Let's Make Productivity Work for Canadians
Presentation to the House of Commons
Standing Committee on Finance
Peter Bleyer, President
Canadian Council on Social Development
Thank you for the opportunity to participate from the outset of this important annual process.
The Canadian Council on Social Development (CCSD) is Canada's oldest non-profit national research organization (we've been in business for 85 years) and the social and economic security of Canadians is at the heart of our mandate.
As a membership-based organization we work with partners across the country and across sectors. We work with many Canadians who are on the front line of social policy and programming in their communities. And the people we work with are also looking for that link to make their cities and towns vibrant, sustainable and productive.
The federal budget is to a large extent the roadmap for public policy at the federal level as those in the social policy field have learned – at times for better, at times for worse.
This puts great responsibility in the hands of the Minister of Finance and consequently in your hands as the Committee that can advise the Minister and hold him (and perhaps someday her) to account.
My comments today link the concerns of our members and partners and our research with the theme of productivity.
Productivity is essentially the relationship between inputs and outputs. Productivity goes up when inputs are used more efficiently. While productivity is an important concept it is also contested.
In this case, a rising tide does not lift all boats. Increasing productivity does not guarantee greater social and economic security or well being.
Our country faces a substantial social deficit.
A quarter of a million Canadians do not have a place to live.
At some point over the next year more than three million people will have to worry about how they will get food for their next meal. The CCSD's upcoming report on Urban Poverty paints a stark picture of how that is effecting our urban population.
A CCSD research team is currently compiling the data for the seventh edition of The Progress of Canada's Children and Youth. Some of the numbers do not reflect healthy and productive families.
Well over one million children living in poverty and a patchwork of income security programs failing dramatically to meet the need. These are some important elements of this deficit.
A single-minded press on increasing productivity will not fix the social deficit. In fact it could very well make it worse. Productivity might be part of the solution but only with some important conditions.
Productivity growth should be understood as a means to an end and not an end in itself. Social and political choices determine the ends to which progress on productivity is applied.
Just as importantly, how we define productivity will pre-determine the goals that can be met.
I was pleased to hear the Finance Minister's own comment this summer that productivity should not be defined in a manner that leads to a “race-to-the-bottom” – lower pay, longer hours and job cuts. At a minimum productivity should be measured in output per hours worked and not in output per worker. Just as importantly, productivity must be linked to broader concepts such as the standard of living and quality of life.
In this context one can imagine a two-fold productivity dividend that can be applied to tackling the social deficit.
Here are a couple of policy priorities that would fit this bill:
The minimum wage in Canada's provinces remains below what it was in purchasing power thirty years ago. Raising the salaries of our low paid workers – setting a federal minimum wage of $10.00 an hour for the federally regulated sector – would have a direct positive impact for the sector and set a positive precedent for other jurisdictions.
Other countries have raised their minimum wage – recently the United Kingdom raised its rate to over 5 pounds (over $11.00). The UK experience shows that there is no measurable job loss when the minimum wage is increased. In fact, the UK Low Pay Commission found evidence of a “positive one-off effect on productivity”.
Similarly reducing work time would have a positive impact on output per hour worked – as well as a variety of other social benefits.
Of course, returning the EI program to its vocation of providing the most support possible to as many unemployed Canadians as possible would also be particularly helpful given the degree to which employment has become part-time, low wage and precarious.
As the Centre for the Study of Living Standards points out, a policy mix that aims for full employment drives productivity growth by ensuring that unused potential is kept to a minimum. A real commitment and concerted effort to enlist a variety of policy tools to contribute to the creation of more and better jobs is required.
When it comes to enhancing productivity, all tools are not created equal. In contrast with these positive labour market measures, corporate tax cuts are at best unproven as a means of growing productivity and at worst terribly destructive.
Simply put, there is no automatic relationship between corporate tax breaks and investment and jobs.
After the last round of major tax cuts the Department of Finance suggests that, “(t)he average corporate tax rate in Canada is now below the average U.S. tax rate” – as much as 5% lower in 2004. And yet here we are discussing languishing productivity growth. In fact research shows that the current period of a declining effective corporate tax rate has coincided with decreasing business investment.
Another round of wasted, untargeted, unconditional corporate tax breaks would be costly to this country. It would compromise our ability to tackle the social deficit and invest in the social infrastructure and human capital that can be the backbone of a real progressive productivity agenda.
Instead, the budget needs to reflect a country that is willing to invest:
Education, from early childhood, through K-12 to post-secondary, and training must be priorities.
Millions of Canadians have poor literacy skills and 15% of adults are functionally illiterate. A productivity agenda that doesn't deal with this blight is unthinkable.
Early Learning and Childcare investments will contribute to productivity today – by easing workforce participation – and tomorrow when future generations enter the workplace.
Canada's voluntary sector, can be found in almost every community in this country. It is an important pillar of our social infrastructure. As the CCSD's Funding Matters report has shown, the voluntary sector is sadly neglected and needs direct and indirect support for its critical work.
The growing shadow of social exclusion has to be tackled head on: child poverty, the racialization of poverty, aboriginal poverty, and growing inequality between have's and have nots. These are barriers to labour force entry that compromise any aspirations to being a truly productive society, they taint our collective quality of life and clash with our core values.
The list is long. It requires strategic long term thinking.
Where to start? As part of a concerted horizontal Government of Canada strategy to erase the social deficit and rebuild our human capital, a good first step would be to:
- return the Canada Social Transfer to indexed 1995 levels,
- assure predictable funding for future years,
- develop common principles and objectives for the transfer that should be agreed to by all parties and,
- take steps to assure transparency and accountability.