Tag Archives: Fraser Institute

The dos and don’ts of reducing disparity

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In an astonishing turn of events, worthy of major international coverage, your humble scribbler finds himself in actual, authentic agreement with the right-wing, free-market- loving think tank, the Fraser Institute.  Sort of.

How this happened is less important than why, which I can summarize thusly: Even a blind pitcher will hit the broad side of a barn once in a blue moon if he’s standing next to a silo. . .or. . .something like that.

The point is when the Institute’s recent report, The Economic Effect of Living Wage Laws, concludes that such legislation in the United States – which is designed to raise poor people’s salaries and, so, reverse growing income disparity – are backfiring, it is largely, albeit lamentably, correct.

“The best available evidence from the U.S. serves as a cautionary tale for us in Canada about adopting living wage laws,” said Charles Lammam, the study’s author and Fraser’s resident scholar in economic policy. “When governments try to legislate wages, there’s typically a trade-off – while some workers may benefit from a higher wage, their gain comes at the expense of others who lose as a result of fewer employment opportunities,”

The press release continues on to explain: “Although activists claim living wage laws can increase wages with minimal costs, the reality is quite different. According to the best available research, a 100 per cent increase in the living wage (for example, going from an hourly minimum wage of $10 to $20) reduces employment among low-wage workers by between 12 and 17 per cent.”

The reason has to do with labour market shock. When living wages are “mandated” to rise regardless of other factors and circumstances, businesses cut back jobs – especially the lower-end ones – and training programs precisely because they are not likewise “mandated” to employ anyone. The relationship between the supply of jobs and the regulations governing pay rates asymmetrically disadvantages workers.

This has the corollary effect of undermining overall productivity and innovation in the private sector despite the fact that Mr. Lammam found evidence suggesting that “employers also respond to living wage laws by hiring more qualified workers and passing over those with fewer skills thereby reducing the opportunity for less-skilled workers to participate in the labour market.”

All of which only means that which we already know: Governments are lousy micromanagers of wages and prices. But can they play any productive role in narrowing the income gap between the rich and the rest? Fraser doesn’t say, but I suspect their answer would be: “a minimal one, thank you very much.”

This is where I (with a sense of great relief) would part company with the Institute.

The socio-economic costs of wage disparities, which are growing rapidly in the western world, are several and serious. As more money flows to fewer people, lobbies and special interests skew public spending priorities.

Suddenly, the infrastructure on which a fair and democratic nation relies – everything from public transportation, roads and bridges to schools and hospitals – becomes less important than tax cuts for the wealthy.

The malign effect on the culture is equally worrying. Prolonged, structural economic inequality creates class systems and all the attendant evils of social immobility: little access to high quality education and jobs; and few, if any, opportunities for meaningful career advancement. In effect, permanent, grinding working poverty becomes the norm for millions until, of course, comes the revolution.

Governments, then, owe it to themselves and to the people – all the people – they represent to be mindful of even the slightest imbalances in the scales of social justice. The role they play is not properly reactive (living wage legislation, as one example), but proactive. Robust, progressive, encompassing social policy designed to create the conditions for broad and general prosperity is what they can and do best.

They should start with a redistributive frame of mind by tithing the personal wealth of rich more aggressively. The notion that economic opportunity trickles down from the top is utterly bankrupt. Rich people spend less of their incomes, per capita, in their local economies than do middle-class wage earners.

Governments should also provide corporate generators of wealth with more incentives for plant reinvestment, job training and apprenticeship programs – for, in effect, a national, private-sector “manpower” program that focusses, once again, on people as much as it now does on profits.

Such are, of course, humble proposals that have, in the current political climate,  about as much chance of being adopted as I have.

On this matter, too, I am certain the Fraser Institute would concur.

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Sticking out our economic chin

Oh yeah, baby, we are stuck where the sun don't shine

Oh yeah, baby, we are stuck where the sun don’t shine

Of course, precisely 11 months before the next provincial election in New Brunswick, the urgent conversation would have to shift, the channel change, the page turn. After all,  there’s only so much bad news one person can digest before he succumbs to the hallucinogen of wishful thinking.

Now, the question for all to ponder is whether we are, at base, a glass-half-empty or a glass-half-full kind of folk. And in so doing, the campaign slogans of yore will no longer suffice. We will no longer respond to heady promises of prosperity any more than we will believe desperate warnings of imminent penury.

Right down the middle, between all possible extremes of human circumstance, is where we are and where we want to stay. The political party that understands the true power of self-delusion will win the day, as it brands its march to the ballot box with a few, well-chosen words: “Hey, here in New Brunswick, it could be worse.”

The province’s annual deficit is now projected to reach $499.9 million by the end of fiscal 2013, the result of lower-than-expected revenue. “That’s due mainly to weaker than anticipated results from NB Power,” Finance Minister Blaine Higgs told reporters last week. “We’ve had this information on the first quarter for a few weeks but we were intending to be able to line it up to the year-end results from last year.”

As for the three-month period ending this month, he’s no more sanguine: “We’ve seen some signs of growth in sectors like in the forestry sector, but I’m not expecting a huge uplift in revenue for the second quarter.”

Cheer up, though: .

“If we had not made that decision (to cut government spending) early on, looking at the continued economic performance and the issues of revenue, we as a province would be in very dire straits,” Premier David Alward reassured the press corps.

Unsaid, but implicit, was the proposition that a province of 756,000 souls, with an annual lien of half-a-billion bucks and a structural long-term debt approaching $12 billion, is not, technically speaking, in dire straights. Clearly, Mr. Alward’s definition of the word ‘dire’ departs somewhat from the Fraser Insititute’s, which concluded in April, “It’s hard to deny that New Brunswick’s finances are in a dire state.”

Indeed, wrote the Vancouver-based think tank, “The province has splashed red ink every year since 2008/09. . .With the provincial government persistently spending beyond its means, New Brunswick’s net debt (financial liabilities minus assets) is set to dramatically increase from a recent low of $6.7 billion in 2006/07 (25.4 per cent of GDP) to $11.6 billion in 2013/14 (34.2 per cent).”

On the other hand, that’s just the Fraser Institute: Always raining on everyone’s parade. Should we more properly worry that we continue to lose the tax base we need to get our finances shipshape and Bristol fashion?

This week, Statistics Canada reported that New Brunswick shed 947 people during the 12-month period ending July 1, 2013. Michael Haan, a population expert at the University of New Brunswick, told the Telegraph-Journal, “I would estimate we will see year-over-year declines for the next five years or so. We are at a point in history where we have a large group at the age of migration. The baby boomers’ children are between 15 and 30 now. The prime year for moving is around 28.”

Again, however, it could be worse. The year before, New Brunswick lost more than 2,000 people to better jobs and rosier opportunities in Ontario and Alberta. Besides, at least we’re not Greece or even Spain where, as Bloomberg Businessweek reported in June, “The nation’s population fell last year for the first time since records began in 1971, and the main reason was an 18 per cent increase in the number of foreign nationals leaving the country. Romanians, Moroccans, and Ecuadorians led the way out.”

Rest assured, gentle reader, all is not woe in New Brunswick.

In fact, given our stubbornly sunny disposition, it’s remarkable we’re not all on skid row.

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What’s the cost of raising Cain?

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Very occasionally, the Fraser Institute, a Vancouver-based think tank, issues a report that is not replete with errors, misinformation and ideological proclamations masquerading as dispassionate observations. Last Thursday morning was not one of those occasions.

In a paper entitled “The Cost of Raising Children”, the conservative ideas factory concludes that the tab for bringing up junior is equivalent to “what parents can expect to spend (on) the essential needs of their child. Using. . .this working definition. . .the ‘benchmark’ cost of a child in Canada is between $3,000 (and) $4,500 per year depending on the age of the child. This does not mean that lower income parents cannot successfully raise children on less than this.”

What it does mean, apparently, is that any other method deployed “to measure the cost of children is laden with political implications. . .There are vested interests in having high costs for raising children. The social welfare community, a broad coalition of public service workers, social activists, academics, and many journalists, is active in lobbying the state for more resources for families with children. This agenda, associated with left-liberal and social democratic positions, is part of a redistributionist perspective and it would be naive to ignore the influence it has on public policy. A high cost of children is consistent with this agenda.”

As one of those left-liberal, social democratic-minded journalists, the father of two, the grandfather of three (with another on the way), I am tempted to respond to the Institute’s findings with the simple, if inelegant, retort: Poppy-cock. So evidently flawed is its logic; so transparently larded with its own partisan agenda is its argument. But, in the interest of fuller discourse, I shall elaborate.

I am utterly certain that it is possible to raise a Canadian child on between $3,000 and $4,500 a year. Tens-of-thousands of families across the country are doing it right now. That doesn’t mean that such budgetary constraints are desirable. It certainly doesn’t mean that they comprise any sort of “benchmark” in a country where the actual costs vary wildly from province to province, city to city, village to village.

The cost of raising a child in downtown Toronto is in no way comparable to that of raising one in Antigonish, N.S. Even if one measures only the “essential needs” of a kid – food, clothing, personal goods, school supplies, and the like – the spending regimes are affected by situational factors, such as transportation infrastructure and available networks of family and friends.

In some locations, where the cost of living is higher than the national average, my $3,000 or $4,000 will stretch only as far as I am willing to raid Salvation Army bins for cheap hand-me-downs, stock up on powdered milk and processed macaroni dinners, and supplant cartons of fruit juice with less expensive bottles of soda. What, then, are the costs of raising a child who grows fat, listless and diabetic?

Beyond this, what breathtaking arrogance drives the Institute’s determination to define a kid’s “essential needs”? Are organized sports, which train the body and temper the mind, mere frills? Are music lessons and technology camps unnecessary luxuries? What about books? Hell, what about sneakers, out of which tykes grow faster than a dandelion in springtime?

When we assess the degree of success we’ve had in raising a child, will our true benchmark have less to do with the amount of money we’ve saved and more to do with the condition of the final “product”? Imagine a grotesque simulacrum of Huck Finn: Not merely barefoot, illiterate and unkempt; but also corpulent, bored and disengaged. Welcome, citizen of Canada. Your room in one of the nation’s finer penal institution awaits your arrival.

Perhaps the most astonishing finding in the report concerns structured child care, which the Institute does not consider an essential need. That’s not because, as it says, it’s not a “legitimate expense”. It’s because “many families with children will have little or no daycare costs. For example, in some two parent (intact) families, one parent may decide to stay at home to care for a pre-school child or children.”

Some may, but most can’t afford the “luxury” of prolonged unemployment. If you don’t believe me, dear Fraser, check the latest Statistics Canada figures on subject.

Oh, my mistake. I momentarily forgot, that this isn’t something you’re actually prone to do.

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