The Truth About Canada (8 page)

This said, it’s interesting to note that since early 2003 the growth of GDP has substantially outpaced the growth of employment. In 2006, there were 13.510 million Canadians employed full-time and 2.975 million employed part-time. Of all those employed, 8.727 million were men and 7.757 million were women.

While Canada has had a boom in well-paid jobs, there has also been a big growth in low-skill, low-paid jobs. In most Western European countries, low-paid jobs are somewhere between 8 and 12 percent, but in Canada they make up a big 21 percent of all jobs. Unfortunately, the large number of lost manufacturing jobs in Canada have been among
the highest-paying in the country, year in, year out. About one in five jobs now pay less than $12 an hour. In addition, in many European countries, good public child care makes it much easier to go out into the workforce, and if necessary work at a relatively lower-paid job. In Canada, it’s much more difficult, if not impossible, particularly in larger, more expensive cities.

Employment and unemployment rates, while very valuable indicators of the health of an economy, are in themselves incomplete if a number of other labour force factors are not also considered. For example, in some economies, part-time employment (which usually includes few benefits and much job insecurity) is a reflection of the underperformance of the economy.

In the spring of 2007, Canada’s part-time employment was about 18.2 percent of total employment. In comparison, in 2006, the average for the G7 group of leading industrialized nations was 16.4 percent, and the OECD total 16.3 percent. The Czech and Slovak Republics have part-time employment percentages of only around 3 percent, followed by Hungary at 3.2 percent, Turkey at 5.8 percent, and Greece at 6 percent.
¹
The U.S. rate of part-time employment in 2005 was only 12.8 percent. Statistics Canada reports that most of Canada’s part-time workers were people who could not find full-time jobs, or those for whom child care presented a big problem.

Another useful way of looking at a country’s economy is to measure self-employment as a percentage of total employment. Often, self-employment increases as the economy deteriorates and full-time jobs become scarce. Some contend, on the other hand, that a high rate of self-employment is often a sign of entrepreneurial skills.

In 2005, 21 OECD countries had a rate of self-employment higher than Canada’s 15.5 percent. Greece was the highest at 30.2 percent, followed by Turkey at 28.7 percent, Mexico at 29.6 percent, and Italy at 25.5 percent. Luxembourg had the lowest rate, at 6.7 percent, Norway was at only 7.1 percent, and the United States was at 7.4 percent. Canada’s self-employed rate was well above the G7 average of 10.2 percent, and also above the EU average of 14.5 percent and the OECD total of 14.4 percent.
²

While job creation in Canada was good in 2007, a large number of these jobs have been in self-employment, most in the food services industry. For David Wolf, chief economist at Merrill Lynch Canada, “That’s an awful lot of lemonade and hot dog stands.”
³

It’s also important to note that despite their huge profit increases, private sector employment growth has been abysmal. In 2007, Canada’s private sector employment increase was only a very poor 0.4 percent.

Let’s look briefly at the relationship of free trade to employment. In the five years before the FTA came into effect in 1989, employment in Canada grew at an average annual rate of 2.9 percent. In the five years from 2001 to 2005, it grew at an annual average rate of only 1.84 percent.
⁴

In 1989, the labour-force participation rate in Canada was 67.3 percent. In 2006, it was 63.6 percent. In the United States, it was lower at 63.1 percent. In 2006, in a list of 40 countries, Canada had the sixth highest labour force participation rate, higher than any other G8 country.

What is most amusing is the number of recent “think tank” reports attributing Canada’s comparatively low level of productivity to the fact that Canadians don’t like to — or aren’t forced to — work as many hours as Americans. This is true if you look at the number of hours worked (see also the chapter on wages), but for the years 2004, 2005, and 2006, Canada’s employment rate surpassed the U.S. rate. In our employment rate, in a list of 80 countries, we’re in seventh place, tied with Denmark but ahead of the United Kingdom, Japan, and Germany, for example — in fact ahead of all G8 countries.
⁵

When the FTA came into effect in 1989, unemployment in Canada was about 7.5 percent. It immediately began to climb, peaking at just under 12 percent in 1992/1993, before beginning a long fall back down to the pre-FTA levels.

Much has been said about Canada’s recent low unemployment rates. But the 1990s saw the highest rate of unemployment in Canada of any decade since the Great Depression, and since the FTA came into effect, in the period from 1989 to 2006, Canada’s unemployment rate was higher than that of the 30-nation OECD average every single year.
⁶
In the period
from 1995 to 2005, 17 OECD countries had a lower rate of unemployment, while only nine were higher.

A word about the low U.S. unemployment rate. The very large American prison population in the United States and the increasingly large number of “discouraged workers” who have stopped looking for work serve to bring the rate down, while, remarkably, those who are classified as long-term unemployed are removed from the unemployment counts after six months!

It’s very important to look at the prison population when considering American unemployment rates. The U.S. prisoner rate per 100,000 population was 725 in 2004, compared to the OECD average of 132.4 and Canada’s rate of only 107. While Canada does well in this respect, all the following countries have rates lower than ours, beginning with the lowest and proceeding in ascending order: Iceland, at just 39, then Japan, Norway, Finland, Denmark, Sweden, Switzerland, Greece, Ireland, Belgium, France, Germany, Austria, Italy, and Turkey at 100, just below Canada’s rate. In 2006, there were about 2.3 million men and women in U.S. prisons.

A few more words about the service sector in Canada, which now accounts for more than 70 percent of our economy and over 75 percent of all jobs. This sector has been responsible for most of Canada’s employment growth in the past 10 years. It includes both high-paid jobs in financial services, transportation, information services, and telecommunications, but also lots of low-paid fast-food, janitorial, and other jobs.

What constitutes the service sector of our economy? Statistics Canada includes transportation and warehousing, finance and insurance, real estate, renting and leasing, the management of companies and enterprises, professional, scientific, and technical services, information and cultural industries, arts, entertainment, and recreation, administration, waste management, remediation services, educational services, health care, social assistance, accommodation and food services, public administration, and policing. In a list of the top 40 countries, Canada is in seventh place in our total services output,
⁷
but we invariably have a
large trade deficit in services, reaching a record deficit of over $16-billion in 2006.

At this writing, Canada’s unemployment rate is 5.8 percent, slightly higher than the OECD average of 5.7 percent. As Daniel Gross put it in the
New York Times
, “You can’t use a low unemployment rate to pay a mortgage.”
⁸
If, as we shall see shortly, distribution of income is badly skewed, average unemployment and income figures can present a very misleading picture.

6

OTTAWA’S UI/EI CASH COW

“Employment insurance is a myth.”

A
word about unemployment insurance, or, as it is now ridiculously called, “employment insurance.” Before Brian Mulroney, Jean Chrétien, and Paul Martin went to work, more than 80 percent of unemployed workers in Canada received unemployment insurance; in fact, in 1980 it was as high as 86 percent. Today, it’s down to only 40 percent. In Toronto, it’s only 22 percent. In Ottawa, it’s less than 21 percent.

Hundreds of thousands of unemployed Canadian workers now can’t get EI and are forced to live on totally inadequate welfare with incomes far below the poverty line, thanks to the likes of the three above-mentioned prime ministers and premiers Mike Harris, Ralph Klein, and Gordon Campbell. In real terms, many Canadians on welfare are now receiving 45 percent less than equivalent rates of 10 years ago.

From 1962/1963 to 1982/1983, the unemployment insurance premiums received by Ottawa ran from a low of 3.2 percent of federal budgetary revenues to a high of 7.3 percent. But for the next 20 years they ranged from 9.3 percent of the federal government’s revenues all the way up to 15.6 percent, a huge difference. For 16 of these last 20 years they exceeded 10 percent. From 1994 to the end of 2006, Ottawa had a massive employment insurance surplus of $51-billion.

Changes to the rules by Paul Martin when he was finance minister were destructive to the intent of the program. By 2006, only 53 percent
of the unemployed even potentially qualified for benefits. But while payouts were being chopped, there were no equivalent cuts to premiums. While only 40 percent received benefits, 68 percent of the unemployed had been EI contributors. The result was that a social program intended to help the needy ended up being a very regressive tax used to pay down Ottawa’s debt. Jean Chrétien and Paul Martin were widely praised for using the EI surpluses to cut the federal deficit.

Toronto Star
columnist Thomas Walkom puts it all in the proper perspective:

Unemployment insurance should be available to the unemployed. A minimum wage should bear some relationship to the cost of staying alive. Programs designed to reduce poverty should help the poor.

These days, more people are working part-time at multiple jobs. Yet Canada’s unemployment insurance system (which the federal government calls “employment insurance” to make it sound more positive) is available only to those who work in good, steady, full-time jobs — that is, to people who are almost never out of work.
¹

By May 2006, a task force designed to bring in recommendations to improve Canada’s income security policies was direct and to the point: Ottawa had to reform unemployment insurance quickly to make it easier for out-of-work people to claim benefits. For David Pecaut, task force co-chair, “employment insurance is a myth.”

In an editorial on February 25, 2007, the
Toronto Star
said this:

Despite their sharp attacks on the fund while they were in opposition, the Conservatives have done absolutely nothing to reform the system.

The benefit program must return to being a true insurance policy for those who lose their jobs, not a cash grab by the government at the expense of the most vulnerable in our midst.

How does Canada compare with other countries in terms of unemployment benefits? In a list of 28 OECD countries, we’re way down in 22nd place when benefits are measured in terms of the replacement rates of previous earnings. Canada’s rate is less than half that of Denmark, Finland, Israel, Germany, New Zealand, Austria, the United Kingdom, Belgium, France, Japan, and Australia.
²

7

WELFARE IN CANADA

“An utter disaster”

“In reality, we do not care.”

J
ohn Murphy is the former chair of the National Council of Welfare. He describes the present situation in Canada as “shameful and morally unsustainable.” An editorial on welfare in the
Toronto Star
is to the point:

Canadians pride themselves on being a caring and compassionate society. But, when it comes to the least fortunate in our midst — children included — we are anything but. We fail to provide them with the tools they need to help themselves, in the form of skills, training and access to childcare. Then we expect them to get along on incomes that don’t reach half the poverty line.

This country is rich enough to create a coherent national program that provides a decent level of income support to every family in true need. It is past time we recognized that, and acted on it.
¹

In their publication
Welfare Incomes 2004
, the National Council of Welfare wrote,

Canadian welfare policy over the past 15 years has been an utter disaster.

Welfare incomes were further below the poverty line in most provinces in 2004 than they were in the late 1980s or early 1990s. Losses of 25 percent or more were reported in seven provinces.

And the council’s
Welfare Incomes
2005 said that

welfare incomes continued to decline in 2005, making life more difficult for the 1.7 million people — five percent of the population — forced to rely on welfare. Nearly half a million of those on welfare were children.

New Brunswick and Alberta had the lowest welfare incomes in 2005 for the four household types we looked at in each province and territory.

In 2005, welfare incomes were at the lowest point since 1986 in 20 scenarios.

When the peak year welfare incomes were compared to 2005 welfare incomes, some of the losses were staggering. In Alberta, the income of a single person decreased by almost 50 percent. In Ontario, a lone parent’s income decreased by almost $6,600 and a couple with two children lost just over $8,700.

The income of a single person in Alberta with a disability was only 38 percent of the poverty line. And for a lone parent with one child, only 48 percent of the poverty line.