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Trudeau entertaining, but light on economic policy

Supporters hold up banners prior to Liberal MP Justin Trudeau announcing his run for the leadership of the Liberal party in Montreal on Oct. 2, 2012.

CHRISTINNE MUSCHI/REUTERS

The general consensus among the Twitterati was that Justin Trudeau's speech, while entertaining, was (expectedly) light on economic policy. His repeated appeals to the middle class, however, do give some indications of where he wants to go -- he just hasn't indicated how he'll get there.

Mr. Trudeau has identified three difficulties facing the middle class: Stagnant middle-class incomes; rising cost of living; and rising household debt.

There are a number of possible policies that could deal with household debt, but Mr. Trudeau has not identified any. He will need to outline his solutions in future speeches.

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Tackling the rising cost of living is more problematic for Mr. Trudeau. While the rate of inflation is ultimately set by the Bank of Canada, the concept of "inflation" involves a representative consumer purchasing a representative basket of goods. Different demographic groups experience different levels of inflation due to the differences in the types of goods they purchase. The rate of inflation experienced by lower income households in Canada is almost certainly higher than that of the general population, as it is in the United States. Mr. Trudeau is correct in identifying this as a problem.

But what policies would Mr. Trudeau implement to combat the rising prices of goods such as food and gasoline? Ending supply management of dairy products is an obvious solution, but unlike Martha Hall Findlay, Mr. Trudeau is aligned with the current Liberal position that supports the program. Furthermore, how will Mr. Trudeau deal with the rise in gasoline prices that will be caused by any policy to curb greenhouse gas emissions? The policy positions taken so far by Mr. Trudeau would seem to raise, not lower, the cost of living for middle-income households.

The problem of stagnant middle-class incomes is the thorniest of all. Fortin et. al. show that median family incomes have risen in Canada, thanks to rising wages for female workers and more women entering the work force. But low-to-medium male wages have declined substantially over the last 30 years, mostly due to pay in male-dominant sectors such as manufacturing not keeping up with inflation. This phenomenon is not unique to Canada: Declining real manufacturing wages are a reality across the developed world. There are no obvious solutions to reversing a secular decline in blue collar male wages and I have not seen any evidence that Mr. Trudeau has a plan to combat this slump.

I was delighted to see Mr. Trudeau identify the need for "scientific facts and data" in policy making; I could not have agreed more. I hope to see some policies based on facts and data that will take on the very real economic problems he outlined in Tuesday's speech.

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About the Author

Mike Moffatt is an Assistant Professor in the Business, Economics and Public Policy (BEPP) group at the Richard Ivey School of Business – Western University. Mike also does private sector consulting for the chemical industry. More

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