through the labour market means thousands of economic decisions are made by individuals based on price, has the advantage of engaging Adam Smith’s invisible hand.

The economics on the street is the population is aging and immigration will be required to support the incurred social costs. This is premature. The unemployment, low wages, moving people to jobs and in particular the drop outs from the labour force means that Canada needs growth for a least ten years to tighten the labour markets. Main stream economists simply look at the national labour force figure and analyse no further. This is what is happening in the country. In 10 years when the labour force does become tight you’d have the option of slowing growth further by increasing minimum wage and shooting for better jobs rather than growth through immigration. This would require some determination by politicians.

The national productivity figure is still easing up, about ½% a year. In ten years, which is the scope of the plan here, the $12 minimum wage should be edged up to $12.50. A newly arrived couple in a growth city would be guaranteed a starting salary of $50,000. In addition the subsidies in the Canadian nanny state are generous at present and at $12.50 a worker pays $3 less in tax than an average worker. This is a subsidy. Hence the living standard for our newly arrived couple would be $62,000. That’d would include service such as the police. It’s a good starting point.

Going forward ten years there will be retirement from the aging baby boomer cohorts and the skilled and professional jobs left behind will become an opportunity for youth. Similarly good unionized jobs will become more available. Economists are saying there will be shortages but the high level of formal training means there are still graduates on the shelf and that all in all the shortages may not materialize. This is in particular if businesses do more on the job training and become less focused on hiring star candidates. They will have to be socialized and pressured into doing this. It might be tactical to get better numbers on the perceived shortages. Engineers in particular are going to retire in droves while the training is still in small numbers. Engineering alone provides a target that should be looked into.

Another way of helping the regions is relocating businesses to them from the cities that become too expensive. At present immigration keeps the main cities of Canada low wage areas but with a higher minimum wage some businesses would be forced to consider cheaper areas.

As the population ages the labour force in the regions will shrink. This has the advantage of clearing up unemployment in the remote or depressed regions. In the next ten years the cities might come to full employment and better jobs through growth while the regions will do the same through a shrinking labour force. There is the possibility of approaching full employment all across the country in the next ten years as a result.

Here is a set of ideas that could augment growth and provide a national economic strategy. It could make us the best run country in the world. JITi, on the job training, more people working and moving people to jobs could become the source of social improvements in the next ten years as all the governments bog down with deficit and debt concerns. It’s in the tradition of Canada being a leader in good jobs, it’s the Canadian Way – which is flagging and needs a bit of attention.