Posts Tagged Economy
(Businesses Across Ontario Are Being Too Penny Wise With The Proposed Wage Increase)
Scary clowns are a big hit these days at the box office, and while the people of Ontario get acquainted with a clown called Pennywise from the latest version of Stephen Kings IT, the Financial Accountability Office of Ontario [FAO] is warning tax payers and job seekers of another scary metamorph; a proposed minimum wage hike of $15/hour. This increase is set to be fully implemented by 2019 and came under fire yesterday in a report from the FAO. The FAO stated that it will cost the Ontario economy 50,000 jobs if it goes ahead with this wage hike.
It’s not a surprise that businesses – whom over the past several years have enjoyed a tremendous amount of federal tax breaks – are lining up to oppose this policy and demonizing it as being economically unsound. Ontario Progressive Conservatives leader Patrick Brown had something to say about it as well, however he brushed off the wage increase a distraction in a bizarre rant on twitter, and Brown isn’t clear on his stance on the policy at all and what he would do differently if he became Premier:
— Patrick Brown (@brownbarrie) September 12, 2017
Brown seems very comfortable in the opposition benches. Offside of the very off tone Ontario PC response, there seems to be a lot of red balloons around the economic storm drains on this policy and it isn’t even Halloween yet.
Since the market crash of 2008, we’ve been shifting from traditional conservative economic ideology (which failed miserably) towards one of managing the economy on several different levels in a bi-partisan way. Corporate tax cuts have not produced substantial jobs in Canada, in fact the opposite has happened. A study by the Canadian Centre of Policy Alternatives in 2011 found the biggest employers were sitting on the money they saved from these cuts:
“From 2005 to 2010, the number of employed Canadians rose 6% while the number of jobs created by the companies in the study grew by only 5%. In essence, the largest beneficiaries of corporate tax cuts are dragging down Canadian employment growth.”
In 2013, federal conservatives were warned by then Bank of Canada governor Mark Carney that Canadian companies were sitting on vast sums of cash they have saved through tax cuts, and bail outs rather than creating jobs to bolster the economy. As I remember it Carney stated this several times throughout his time at the Bank of Canada. While company CEO bonuses grew, so did the economic divide in Canada and in Ontario as well as a result of businesses not investing what they should in the local, regional, and federal economies. The economy has changed post 2008 not just in Canada but globally, and managing this economy has changed as well.
If the cost of living is high throughout the country and the province, than a minimum wage increase to ensure people have the means to survive should be something we all should be embracing patriotically. Businesses will adjust. Yes there may be some job losses (in my opinion way less the FAO has reported will happen) in the short term by companies who are not willing to spend profit margins on their employees, however just as those jobs are lost, they will be offset by more spending power by the general worker. As the minimum wage increases, so should increases to everyone’s wage as the economy grows as a result of more spending power. At least that would be the working economic theory on this policy. The wage increase is cycled through the economy. Employees who make more, become more productive and contribute more to the economy on whole. With many people in Ontario living paycheque to paycheque, and the fact that over the past several years businesses have sat on cash from tax cuts, they can suck it up and do their part.
The Ontario NDP has been calling for this wage hike for some time. This ideology was also adapted by conservatives who bailed out auto sectors, and bailed out the economy through “stimulus” after the disastrous effects of traditional conservative ideology of deregulation and corporate tax cuts took hold in 2008. Change is difficult, but necessary post 2008 economics. Greed is no longer good economics, nor is it socially acceptable post 2008.
It’s been no surprise that Canada has long been in a housing bubble. Foreign investors from China have been buying up property in Canadian cities for years, and reselling them to Canadians for way more than the property is worth. China seems to be intentionally creating a housing bubble in Canada. What Chinese investors are doing is buying up property, and immediately reselling the property to the highest bidder even before the closing date of the first sale. This cycle can repeat as much as 3 or 4 times prior to the closing date of the first buyer, artificially driving up the costs of real estate property. There are signs that the artificially created housing bubble is about to burst.
Last month the Office of the Superintendent of Financial Institutions (Canada’s financial watchdog) stated that Canadian banks need to be stress tested against a 30% drop in housing prices, echoing concerns from the Bank of Canada in June. Last week Chinese media has been warning investors in that country to pull out of the Canadian real estate market, and is expecting a housing crash one that could rival or even be worse than the US housing market crash of 2008.
In 2010 the director of CSIS Richard Fadden warned Canadians in an interview with the CBC that the biggest risk to Canadian security wasn’t from terror groups but from foreign powers that are infiltrating Canadian politics and influencing public servants, fueling a growing concern about economic espionage. Little was done to correct the housing bubble by the Conservatives when they were in power. Little has been done by the Liberals either since they have taken control of the House of Commons last year. Vancouver recently passed laws to increase taxes on foreign real estate investors to help curb the growing concern regarding this artificially created bubble, however there are a lot of doubts whether or not it will work.
Why hasn’t anything been done to completely correct this bubble and warn off concerns of economic espionage? Governments of all levels seem to be cashing in on the taxes of these sales, that’s one reason. The other is because any major correction in the housing market could see that bubble burst with fears of major economic instability. This leaves Canada’s economic future purely in the hands of China, in which it seems they are now moving to burst this bubble intentionally by warning off that country’s investors.
Canada shed 31,200 full time jobs last month. While our prime minister is running around the country shirtless, there has been no word on what our federal government is doing to curb the current housing crisis it inherited from the Conservatives. As result of the current series of warnings and years of inaction, we could be in for a very rough ride ahead. Ontario will be hit particularity hard. A large segment of our population, and many businesses here in Ontario can’t even afford to keep the lights on. Gas rates set to rise as well. There also has been absolutely no word from the Ontario government on what they plan on doing to also head this expected downfall in housing prices, and economic instability as a result.