Questions and answers about good jobs and the deficit

1. What is the solution to Ontario’s budget deficit?

The real crisis facing Ontario today is the shortage of good jobs that can sustain families and communities. Focusing on the deficit now will only take money out of the economy and delay the recovery.  Preserving and creating good jobs will speed up the recovery so we can start paying down the deficit. Paying down the deficit won’t create good jobs, but creating good jobs will pay down the deficit. That’s why the government’s number one priority in the 2010-11 Budget must be saving and creating good jobs, not paying down the deficit.

2. How can government help create good jobs?

There are a number of ways. The first step is to decide that it’s not just a priority, but the top priority for Ontario. Here are just some of the steps Queen’s Park can take to get us save and create good jobs:

  • Get the stimulus money out the door, fast. The 2009-10 budget allocated $32.5 billion for infrastructure spending to boost the economy and create jobs. Most of it has not yet been spent.
  • Get serious about a Buy Ontario program. Under the Green Energy Act, electricity producers who want to earn the higher prices paid through the province’s feed-in tariff program have to meet a Minimum Required Domestic Content Level for the goods and services they use to generate the electricity. There is no reason such a rule couldn’t be extended to all government purchasing to help more Ontario industries.
  • Invest in training and re-training. Jobs are scarce and the economy is changing – now is the time to provide people with the skills they need for the jobs of tomorrow. The government must re-boot the Second Careers program and make sure Employment Ontario has the funds it needs to help people.
  • Don’t cut public services. If we are investing billions in economic stimulus to create jobs it hardly makes sense to cut billions of dollars out of public services at the same time. It’s like driving with one foot on the gas and one on the brake. Public services are important in themselves – we need them – but they also act as an economic stabilizer for communities, especially communities with high unemployment
  • Create good, green jobs (1). The provincial feed-in tariff creates an incentive for new investments in green power generation, but government can do more. Queen’s Park should help businesses and homeowners create jobs by giving municipalities the legislation and start-up funding they need to implement Property Assessed Clean Energy[1] programs. Such programs, already in effect in the U.S., could be used here to finance small-scale generation of green energy, building retrofits, and installation of high-efficiency furnaces, boilers, and other equipment.
  • Create good, green jobs (2). There is much more to creating green jobs than energy. The government could also: create a Green Factory Transition Fund to revitalize manufacturing and processing through retrofitting, retooling, and redesign for new work; put more money into the Advanced Manufacturing Investment Strategy, increasing the pool of funds available from $500 million to $1 billion; and provide funding to pilot “disassembly” facilities as part of a provincial Extended Producer Responsibility (EPR) program.
  • Enforce the Employment Standards Act. Bad bosses mean many workers have to fight to get paid at all. More enforcement of employment standards will help the lowest-paid Ontario workers. It will also help create more jobs as it will put money in the pockets of people who, because they are poor, are more likely to spend their money, and spend it locally. More spending power for workers means more jobs in local communities. The McGuinty government must keep its promise to increase enforcement of employment standards.
  • Cancel the planned corporate income tax cuts. On July 1, 2010, the McGuinty government plans to cut the Corporate Income Tax cut from 14 to 12 per cent. This is a mistake. Ontario’s corporate tax rates are already competitive with those of our U.S. competitors, and corporate tax cuts are a very poor way to stimulate the economy.[2] Putting this money directly into the pockets of low-paid or unemployed workers would have five times the stimulus effect of a corporate income tax cut.

3. The deficit is bigger than ever before. Surely we need to get it under control?

Relative to the size of our economy, the deficit is now bigger now than it has been in past recessions. It’s manageable. Past recessions have taught us that deficits go away when the economy recovers. That’s why we need to focus on good jobs first, the deficit second.

Even severe cost-cutting doesn’t do much to pay off deficits – all it does is slow down the recovery and prolong the recession. For example, the extreme cost-cutting by federal Finance Minister Paul Martin in 1995 eliminated the federal deficit just 14 months earlier than if he had cut nothing at all. Canadians paid a high price when Martin cut federal public services and transfers to the provinces for health and education.

4. Shouldn’t the government be cutting spending?

In 2007-08 and 2008-09, the Ontario government spent $18 billion on infrastructure spending. In 2009-10 and 2010-11, the government has budget $32.5 billion for similar projects – an increase of $14.5 billion.[3] These are wise investments. But if we are investing billions to create jobs it hardly makes sense to cut billions of dollars out of public services at the same time. It’s like driving with one foot on the gas and one on the brake.

We have public services because we need them. Whether we’re talking about schools, hospitals, roads, environmental protection, the court system, women’s shelters, or social assistance, public services provide important benefits that Ontarians need.

5. But aren’t we in this situation because we are spending too much?

No. Ontario has the second-lowest program spending of any province in Canada. On a per capita basis, Ontario has the third-smallest public sector workforce of the 13 provinces and territories[4]. In some important areas our spending is shockingly low. For example, when it comes to per-student spending on education, we rank 55th out of the 60 Canadian provinces and U.S. states, behind Kentucky, Alabama, and Arkansas.[5]

6. But aren’t Ontarians paying more and getting less for public services?

Some people say so, but this is perception, not fact. Provincially, Ontarians are not paying more than they used to. Mike Harris cut personal income taxes by 30 per cent in his first term in office and by 20 per cent in his second term, and the Ontario Health Premium introduced in 2004 increased taxes by just a fraction of the amount they had been reduced by.

Because of economic growth, government spending to repair public services that were damaged in the 1990s has gone up, but not by as much as it seems. Inflation, population growth, and an aging population account for the lion’s share of the increase (health care costs for people over 65 are double what they are for people below 65; from 1996 to 2006, the average life expectancy of Canadians rose from 78 to 81 years old[6]). Drug costs – the second-highest and fastest-growing health care expenditure – are set by private companies outside of the control of government.

Ontarians are not spending too much for public services. Our provincial government’s overall program costs are still the second-lowest in Canada.

7. The private sector has been hit hard by the recession and a lot of jobs have been lost. Isn’t it time the public sector carried its share of the burden?

Ontario has been hard hit in many areas and has lost about 200,000 jobs due to the current recession. According to the Pollara research firm, about 15 per cent of Canadians say the economic downturn has had a major negative impact on them.[7] This number is likely much higher in Ontario.

Cutting public spending won’t help people who have been battered by the recession. Cutting spending now will only take money out of the economy and delay the recovery.  Preserving and creating good jobs will speed up the recovery so we can help people now and pay down the deficit sooner.

8. But don’t public employees get paid more than private sector workers? Can’t they take pay cuts?

Public sector workers in Canada do get paid slightly more than private sector workers on average. But according to academic studies,[8] this is largely because of pay equity. In the public sector, where the majority of workers are women, workers in clerical, service, and other lower-wage jobs are much less likely to face wage discrimination based on their gender. The real problem is that women in the private sector are much more likely to face illegal wage discrimination. That is why stronger laws, and stronger enforcement of existing legislation, are so important. We need to bring up the wages of all low-paid workers.

Pay cuts won’t save or create jobs for anybody.

9. If we’re broke, shouldn’t we be looking at selling off assets like the LCBO or the Ontario Lottery and Gaming Corporation?

It’s no surprise that private investors would love to own a piece of the LCBO and OLG – they earn billions in profits every year. Right now, those profits go to all Ontarians, to support the services we rely on. If we sell them off for a one-time funding boost, we lose that income forever. It would be short-term gain for long-term pain – sort of like what happened with Highway 407.

10. The government is cutting corporate taxes. Won’t that create jobs?

No. Ontario’s tax rates are already on a par with those of our U.S. competitors, so companies won’t invest here based on that. They’ll invest here based on our public health care system, our skilled workforce, and our safe cities. Cutting tax revenues will have a negative impact on all three.

Corporate tax cuts provide little economic stimulus because companies who get them mostly use the money to pay down debt, give bonuses to executives, or increase the profits they send to head offices outside Canada. Also, untargeted corporate tax cuts often go to companies that are actively shipping jobs out of Ontario. We shouldn’t be rewarding behaviour that hurts our economy. We can’t afford tax cuts that don’t guarantee new investment.

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Notes

[1] Renewable Funding. “As Obama speaks in Copenhagen, Property Assessed Clean Energy (PACE) programs spread across the country.” December 16, 2009. Available at http://www.ngenpartners.com/Files/Press%20Releases/RF%20PACE%20update%20121609%20FINAL.pdf. PACE programs are already working well in several U.S. cities and states and have been named as one of the top 20 ideas that can change the world by Scientific American[i] magazine. See Mims, Christopher. “World changing ideas: 20 ways to build a cleaner, healthier, smarter world.” Scientific American. December 2009, p. 50.

[2] According to Moody’s Economy, a leading economic forecaster, permanent corporate income tax cuts provide 30 cents of economic benefit for every dollar spent, while infrastructure spending provides $1.59 for every dollar spent. See http://www.economy.com/mark-zandi/documents/Economic_Stimulus_House_Plan_012109.pdf, p. 9.

[3] Ontario Ministry of Finance. 2009 Ontario Budget Backgrounder: Preserving and Creating Jobs. Toronto. Ontario Ministry of Finance. March 26, 2009. Available at http://www.fin.gov.on.ca/en/budget/ontariobudgets/2009/bk_jobstoday.html

[4] Statistics Canada. Public Sector Statistics: Financial Management System. Available at http://www.statcan.gc.ca/pub/68-213-x/68-213-x2008000-eng.pdf. Pp. 42-43.

[5] Mackenzie, Hugh. No Time for Complacency: Education Funding Reality Check. Ottawa. Canadian Centre for Policy Alternatives. November 5, 2009.

[6] Canadian Institute for Health Information. Health Care in Canada 2009: a Decade in Review. Ottawa, Ontario. CIHI. 2009.

[7] Pollara. http://www.pollara.ca/ECOT2010/report.pdf

[8] Macdonald, David. An Examination of the Public Sector Wage Premium in Canada. Ottawa. NUPGE. October 2009. Available at http://www.nupge.ca/files/publications/Public-Private_Sector_Wage_Gap_Sept-4-09.pdf