PC leader Tim Hudak has wrapped himself in the persona of being the jobs candidate. He claims that his government would create a million jobs in Ontario – a 15 per cent increase to the existing 6.9 million jobs (full-time, part-time, casual) that existed in 2013. Jobs are important, especially in the context of the social determinants of health, but the PC party platform would need to create closer to 1.2 million jobs to offset those it would first kill through cuts to the public sector and its subsequent spin-off impact on the private sector.
There have been many economists who have found the million jobs promise more than just a stretch. Just because you say something doesn’t make it true. The PCs believe if you say it a lot, it will make it so. Unifor economist Jim Stanford, writing this week in the Progressive Economics Forum, says to meet that challenge the economy would have to “significantly accelerate” real growth in excess of 3 per cent annually. There are times when we have done that – most recently in 2003, 2007 and 2011, but that isn’t sustained and consecutive growth.
Stanford notes eliminating the provincial deficit would negatively impact the economy by 2.4 per cent, which is a big hole to dig out of, especially if you plan on rushing that objective. What would a 2.4 per cent reduction in GDP mean for jobs? According to Stanford, en route to his million jobs promise Hudak would start by eliminating about 165,000 jobs in the province.
Stanford doesn’t see much in the PC platform that would replace those jobs. Reducing taxes, he says, can create new demand, but not very efficiently or fairly. He also points out that it also makes it more difficult to balance the budget, which is Hudak’s overriding obsession. Reducing energy prices for business may save corporations money, but there is no guarantee they would re-spend it. Training skilled workers would create a few education jobs, but Stanford points out that the idea of a skills mismatch has been largely discredited. The only jobs effect of reducing bureaucracy would be to cut more public sector jobs. Lastly the PCs say they will expand trade – which is much easier said than done. Stanford points out that free trade agreements are not working, and balancing exports versus imports is always difficult.
Stanford paraphrases John Maynard Keynes when he says Hudak has got it backwards – you don’t balance the budget to create jobs, you create jobs to balance the budget.
Nor is deficit elimination anywhere near the international consensus on what must be presently done. As far as deficits go, 1.6 per cent of GDP is not high relative to what Stanford calls international or historical experience.
The economist notes both the International Monetary Fund and the G20 have argued for “caution and balance” in current deficit reduction efforts, noting international agencies do not even identify balancing the budget as a priority. Instead they are seeking “sustainable fiscal balance,” or what Stanford describes as a stable or declining debt-to-GDP ratio. That doesn’t necessarily require a balanced budget tomorrow or by 2018.
To read Jim’s full comment on the Progressive Economics Forum, click here.