Liberal Party leadership candidate Justin Trudeau has been largely silent on where he stands on major policy issues. Economy Lab's Mike Moffatt parses a recent article written by Mr. Trudeau for clues.
In a Toronto Star opinion piece, Liberal leadership candidate Justin Trudeau identified stagnant middle class incomes as a significant problem that needs to be addressed by the federal government. I would quibble with Mr. Trudeau’s characterization of this an escalating situation, as there was a massive jump in inequality during the 1990s with a levelling off in the last 10 years. However, there is a great deal of data showing falling or stagnant wage income for the lowest three income quintiles since 1976, so it is not an unreasonable focus for public policy.
True to Mr. Trudeau’s current style, the piece was maddeningly light on specifics on how he would address the situation. Along with identifying the “continued need for a stable social safety net”, Mr. Trudeau indicated three struggles of the middle-class: mortgage debt from rising housing prices, access to post-secondary education and lack of access to foreign capital. While Mr. Trudeau has given us little to work with, it is possible to analyze his proposals in general.
Foreign investment in Canada
Trudeau on foreign direct investment: "Because capital is mobile and our domestic market is small, we need foreign direct investment and export growth to support job creation here in Canada. So Canadians need a more coherent and strategic position on trade and foreign investment than the 'Keystone Kops' approach currently on display in Ottawa."
Analysis: A well-constructed and coherent FDI policy would increase inflows of capital into the country. This would both increase economic activity and increase middle class wages, through higher demand for labour. Our current policies are costing Canadians billions and need to be reformed.
Grade: A-. Specifics are needed, as there is the potential for a replacement to the “net benefit test” to be poorly designed and counterproductive. This idea, however, has A+ potential.
Trudeau on House Prices: "At the same time, the middle class is carrying unprecedented debt levels and facing an increasingly inaccessible housing market, especially in cities like Toronto, Calgary and Vancouver."
Analysis: There is arguably a generational inequality issue here, as first time house buyers struggle to afford houses while families who bought houses 30 years ago receive windfall profits. Apart from changing the tax code to apply capital gains taxes on home sales (which is almost certainly a non-starter politically) I do not see how the federal government can “fix” this problem.
Grade: Incomplete. I am unsure how Trudeau will turn this problem into actionable policy.
Trudeau on Post-Secondary Education: "The solutions we propose will have to be affordable. We need a more inclusive approach to post-secondary education — universities, technical schools, colleges, trades, apprenticeships."
Analysis: A better educated work force is likely to be a more productive one, raising the overall standard of living. But does this help the middle class? By increasing the skilled labour pool, in the short run this will lower wages as firms have a larger pool of workers to select from. Lowering overall tuition (and it is unclear Mr. Trudeau is proposing this) would lower costs for many young members of the middle class, along with lowering costs for students from higher income families as well.
Grade: C. I am tempted to give this a D or even an F, but there may be some way to salvage this and create useful policy. As it stands now, it appears to be counterproductive.