Category Archives: Saskatchewan

Examination of public sector in Western Canada remains necessary

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By Marco Navarro-Génie, President and CEO

The paper AIMS published last week with the Frontier Centre for Public Policy looked again at public sector workers in Canadian provinces, excluding the federal public service.  The new work placed an emphasis on Western Provinces;  the first one focused on the Atlantic region.

The type of reaction to the “Western” data paper in the Winnipeg Free Press caught my attention.  David Camfield, an associate professor of labour studies and sociology at the University of Manitoba was quick to dismiss the paper as a kind of fake news.  He charged that the paper was looking for troubles where there are none, and suggested the authors of the study thought the public sector workers are unimportant.  None of those comments had evidentiary bases in the paper.

Camfield did introduce substance to his criticism by addressing the issue of scales, which dictates that smaller provinces (in population) tend to be at a disadvantage.  This is true to some extent, and the observation is valid. But the critique is less effective because the measure we use (number of public servants per one thousand people) goes some distance to account for scale.

The data, in addition, show that other smaller provinces with similar profiles have fewer public sector workers per thousand residents than Manitoba.  The worst case in Atlantic Canada, Newfoundland and Labrador, has half the population of Manitoba. Newfoundland’s population is extended over a very large territory, yet Newfoundland has 101 public sector workers per thousand versus the 111 in Manitoba.

Manitoba is more densely populated (Newfoundland and Labrador has 1.31 inhabitants per square kilometer; Manitoba has 2.03).  Should it take 10 more public servants per thousand paid by provincial residents to deliver services in Manitoba than it does in Newfoundland and Labrador?

Manitobans ought to ask why it is that their provincial and municipal governments need so many public servants. 111 public servants per thousand drawing pay from the provincial taxpayer in Manitoba represent 28 more per thousand than the national average, or 34 per cent more over all.  Manitobans need to ask if the services they receive are 34 per cent better than those of the average Canadian. Are they 34 per cent better than in New Brunswick?

New Brunswick offers an instructive comparison with Manitoba.  While Manitoba has a notable French-speaking population (4 per cent), New Brunswick (and its relatively-high rural population) is officially bilingual (and 32 per cent francophone). It offers many public services in French, significantly increasing their delivery costs and often duplicating them.  Yet, New Brunswick is below the national average with 81 civil servants per thousand.

Our call for a thorough examination of the public sector’s size in Manitoba and Saskatchewan remains necessary.

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Interest-Free Nova Scotia

Nova Scotia’s Finance Minister Diana Whalen announced last week the Liberal government is eliminating the Graduate Retention Rebate, remarking that the program failed to attract, much less retain, newcomers to the province during its five-year tenure. The government intended for it to attract new graduates by offering college- and university-educated individuals $1,250 and $2,500 in tax refundable tax credits, respectively, over five years.

The rationale for elimination, however, reveals why implementing it in the first place was unlikely to succeed: employment prospects are the most powerful incentive to relocate. The reason graduates, skilled labourers, entrepreneurs, and several others flocked, and continue to flock, toward Western Canada is because those provinces are rich in job opportunities. Indeed, the Nova Scotia Finance and Treasury Board states, “Studies on Canadian migration patterns show tax credits like the Graduate Retention Rebate do not play a role in decisions about where to live. Wages and the availability of jobs are the most important factors for young graduates deciding where to live.”

Statistics available on the Finance and Treasury Board website show that 1-, 2-, and 3-year retention rates declined steadily from 2003 and 2011. There was initially no retention rebate from 2003-2005, after which the government introduced the Graduate Tax Credit until 2008, ending with the Graduate Retention Rebate from 2009-2011. These numbers are certainly discouraging, yet, they do not necessarily imply the Graduate Retention Rebate failed, insomuch as lackluster economic performance suppressed its effect. In other words, would outpour of Nova Scotians have steepened in the programs absence? It is conceivable that Nova Scotia’s experiment with the rebate could have been more positive given better economic conditions.

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In Saskatchewan, graduates are eligible to receive up to $20,000 in refunds based on tuition-paid and the government considers the program successful. For instance, net interprovincial migration in Saskatchewan was negative from 2000-2006, after which the province’s population grew from 992,302 to 1,108,303. Importantly, though, Saskatchewan is more tax competitive than Nova Scotia, has the lowest unemployment rate in the country, and, in the 1990s, the government passed balanced budget legislation that prevents deficit spending and ensures fiscal prudence. These qualities are likely driving the success of Saskatchewan’s retention initiative. In other words, would the influx of newcomers to Saskatchewan have dampened in the programs absence?

Nevertheless, Minister Whalen unveiled $625 million in financial support for postsecondary students, graduates, and the businesses that employ them. In addition, the government will remove interest on the provincial portion of student loans, which saves it roughly $40 million. Yet, if providing direct financial support failed to attract and retain new talent, why would eliminating interest on student loans be any different?

Removing interest on loans to help students with debt repayment is a stopgap measure and is not good public policy. It may help them service their debt quicker, yet, so too would employment. If anything, it provides an incentive for individuals to obtain an interest-free loan from the Nova Scotia government and attend college or university in the province, but does little to retain them after graduation. They are still likely to migrate west, find employment, earn more than they would in Atlantic Canada, and pay less in taxes. Meanwhile, the Province of Nova Scotia will lose them and the interest they would have owed.

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Economics in One Lesson: An Introduction

In 1945, Henry Hazlitt authored Economics in One Lesson, wherein he offers market-oriented insight into a number of post-war developments in the United States and dispels several myths associated with economic theory that continue to dominate public policy discourse over sixty years later.

The first chapter, titled, “The Lesson,” discusses how many economic theories rely on fallacious assumptions and fail to anticipate the long-run consequences of public policy: “The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.”

In other words, Hazlitt is reviving Bastiat’s concept of opportunity costs and law of unintended consequences, introduced nearly a century earlier in his essay, “What is Seen, What is Not Seen.” Bastiat presents a scenario in which a shopkeeper’s son breaks a window and spectators console the man that,

“It is an ill wind that blows nobody good. Everybody must live, and what would become of the glaziers if panes of glass were never broken?” In response to this hypothetical situation, Bastiat posits to the reader “what is not seen”:

“But if, on the other hand, you come to the conclusion, as is too often the case, that it is a good thing to break windows, that it causes money to circulate, and that the encouragement of industry in general will be the result of it, you will oblige me to call out, “Stop there! Your theory is confined to that which is seen; it takes no account of that which is not seen. It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way, which this accident has prevented.”

The ideas of opportunity cost and unintended consequences profoundly affected public policy, challenging economists and politicians to scrutinize more heavily initiatives to intervene in the economic or manipulate economic outcomes. Hazlitt’s lessons, of which there are two dozen, apply to the 21st century economy, as well. He discusses how taxes discourage production, what effect minimum wage laws have on employers, where “Saving the X Industry” fails, and whom tariffs protect. I plan to enumerate these lessons in the coming weeks, applying them to various municipal, provincial, and federal policy initiatives and offering market-oriented solutions to each. This will familiarize the reader with Canadian politics and introduce ideas from some of history’s greatest thinkers.

Hazlitt’s book is available for download at Mises.org!

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