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doug peters and arthur donner


The Great Recession is over - or it seems that almost everyone is saying so. But is it? For 11/2 million or more Canadians, this recession will not be over until they find worthwhile jobs. Thus the economic, social and political problem for 2010 and beyond is jobs.

In the United States, the unemployment rate has been about 10 per cent over the past couple months, while Canada's official rate is 8.5 per cent. In the U.S., if one counts the discouraged workers (those who have given up looking for work) as well as those in temporary jobs but looking for full-time work, then the actual rate of unemployment is over 17 per cent. In Canada, where no comparable statistics on discouraged workers exist, the rate of unemployment would also likely rise to 12 to 14 per cent if they were properly included.

For example, over the past 12 months, the number of unemployed Canadians rose by 358,000, and reached 1.6 million as of December. While Canada's labour force grew by 118,000 last year, there was a massive purge of 259,000 full-time jobs, although 20,000 part-time and 80,000 self-employed jobs were created. The shrinking job market with the tilt to part-time and self-employment also suggests major underemployment in Canada.

Thus, one in six workers is really unemployed in the U.S., and one in seven in Canada. There can be no genuine economic recovery until there is a substantial decline in the number of unemployed.

In Canada, the jobs crisis rather than the high budget deficit should be the federal government's top economic priority. The government's infrastructure investments, which were part of the stimulus program, were a positive move since they held the greatest potential for job creation.

But, with a federal budget coming up soon and the stimulus program winding down, one should ask: What more can be done to promote increased employment? Certainly the existing programs relating to education and training for the future are important. So too are programs that increase the ability of workers to move to areas where jobs are available. These are programs that prepare workers for better jobs when they might come available. But what about business?

Unquestionably stronger economic growth would help, but that may only come later this year and in 2011. And in such a period of uncertainty business may delay hiring to the last minute or later. Are there better ways to encourage business to look ahead to times of strong economic growth and the likely need for more employees?

South of our border, where the jobs problem is even worse than Canada's, the Obama administration has been considering proposals to encourage businesses to hire new workers by easing the flow of credit and implementing a series of tax cuts for small business.

In a similar way, we suggest Canada's next budget should stress the creation of employment - not just jobs but rather useful, productive and interesting work for all those who want to work. In other words, this means adding to the existing programs to help the unemployed.

We recommend introducing a set of programs that could apply to medium-sized and small businesses or to all employers. First would be the elimination of both employer and employee payments for employment insurance for new and additional employees. At the same time, they would remain covered by EI.

The second program would apply to these same employees. The federal government would pay the employer and employee contributions to the Canada Pension Plan.

We suggest these programs would last for one year only.

There would be a cost to the federal government - but that would be offset, at least in part, by the new taxes these new employees would be paying.

One must remember that increasing employment has a twofold effect. First, it reduces government expenditures by taking people off EI and welfare. And, it raises tax revenues as the new employees pay their income and other taxes.

The intention of our programs is to encourage the private sector, particularly the small and medium-sized businesses, to hire new and additional employees without the firms initially absorbing the costs inherent in these two government programs.

We know these temporary new programs would, at the margin, increase Canada's budget deficit. But we do not see any value in scarring a whole generation of Canadians with unnecessarily high unemployment, when something positive could have been done about it. The right kind of public spending today will benefit future generations.

Doug Peters is a former chief economist of the Toronto-Dominion Bank. Arthur Donner is a Toronto economic consultant.

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