DOBBIN: Why Canada’s Job Future Is Sinking like a Stone

[Oscar]

DOBBIN: Why Canada’s Job Future Is Sinking like a Stone

[ http://murraydobbin.ca/ ]

Posted on December 1, 2014 by murray dobbin

Canada’s economy is increasingly at the mercy of a risk-averse, inept corporate elite addicted to government tax breaks. They are enabled by an ideologically addled government which is incompetent.

It is a deadly combination — a dumb and dumber team dragging us backwards at a time when the world is hoping there won’t be another economic collapse.

Recent media reports reinforce what we have known for decades about the Canadian corporate elite. One highlighted Canada’s dismal performance when it comes to research and development, the other our pathetic efforts at broadening our markets for exports. More and more evidence piles up that we are de-industrializing — reminding me of the Star Trek episode where the whole crew starts devolving. Captain Picard is destined to become a pygmy marmoset. I wonder what the end point for Canada might be?

An OECD study reported in the Globe shows that Canada has dropped out of the top ten in R&D spending and now ranks 12th. While we de-industrialize and fall back on raw resource exports, previously underdeveloped countries — Taiwan, India and Brazil — are now outspending us as they industrialize.

We continue to decline in the World Economic Forum’s World Competitiveness Index as well. For 2014-2015 we rank 15th.

Even worse, in the category of “innovation and sophistication factors” we rank 25th.

In 1998 our overall rank was sixth. Some of the countries that now beat us: the United Arab Emirates, Taiwan, Hong Kong and Singapore.

Canada’s dramatic decline in R&D has a continuing negative impact on labour productivity as well. According to OECD figures for the year 2012 we stood at 73 per cent of the U.S. benchmark of 100. This failure to increase labour productivity through investment in new machinery and innovation has a huge impact on our standard of living and the domestic economy: as wages stagnate and personal debt increases domestic consumption starts to flatline — and that further suppresses investment.

The other media report that reveals the pathetic level of government and corporate leadership on the economy focused on our complete failure to look to India as a potent export market. It is the fastest growing economy on the planet yet Canadian corporations and their government partners seem asleep at the switch. Kevin Carmichael in the Globe and Mail quotes the president of Canada-India Business Council: “We’ve got to get in here fast or we’re going to miss the boat. You’ve seen a rush to the gates [from other nations]. We seem to be taking a slow walk.” Currently exports to India account for a minuscule .63 per cent of Canadian exports — and just under half of that is raw materials.

Canada scarcely does better in other emerging nations: our top three destinations for goods: the U.S. takes 74.5 per cent, China 4.3 per cent and the UK 4.1 per cent. Australia, a Pacific nation we compete with is far more diversified: China 29.5 per cent, Japan 19.3 per cent, South Korea 8 per cent, India 4.9 per cent.

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Everything oil wants

Imagine if even 10 per cent of the largesse and free passes showered on the oil and gas sector was used to create what the Advanced Manufacturing Fund was established to do. According to the IMF Canadian subsidies to the oil sector, in real dollars and avoided externality costs, amount to $34 billion a year.

If you have been taken in by the spin that this sector creates thousands of jobs in other provinces then think again. The entire resource sector accounts for only 7 per cent of the economy and is one of the worst job creators we have. Two reports, one by the IMF and another by the Canadian Energy Research Institute in 2011 revealed just how little the oil and gas sector contributes to jobs and GDP growth.

Commenting on the reports, Frances Russell highlighted the fact that “Canada’s energy sector created only 1.7 per cent of all new jobs in Canada from 2007 to 2012.” That was just 13,000 jobs. Compare that to the 22,000 jobs created in a single month, December 2013, in health care and social assistance. “The energy sector accounts for only 0.1 percentage point of the average 2.25 per cent annual GDP growth over the last decade,” according to the IMF. As for the alleged benefits accruing to other provinces, a dollar invested in the tar sands boosts manufacturing in the rest of Canada by three cents and GDP in Ontario by four cents. And if none of the pipelines from the tar sands were built? The economy would grow 0.5 per cent less by 2020.

The potential for Canada to be leading in many new areas of innovative green growth has been squandered for years and continues to be ignored.

Instead Canadian governments shower the oil and gas sector with obscenely large subsidies and allows risk-averse and timid added-value sectors to languish in the ferocious competition for global markets.

To add insult to injury we hand over billions in tax cuts that could be used to become genuinely competitive. Dumb and Dumber was a bad movie. But this one’s worse.