Courtesy of Ian Roberston:
IR: OECD calls for less austerity and more public investment … So let’s do our part here! (Housing and Skytrain and ‘green’ things oh my!)
Many countries have room for fiscal expansion to strengthen demand. This should focus on policies with strong short-run benefits and that also contribute to long-term growth.
“A commitment to raising public investment collectively would boost demand while remaining on a fiscally sustainable path.”
It added that investment spending had a high multiplier effect, with strong knock-on effects from investment projects on overall growth rates. Quality infrastructure would support future growth and make up for “the shortfall in investment following the cuts imposed across advanced countries in recent years”.
JB: I can’t help but wonder if building with less austerity would reveal itself in the form and material (in addition to frequency as described in the article) of the architecture as well. Investing in the Canada Line was great, but what if the Canada Line further had architectural significance or a sense of public pride/ownership?
As another aside, would a massive investment in our green or tech sectors encourage the kind of buy-in from global capital that we would want to see here?
On the question of a massive investment in the tech sector, we shouldn’t forget that low wages are the backbone of this sector. One example: a startup begged a young friend of mine to drop out of his last year in business school and come build the customer-facing division of the company for the princely salary of $36k per year. He went instead to San Francisco and got $100k to start. Another example: Hootsuite’s CEO recently lamented very publicly that the cost of housing was driving young people out of the city. A quick look at Glassdoor, the site where people disclose their salaries, shows that Hootsuite pays roughly 40% less than people get in Silicon Valley, even ignoring the difference in the dollar. So our tech sector is largely built on low wages.
As far as the article explains I do not believe that housing is a fiscal issue. I would prefer if governments were better at reducing demand for housing through changes in regulations so that we don’t have empty buildings and foreign ownership by people who are paying very little tax.
Also 36K is close the Canadian average for income so not sure if that would be considered low wage, perhaps in the tech sector but not overall.
StatsCan says the average wage for all people over 15 in Canada was $24.96 an hour or roughly $49k per year. So, yes, $36k in the tech sector in Vancouver is low, and in a city that is expensive to live in, very low.
its well below median … so by that simple measure alone, it is low wage
We need to reign in public spending on operations as we pay civil servants far too much. The core reason we have such massive deficits in almost all western societies is run-away public sector sizes, salaries and especially benefits/pension. if we restrained that we actually had some money to invest in real useful infrastructure !
related articles:
Public sector workers make out like bandits: http://www.cfib-fcei.ca/english/article/7290-public-sector-workers-oped.html
Ontario now the highest per capita debt in the world of any sub-nation, triple that of California per person, and could have $15B surplus today : http://business.financialpost.com/news/economy/ontario-could-have-surplus-as-high-as-15b-if-spending-had-been-restrained-fraser-institute-report-says
The core reasons we have debt aren’t public sector sizes, salaries, or benefits Thomas … If we invested in infrastructure maybe we’d have some money to pay salaries, and taxes – the argument can be used either way.
related articles:
Wars and tax cuts?
http://krugman.blogs.nytimes.com/2009/11/27/deficits-the-causes-matter/?_r=0
… and maybe some over-reliance on private money to fund the public good (ahem, PPPs anyone?)
http://qualicuminstitute.ca/federal-debt/
Southern Europe has cut their salaries like mad, but their deficits have still gone up because austerity killed the taxes coming in. The cause matters just as much (or maybe more) than the deficit.
There is nothing per se wrong with debt to buy revenue producing infrastructure like roads, bridges, tunnels, highways, subways, electric power grid, dams etc.
But the issue is that public sector wages, when adjusted for the low risk of layoffs, hours worked and cushy benefits, especially pensions BY FAR exceed those of private sector employees, especially after 2008/2009 financial crisis and in a low interest rate environment. The gap is 25-33%, more in some jobs (eg BC Liquorstore employees or BC Ferries ticket booth operators that get 50-100% above comparable salaries) and less in other (eg nurses or teachers’ aides)
The core issue is vote buying and excessive demand by voters too easily given in to by elected politicians. For example, Ontario now spends over $11B a year in interest — the third-highest single program spending area behind health care and education and more than the province spends on welfare. So in essence, public sector unions steal from the homeless.
Ontario will be like Greece soon enough where they cannot refinance their debt or only at ever higher interest costs, especially once the Alberta transfer payments stop coming in !
Canada is on a reckless dangerous path here, and luckily in BC we are not quite so bad due to a high Asian immigration with loads of cash pumped into real estate. Once that stops or slows down, watch out !
So, yes to more investments but not to ever increasing salaries and benefits of an already bloated an overpaid civil servants apparatus !
So, Hootsuite pays 40% less here than SF says John Graham … couldn’t the solution just as easily be that private companies pay more rather than public pay less?
The classic union-busting line is to point to someone else and question why he is being paid more (Oy! He should be knocked down a peg, obviously!), rather than have someone question why they are paid less.
What if public salaries are all right and the rest of things are out of whack?
Could it be that Wages haven’t been keeping pace? That people are relying on debt to get them by to increasingly high degrees?
Why yes, yes they have.
http://business.financialpost.com/personal-finance/have-your-wages-kept-up-with-inflation
Thomas, the contribution to the provincial GDP in 2013 of public administration, health care and educational services was 18.3%. Private real estate, rentals and leasing was 17.7%.
That 18.3 % doesn’t include the public side of transportation which altogether was another 5.5%. You could round the public sector contribution up to about 20%, or ~$42 billion in one year. The multipliers and taxes paid on those billions are very significant.
Source: BC Financial and Economic Review, 74th Edition, BC Ministry of Finance (2014).
It’s plain to see that your objections to the public sector are ideological, and that the net result of your “solutions” would be to weaken BC’s overall economic performance while lowering all kinds of labour and social standards.
Instead, you should be praising BC’s overall good performance, which stems from our diversified economy. While Alberta nosedived from its extraordinarily foolish lifeline dependency on one commodity, BC leads the country in growth today and long-term stability.
Let’s not be so smug, please.
BC is essentially a live-style decision by many folks that could live anywhere. It lives off its scenic beauty and relatively warm climate compared to the rest of Canada. So it attracts retirees, expats from Alberta (like me), rest of Canada, Europe and of course, Asia. Most of these folks come with cash. Imagine BC without immigrants or Asians. It would be a basket case. As such, the biggest industry catering to this large consumer base is REAL ESTATE. Diversification ? You mean real estate is not only by Chinese, but also by Taiwanese, folks from Hongkong, Korea and now, Iran ?
Or do you mean the minimum wage film jobs, minimum hotel/restaurant/tourism jobs (many part-time/seasonal), or agricultural jobs (also part-time or seasonal) or a few $50-70,000 software & e-gaming jobs ? Or a few of the remaining mining execs and geologists ? What else does BC export ? LNG ? Not yet. Wood. What else ? cars ? aerospace ? Nope & nope. Weed .. maybe soon. Agriculture & some hightech / software ?
Then there are the ports of course that employ quite a few well paid folks. Hence the Massey Bridge to allow expansion of major ports in Delta, Surrey and New West to create more of these jobs .. or oil terminals – all heavily opposed by the (under-employed) greens or those civil servants with life time jobs. There are 30+ ports in MetroVan employing tens of thousands. Huge employment in MetroVan.
The safe from layoffs overpaid civil servants middle class with big benefits lives off the immigrants that come with cash, and the ports. Let’s not forget that.
So, scenic beauty and geographic location is BC’s natural advantage. Alberta is not so lucky, and as such exploits its advantage: oil & gas & agriculture. BC might get LNG off the ground in vast volumes like Alberta’s oilsands, but that verdict is still out.
You are right about LNG. The verdict is out.
I forgot to mention the two biggest brands BC exports: UBC (ie education services for foreign students and associated lesser known and cheaper learning institutes like SFU, BCIT, Cap College, UVic etc ..) and Lululemon, and of course: Vancouver as a tourist destination (cruises, dining, mini-vacations) & Gulf Islands ..
Thank you for pointing out the great performance and contribution of PUBLIC educational institutions rife with unionized staff and well-paid faculty paid largely from the public purse. There is also the growing research capability too, with co-operative public-private investment opportunities to benefit from patents.
This brings to mind Jim Basillie’s very illuminating recent article in the Globe about the need to generate and enhance Canada’s intellectual property rights as a significant national economic strategy to diversify away from over-reliance on raw resources. Universities could be home to interconnected innovation labs that could generate patents. Google, Facebook, Amazon, Microsoft, Apple et cetera generate hundreds of billions in economic activity every year and did not spring from free trade agreements. They were borne by their own incubation labs. However, they now use free trade agreements to protect their own US patents and kill the international competition. Google lobbied heavily on the TPP which Canada is now being pressured to ratify. Basillie says we would be foolish to do that.
The Globe’s Report on Business is, on average, a lot more objective and less ideological than the Financial Post. You may wish to consider broadening your horizon.
http://www.theglobeandmail.com/report-on-business/rob-commentary/for-canadian-innovators-will-tpp-mean-protection-or-colonialism/article28462854/
My horizon is quite broad. I just don’t buy into the notion that bigger government is better, as they are an ineffective innovator and inefficient (i.e. too expensive) operator. Apple, Facebook and Microsoft were all started by university dropouts. Uber is poopooed by big unions and big government in Vancouver. BC Liquor stores employees making $26-$32 whereas a Safeway employee makes half that. Give me a break. If WestJet or AirCanada were run like BC Ferry they’d be broke long ago .. etc ..
I don’t believe over-taxed, over-regulated, over-governed and over-indebted Europe is the path to the green & prosperous nirvana envisioned by many here on this blog.
Financial Post is ideological ? G&M and CBC is the true mainstream ? That just shows how left we have drifted. The entitlement mentality – free education to age 30, then 25 years of cushy work – then 40 years of indexed pension – is not affordable anymore. Someone always has to pay, and it is often the yet unborn or non-voting youth, saddled with massive debts.
BC is currently leading in economic growth as it is one of two provinces left with sound fairly fiscally conservative governments (the other being SK), due to low Can$ and massive amount of $s flowing here (mainly from Asia) into real estate as it is such a nice place to live (if you have the $s, of course .. not so nice if you have to work at minimum wage and have to rent). Condo and house construction must be the biggest employer in MetroVan. Vancouver is a great place to work FROM (but derive incomes elsewhere as most entrepreneurs that live here do).
In time, we might even get a common sense subway to UBC as that is good debt for a tunnel that last 200+ years with associated PST + GST + employee taxes along the growing corridor, linking hospitals and UBC for enhanced and monetized research. S.th. Canada is not so great at, btw.
http://news.ubc.ca/2013/02/28/rapid-transit-key-to-unlocking-potential-of-ubcbroadway-corridor-study/
… and if any government were run like much of the banking sector, they would go bust just as fast as your hypothetical government run Air Canada … but as a counter argument for this government Air Canada, look at how well the privatized rail is going in the UK, and compare against the national rail systems on the continent, to be more specific, the UK system is being renationalized – just not by the UK! (much is now owned/run by SNCF)
BC has been and is leading the nation in economic growth.
http://www.biv.com/media/filer_public/af/2a/af2ad688-6499-499c-b907-772df3d97c9b/screen_shot_2015-05-04_at_83226_am.png
Tourism and the tech sectors are growing along with real estate transaction value in BC. The low dollar really helps at present with exports of resources like lumber and raw logs, but that is in the context of an overall decrease last decade of softwood exports, which was offset by growth in other sectors.
I will never see BC LNG as anything more than hype given the low world prices, the alternate sources of cheaper gas in China, the extreme decline rates and short-lived wells in shale formations, its finite supply,
and the rise of renewables that are now cheaper than coal and nearing parity with gas and hydro in terms of electrical generation.
Alberta, where I grew up, really needs to learn to diversify its economy beyond its primary fixation on oil. It should have leaned that lesson when cheap conventional oil and gas peaked there in the 90s, and especially now that its resource base has narrowed even more to unconventional oil that requires recession-inducing higher world prices to extract profitably. There is also the little problem of international climate change mitigation measures that Alberta is highly sensitive to, and a future of drought.
There is lots of opportunity in the service sector and manufacturing, and it would please me to see government and business work together to make Calgary’s Stephens Avenue into the new Bay Street, and Edmonton become a hub of investment in renewables like wind, of which there is massive potential.
WRT Canada Line – don’t discount utility is providing a sense of pride.
(i.e. the typical form (aesthetics) versus function (utility) debate.
Getting to and from YVR is a breeze at a bargain price (even with the surcharge), especially compared to the Union Pearson Express in Toronto.
Building infrastructure that increases the efficiency of our cities and leverages higher productivity and lower per capita emissions and energy use, can only do a lot of good.
Thanks for the post that also emphasizes the economic multipliers.
It always strikes me that investing in transit is one of the best strategies we have for dealing with the huge issue of affordability in Vancouver.
Some investment in ‘affordable housing’ could of course be helpful, but there will be limits to what the government can do with respect to the overall housing market in Vancouver, Toronto, or any other jurisdiction. But better urban transit – and while we’re at it, subsidized day care – would at least help make that expensive housing bill more manageable for average income workers and families. A quick calculation of the annual cost of running two cars and having two kids in daycare is well worth the exercise.
We may not be able to control the housing market but we can choose to invest in things that help reduce living costs in other areas.