Financial security Governance Housing Monetary policy

Was ‘Great Recession’ deeper in Canada than US, and is that even a valid comparison?

Chart 1 Canadian and US real GDP, 2007-2011
Chart 1 US and Canadian GDP 2007-2011
Source(s): Statistics Canada and U.S. Bureau of Economic Analysis

Editor’s Note: This post was inspired by a note from a friend of and frequent contributor to this site, which has since been posted as a letter to the editor of the Globe and Mail’s Report on Business.

With the Canadian general election campaign in full-swing amid incessant ‘technical recession’ chatter, it should come as no surprise to once again see finger-pointing at the (current/outgoing?) government’s performance during the Great Recession.

A recent Globe and Mail op-ed attempted to do just that. Unfortunately, it was riddled with factual errors and otherwise muddled whatever criticism it intended to parry.

Employment Financial security Governance Poverty

Why minimum wage policies are ineffective: A brief overview, plus Ontario retail sector example

Chart 1 Change in hours and wages, Retail trade, Ontario, 1983-2014*
Chart 1 Change in hours and wages, Retail trade, Ontario, 1983-2014
Source(s): CANSIM tables for Survey of Employment Payroll and Hours (SEPH), Statistics Canada. (See Note 6)

Encouraged by recent initiatives in relatively more prosperous US jurisdictions (Seattle and San Francisco), Canadian labour groups, particularly those out west (BC and Alberta), have taken to calling for dramatic minimum wage hikes. These labour groups cite research they interpret to mean that min-wages do not affect (dis)employment, and assert that mandated wage hikes will help address income inequality and/or alleviate poverty. Unfortunately, the min-wage research to date does not support this assertion. That may have more to do with the challenge of distinguishing between min-wage and other effects. Perhaps the best approach is not to try to discern the direct effect of min-wage policy at all, but rather infer it from broader labour market trends.

Children Financial security Taxation

Family Tax Cut: A potentially helpful tax policy, undermined by politics (or This is why we can’t have nice things)

Primarily single income, middle-class families, whether by choice or by chance, shouldn’t be penalised relative to their two income counterparts when paying taxes on the same earnings. Framed as such and designed solely to address this income disparity, the federal Family Tax Cut (FTC) would not be terribly controversial. But that’s not how it was designed, and the fallout has been all too typical of the increasingly hyper-partisan political environment in Ottawa.

Financial security Governance Monetary policy

Is Canadian housing price inflation an intended policy outcome?


During the press conference following the Bank of Canada (BoC) July 2014 Monetary Policy Report, bank governor Stephen Poloz was asked whether the Bank was making up excuses – likely in response to his “serial disappointment” remark – to avoid raising its target rate. A lower rate benefits the federal government in a number of ways, primarily by lowering its debt servicing and public spending costs. However, the dangers of an extended period of low interest rates include excessive household debt accumulation, particularly mortgage debt.

But what if the BoC views excessive housing price inflation as a key economic driver – and that view is affecting its policy rate decision?

Employment Financial security Governance Immigration Justice Race and ethnicity

Why Canada avoids asking about race, and why that’s a problem

Making waves in his first speech after taking office in 2009, outgoing US Attorney General Eric Holder then described his country as a “nation of cowards” afraid to confront racial issues. While the US had made remarkable progress on civil rights in the latter half of the twentieth century, election of a biracial president aside, there’s evidence to suggest it has recently regressed. There are anecdotes, like recent incidents in Detroit, Michigan and Ferguson, Missouri. But there are also race-based statistics collected, compiled and published by various US government agencies, from Justice to Labor to even the Federal Reserve.

If fear of confronting race is cowardice, what does one call fear of even asking about it? Because that’s where Canada is at the moment.

Financial security Housing Monetary policy

Canada’s housing price stats likely contributed to inflating bubble

Chart 1 Statistics Canada,Bank of Canada and Teranet-National Bank housing price indices
Chart 1 Statistics Canada , Bank of Canada and Teranet-National Bank housing price indexes

At the July 2014 Monetary Policy Report (MPR) press conference, Bank of Canada Governor Stephen Poloz announced the Bank would be keeping its policy rate in “neutral” for the foreseeable future. While introducing a new catchphrase – “serial disappointment” – the MPR report and the Bank governor’s comments gave short shrift to the over-heated Canadian housing market, which continues to be fuelled by historically low interest rates. Despite conceding “particularly strong” price growth over the past year and “near record-high house prices and debt levels,” the Bank insists housing is in for a “soft landing”.

While the lack of housing market information has been a popular topic of late, a closer look at the little available info on housing prices may shed some light on why the Bank has downplayed rising home prices, and why if or when the housing bust happens the Bank will say it didn’t see it coming.

Financial security Poverty Social security

Fraser Institute pension aversion: ORPP unnecessary, according to FI. Quite necessary, according to reality.

Chart 1: Sources of incomes among the over-65s

Source: Pensions at a Glance 2013 – OECD and G20 Indicators (PDF), The Organization for Economic Cooperation and Development (OECD)

It’s like the Fraser Institute can’t help itself

Proposed Ontario pension plan unnecessary
Charles Lammam and Sean Speer, The Fraser Institute May 2, 2014

Ontario’s recent budget included the Liberals’ proposal for a mandatory government pension plan modelled after the Canada Pension Plan. The proposal, however, is largely based on the faulty assumption that most Canadians are not adequately prepared for retirement.

Who says it’s faulty? Well, certainly not the 33% of Canadians over age 55 who are concerned they do not have enough money saved for retirement, according to a recent ING Canada survey. Nor the 49% of Canadians over age 65 who remain at work because they can’t afford to retire, according to a Canadian Association of Retired Persons (CARP) survey (PDF).

Regarding the ”generous’ pension benefits provided by the Canadian government: Spending on public pensions and government retirement benefits account for only 4.5% of Canadian GDP, whereas the OECD average is 7.8% of GDP. Public transfers account for 39% of Canadian seniors’ gross income, compared to the OECD average of 59%.

Who needs actual seniors or statistics to speak to the necessity of public pension enrichment when Canadians have the Fraser Institute…

Employment Financial security Governance Taxation Trade and investment

r > g: ‘Capital in the Twenty-First Century’, meet ‘Kapital’ of the nineteenth century


One can’t have an economy related page without commenting on this book, apparently. Its recently published English edition, Capital in the Twenty-First Century, was a US best-seller – a remarkable feat for a hefty econ tome.

For those who haven’t read it and/or have no intention of doing so, The Economist has taken to reviewing it in parts (of which there are four) for subscribers. It’s that important. The critique of Capital‘s conclusion is noteworthy:

 If the most likely outcome of the trends Mr Piketty describes is that somewhere down the line a left-of-centre government is elected and passes higher top income-tax rates, higher estate-tax rates and pension reforms, and that defuses the crisis, well, that puts the rest of the book in perspective. If the most likely outcome is revolution, well, that does too. And while it would be absurd to expect Mr Piketty to say definitely whether one possibility or another is bound to occur, I don’t think it’s asking too much, given the ambition of the rest of the book, to think we ought to be given some sense of his view on how social and political movements generally evolve in response to widening inequality, and how that evolution tends to be reflected in policy. What good is it to suggest utopian ideas about how to fix these problems without at least gesturing toward the political mechanisms needed to bring them about?

The topic of capital and wealth distribution precludes separating the political from the economic analysis – which, ironically, is the point of contention between Capital and Kapital. As Marx succinctly put it (prior to Kapital): Although theoretically the former is superior to the latter, in actual fact politics has become the serf of financial power.

In noting the post-World-War periods during which income inequality declined were an aberration rather than proof that capitalism (as we’ve come to know it) optimally (re)distributes wealth, Piketty effectively supports Marx’s central premise – that it doesn’t.

And it’s not just Piketty who (despite not conceding the point) has recently come to the uncomfortable realisation perhaps Marx was right.

However, Piketty (among others) ignores the obvious correlation between capital ownership and political influence by suggesting policy makers can address widening inequality by simply hiking taxes on capital wealth. Bill C-23, the Canadian ‘Fair’ Elections Act, and related recent events in the US speak to the obvious omission.

Picketty also ignores capital flight, a problem his home country of France faced only a few short years ago. And that was before it elected a Socialist government and a famed French actor made it headline news.

Employment Financial security Women

Feminomics: (De)valuing women’s socio-economic influence

Chart 1 – Average hours worked per person (employment and self-employment, age 15+)

Chart 1 Average hours worked, labour

Source: CANSIM Tables 282-0001 and 282-0017 – Labour force survey estimates (LFS), Statistics Canada

It’s a website as well as a movement. Unfortunately, that movement has little to do with promoting either equal opportunity or social security for women, let alone acknowledging the value of their unpaid work. Rather, it seems singularly focused on the fact women are paid less than men.

Owing to their dual roles as mothers / primary caregivers as well as labour market participants, it’s no surprise the hours women commit to unpaid work necessarily translate to less hours on average available to commit to paid labour.

That doesn’t sit well with feminomists(?), who apparently see women choosing to be mothers / primary caregivers as a “systemic problem“. The real problem is distilling women’s socio-economic value to little more than labour market widgets. Rising inequality, the decreasing share of income to labour and the long shadow of the Great Recession may help bring things back into perspective.

After Decades of Decline, A Rise in Stay-at-Home Mothers
D’Vera Cohn, Gretchen Livingston and Wendy Wang, Pew Research Center April 8, 2014

From she to she: changing patterns of women in the Canadian labour force (PDF)
Canadian Economic Observer, Statistics Canada June 15, 2006

Financial security Governance Poverty

Guaranteed income: An insightful analysis on Al Jazeera

Update: Al Jazeeera has uploaded the full video, linked below

Income for all
Could adopting unconditional basic income end poverty?
The Stream, Al Jazeera, March 20, 2014

The linked Al Jazeera broadcast discusses the recently revived notion of a guaranteed basic income, with particular reference to the Swiss plebiscite on the subject. It was a commendable effort by The Stream’s young hosts, touching on both the potential benefits and drawbacks of the proposed programs while making judicious use of both its panelists and social media (an example of digital broadcast media done right).