Five questions on productivity
Finance Minister Ralph Goodale is asking voters to judge next week’s economic statement and his pre-election budget by what they’ll do for Canada’s productivity.
It is a reasonable yardstick. Most Canadians want to make best possible use of the nation’s talent, resources, capital and creativity. But it is a hard measure to apply. Few citizens know which policies work best to unlock an economy’s potential.
Moreover, the mere mention of productivity prompts such vehement calls for tax cuts from business, for public investment from labour and for research grants from academics that it’s a challenge just to cut through the cacophony. But there are a few simple guidelines Canadians can use. As Goodale unveils his productivity plan, here are five questions worth asking: ‰ Is the government doing everything in its power to ensure that none of Canada’s talent is wasted? A productive economy can’t afford to have scientists driving cabs, doctors working as orderlies, pharmacists serving fast food and teachers becoming telemarketers.
For almost two years, the federal Liberals have been promising to make better use of the skills of foreign- trained professionals. But many highly educated immigrants still languish in minimumjobs while Ottawa, the provinces and the various licensing bodies inch their way toward a plan to recognize their credentials. ‰ Is the government doing what it can to knock down the impediments that are holding the economy back?
Part of the reason for Canada’s underperformance is that its cities — its engines of economic growth — are constrained by aging infrastructure, a misalignment of tax revenues and a shortage of badly needed social services. The problem is not a lack of public resources. Nor is it an absence of local initiative. It is that Ottawa and provincial legislatures suck too much of the wealth out of the nation’s urban centres and provide too little in return. ‰ Is the government practising what it preaches?
Before exhorting other Canadians to work smarter and other employers to manage better, Goodale should be able to show that Ottawa is meeting its own standards. Most taxpayers would need a lot of convincing that the Department of Indian Affairs, which employs 4,174 bureaucrats, is a productive arm of government. It took last month’s medical emergency in Kashechewan to jolt it into cleaning up unsanitary conditions on more than 100 native reserves. Most private employers would be loath to emulate the Department of Citizenship and Immigration, which allows huge backlogs of applications to pile up; ignores the country’s labour needs when setting its selection criteria; and knowingly admits foreigntrained professionals who won’t be able to work in their field. Most workers would wince at the thought of behaving more like employees of the Canadian Firearms Centre or the federal Department of Human Resources. ‰ Is the government using Ottawa’s surplus as effectively as possible to modernize the economy?
It would be hard to make a case that across- the- board personal income tax cuts, which Goodale appears to favour, meet this test. Assuming the surplus is $ 10 billion — which is what most forecasters expect — the minister would have $ 2.5 billion for tax relief. ( Under the formula he announced last month, the first $5 billion would be used for debt repayment and the remainder split between tax cuts and spending.) This means each taxpayer would get approximately $ 125.
That might be a nice pre- election gift. It might produce a tiny uptick in consumer spending. And it might win plaudits from the Canadian Chamber of Commerce. But if the objective is to improve productivity, there are better alternatives. One would be to provide literacy training to the millions of Canadians trapped in menial jobs, who are contributing far less to the economy than they could. Another would be to offer tax breaks to companies that invest aggressively in new technology and training. A third would be to target relief to the working poor, many of whom face effective marginal tax rates as high as 60 per cent, leaving them no better off earning a living than they would be on welfare. Even using the surplus to strengthen key industries — biotechnology, film and television development, clean energy, agri- food — would be better than doling it out to 20 million taxpayers. ‰ Finally — and critically — to what extent is the government’s economic strategy designed to boost the fortunes of the Liberal party? Most voters should have little trouble judging that. Carol Goar’s column appears Monday, Wednesday and Friday.