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Economy

Canada’s struggling private sector—a tale of two cities

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4 minute read

From the Fraser Institute

By Jason Clemens and Joel Emes

” the private sector must generate the income used to pay for government bureaucrats and government programs. When commercial centres have lower median employment incomes than capital cities, the private sector may be in real distress. “

According to almost every indicator including economic growth, business investment, entrepreneurship, and the employment and unemployment rates, Canada’s private sector is struggling.

A novel way to think about the sorry state of the private sector is to compare income levels in “commercial” cities (basically, cities with little to no provincial or federal government activity and largely characterized by private business activity) with income levels in capital cities, which are dominated by government.

Since the beginning of COVID (February 2020) to June 2023, government-sector job growth in Canada was 11.8 per cent compared to just 3.3 per cent for the private sector (including the self-employed). Put differently, the government sector is booming while the private sector is anemic.

The marked growth in employment in the government sector compared to the private sector is also important because of the wage premiums paid in the government. A 2023 study using data from Statistics Canada for 2021 (the latest year of available data at the time), found that—after controlling for factors such as sex, age, marital status, education, tenure, industry, occupation and location—government workers (federal, provincial and local) enjoyed an 8.5 per cent wage premium over their private-sector counterparts. And this wage gap does not include the more generous pensions typically enjoyed by government workers, their earlier retirement, and lower rates of job loss (i.e. greater job security).

According to a separate recent study, five of the 10 provinces (British Columbia, Alberta, Saskatchewan, Quebec and New Brunswick) have a distinct commercial centre other than the capital city, and in all five provinces in 2019 (pre-pandemic) the median employment income in the capital city exceeded that of the commercial centre, sometimes by a wide margin. For example, the median employment income in Quebec City was $41,290 compared to $36,660 in Montreal. (The study used median income instead of average income to control for the effect of a small percentage of very high-income earners that can influence the average income for a city.)

Remember, the private sector must generate the income used to pay for government bureaucrats and government programs. When commercial centres have lower median employment incomes than capital cities, the private sector may be in real distress.

Equally as telling is the comparison with the United States. Twenty-three U.S. states have a capital that’s distinct from their main commercial centre, but among that group, only five (North Dakota, Louisiana, Wisconsin, Ohio and Kentucky) had capital cities that clearly had higher levels of median employment income compared to the main commercial centre in the state. This is not to say the U.S. doesn’t have similar problems in its private sector, but its commercial centres generate higher median employment incomes than the capital cities in their states, indicating a potentially better functioning private sector within the state.

Many indicators in Canada are flashing red alerts regarding the health of the economy. The comparative strength of our capital cities compared to commercial centres in generating employment income is yet another sign that more attention and policy reforms are needed to reinvigorate our private sector, which ultimately pays for the government sector.

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Business

Maxime Bernier warns Canadians of Trudeau’s plan to implement WEF global tax regime

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From LifeSiteNews

By Clare Marie Merkowsky

If ‘the idea of a global corporate tax becomes normalized, we may eventually see other agreements to impose other taxes, on carbon, airfare, or who knows what.’

People’s Party of Canada leader Maxime Bernier has warned that the Liberal government’s push for World Economic Forum (WEF) “Global Tax” scheme should concern Canadians. 

According to Canada’s 2024 Budget, Prime Minister Justin Trudeau is working to pass the WEF’s Global Minimum Tax Act which will mandate that multinational companies pay a minimum tax rate of 15 percent.

“Canadians should be very concerned, for several reasons,” People’s Party leader Maxime Bernier told LifeSiteNews, in response to the proposal.

“First, the WEF is a globalist institution that actively campaigns for the establishment of a world government and for the adoption of socialist, authoritarian, and reactionary anti-growth policies across the world,” he explained. “Any proposal they make is very likely not in the interest of Canadians.” 

“Second, this minimum tax on multinationals is a way to insidiously build support for a global harmonized tax regime that will lower tax competition between countries, and therefore ensure that taxes can stay higher everywhere,” he continued.  

“Canada reaffirms its commitment to Pillar One and will continue to work diligently to finalize a multilateral treaty and bring the new system into effect as soon as a critical mass of countries is willing,” the budget stated.  

“However, in view of consecutive delays internationally in implementing the multilateral treaty, Canada cannot continue to wait before taking action,” it continued.   

The Trudeau government also announced it would be implementing “Pillar Two,” which aims to establish a global minimum corporate tax rate. 

“Pillar Two of the plan is a global minimum tax regime to ensure that large multinational corporations are subject to a minimum effective tax rate of 15 per cent on their profits wherever they do business,” the Liberals explained.  

According to the budget, Trudeau promised to introduce the new legislation in Parliament soon.  

The global tax was first proposed by Secretary-General of Amnesty International at the WEF meeting in Davos this January.  

“Let’s start taxing carbon…[but] not just carbon tax,” the head of Amnesty International, Agnes Callamard, said during a panel discussion.  

According to the WEF, the tax, proposed by the Organization for Economic Co-operation and Development (OECD), “imposes a minimum effective rate of 15% on corporate profits.”  

Following the meeting, 140 countries, including Canada, pledged to impose the tax.  

While a tax on large corporations does not necessarily sound unethical, implementing a global tax appears to be just the first step in the WEF’s globalization plan by undermining the sovereignty of nations.  

While Bernier explained that multinationals should pay taxes, he argued it is the role of each country to determine what those taxes are.   

“The logic of pressuring countries with low taxes to raise them is that it lessens fiscal competition and makes it then less costly and easier for countries with higher taxes to keep them high,” he said.  

Bernier pointed out that competition is good since it “forces everyone to get better and more efficient.” 

“In the end, we all end up paying for taxes, even those paid by multinationals, as it causes them to raise prices and transfer the cost of taxes to consumers,” he warned.  

Bernier further explained that the new tax could be a first step “toward the implementation of global taxes by the United Nations or some of its agencies, with the cooperation of globalist governments like Trudeau’s willing to cede our sovereignty to these international organizations.”   

“Just like ‘temporary taxes’ (like the income tax adopted during WWI) tend to become permanent, ‘minimum taxes’ tend to be raised,” he warned. “And if the idea of a global corporate tax becomes normalized, we may eventually see other agreements to impose other taxes, on carbon, airfare, or who knows what.”   

Trudeau’s involvement in the WEF’s plan should not be surprising considering his current environmental goals – which are in lockstep with the United Nations’ 2030 Agenda for Sustainable Development – which include the phasing out coal-fired power plants, reducing fertilizer usage, and curbing natural gas use over the coming decades.    

The reduction and eventual elimination of so-called “fossil fuels” and a transition to unreliable “green” energy has also been pushed by the World Economic Forum – the aforementioned group famous for its socialist “Great Reset” agenda – in which Trudeau and some of his cabinet are involved.     

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Business

Canada’s economy has stagnated despite Ottawa’s spin

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From the Fraser Institute

By Ben Eisen, Milagros Palacios and Lawrence Schembri

Canada’s inflation-adjusted per-person annual economic growth rate (0.7 per cent) is meaningfully worse than the G7 average (1.0 per cent) over this same period. The gap with the U.S. (1.2 per cent) is even larger. Only Italy performed worse than Canada.

Growth in gross domestic product (GDP), the total value of all goods and services produced in the economy annually, is one of the most frequently cited indicators of Canada’s economic performance. Journalists, politicians and analysts often compare various measures of Canada’s total GDP growth to other countries, or to Canada’s past performance, to assess the health of the economy and living standards. However, this statistic is misleading as a measure of living standards when population growth rates vary greatly across countries or over time.

Federal Finance Minister Chrystia Freeland, for example, recently boasted that Canada had experienced the “strongest economic growth in the G7” in 2022. Although the Trudeau government often uses international comparisons on aggregate GDP growth as evidence of economic success, it’s not the first to do so. In 2015, then-prime minister Stephen Harper said Canada’s GDP growth was “head and shoulders above all our G7 partners over the long term.”

Unfortunately, such statements do more to obscure public understanding of Canada’s economic performance than enlighten it. In reality, aggregate GDP growth statistics are not driven by productivity improvements and do not reflect rising living standards. Instead, they’re primarily the result of differences in population and labour force growth. In other words, they aren’t primarily the result of Canadians becoming better at producing goods and services (i.e. productivity) and thus generating more income for their families. Instead, they primarily reflect the fact that there are simply more people working, which increases the total amount of goods and services produced but doesn’t necessarily translate into increased living standards.

Let’s look at the numbers. Canada’s annual average GDP growth (with no adjustment for population) from 2000 to 2023 was the second-highest in the G7 at 1.8 per cent, just behind the United States at 1.9 per cent. That sounds good, until you make a simple adjustment for population changes by comparing GDP per person. Then a completely different story emerges.

Canada’s inflation-adjusted per-person annual economic growth rate (0.7 per cent) is meaningfully worse than the G7 average (1.0 per cent) over this same period. The gap with the U.S. (1.2 per cent) is even larger. Only Italy performed worse than Canada.

Why the inversion of results from good to bad? Because Canada has had by far the fastest population growth rate in the G7, growing at an annualized rate of 1.1 per cent—more than twice the annual population growth rate of the G7 as a whole at 0.5 per cent. In aggregate, Canada’s population increased by 29.8 per cent during this time period compared to just 11.5 per cent in the entire G7.

Clearly, aggregate GDP growth is a poor tool for international comparisons. It’s also not a good way to assess changes in Canada’s performance over time because Canada’s rate of population growth has not been constant. Starting in 2016, sharply higher rates of immigration have led to a pronounced increase in population growth. This increase has effectively partially obscured historically weak economic growth per person over the same period.

Specifically, from 2015 to 2023, under the Trudeau government, inflation-adjusted per-person economic growth averaged just 0.3 per cent. For historical perspective, per-person economic growth was 0.8 per cent annually under Brian Mulroney, 2.4 per cent under Jean Chrétien and 2.0 per cent under Paul Martin.

Due to Canada’s sharp increase in population growth in recent years, aggregate GDP growth is a misleading indicator for comparing economic growth performance across countries or time periods. Canada is not leading the G7, or doing well in historical terms, when it comes to economic growth measures that make simple adjustments for our rapidly growing population. In reality, we’ve become a growth laggard and our living standards have largely stagnated for the better part of a decade.

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