taxation, the public sector and the cfib presentation for cupe western canadian municipal workers’...
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1
Taxation, the Public Sectorand the CFIB
Presentation for CUPE Western Canadian
Municipal Workers’ Conference Regina, Saskatchewan
11 June 2010
Toby Sanger, Senior Economist, CUPE National
2
Stimulus has worked so far: strong recovery 20
05
2006
2007
2008
2009
2010
2011
2012
2013
2014
-4%
-2%
0%
2%
4%
6%
8%
10%
GDP Growth GDP forecastUnemployment rate Unemployment rate forecast
3
Ontario and West hardest hit by job lossC
an
ad
a
NL
PE
I
NS
NB
Qu
e
On
t
Ma
n
Sa
sk
Alb
ert
a
BC
0%
2%
4%
6%
8%
10%
12%
14%
16%
Unemployment Rates in Canada Oct 2008 - May 2010
Oct-08 May-10
4
Canada’s debt situation good, will get better
Source: Federal 2010 Budget, page 154
5
Economic growth being driven by government and households
GD
P gr
owth
Hou
seho
ld S
pend
ing
Gov
't sp
endi
ng
Gov
't in
vest
men
t
Hou
sing
inve
stm
ent
Busi
ness
inve
stm
ent
-10%
-5%
0%
5%
10%
15%
20%
25%
Components of Economic Growth% increase 2009Q1 to 2010Q3 adjusted for inflation
6
Corporate profits up but investment down
Wages and salaries Corporate profits Business investment-15%
-10%
-5%
0%
5%
10%
15%
20%
7
Canada’s corporate tax rates slashed
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
20%
25%
30%
35%
40%
45%
50%
Corporate income tax ratesCanada and US federal and prov/state
Canada
US
8
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
50
100
150
200
250
300
350
400
450
Who benefited from the boom?Economic growth and wages
since 1991=100
GDP per person (2002$) Real average hourly wage
Real Minimum Wage Profits per capita (2002$)
Corporate profits take record share but not investing in economy
9
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008-5%
0%
5%
10%
15%
20%
Rising profit shares, declining productivity
Profit share of Economy
Investment in Machinery and Equipment share of Economy
Productivity growth
10
Record household deficits—and corporate surpluses—developed
-80
-60
-40
-20
0
20
40
60
80
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
Bill
ions
of
dolla
rs
Record Household Deficits--and Corporate Surpluses
Corporations
Persons and unincorporated businesses
Governments
11
Growing inequality, spoils to the richest
19
17
19
21
19
25
19
29
19
33
19
37
19
41
19
45
19
49
19
53
19
57
19
61
19
65
19
69
19
73
19
77
19
81
19
85
19
89
19
93
19
97
20
01
20
05
30%
35%
40%
45%
50%
Top 10% takes half of US incomeS
ha
re o
f to
tal i
nc
om
e t
o t
op
10
%
Economic crisis caused by finance, not workers
12
“I made a mistake…I found a flaw in the model…that defines how the world works.”Alan Greenspan, former head of U.S. Federal Reserve 23 October 2008
“We are facing a systemic failure. This global crisis …was created by a toxic combination of unethical behavior by companies and a faulty regulation and supervision of their activities.” OECD Secretary General Angel Gurría, 22 January 2009
Financial crisis was caused by “people over-leveraging” and ``over- deregulation'' Stephen Harper, Bloomberg News 28 September 2008
Cuts to wages won’t help
13
• “The recipe has to be trickle-up economics…cuts in the corporate tax rate can’t help much...” – Avery Shenfeld, CIBC economist, 23 January 2009
• “Cuts in hourly wages and salaries (and).. salary freezes (can lead to a) wage price deflationary spiral (that) is very difficult to stop…”– Sherry Cooper, BMO chief economist 23 January 2009
14
Federal and provincial budgets With:
• Households spending but at record debt levels…• Corporations with record surpluses, but not
investing…They:
Freeze public sector salaries Increase sales taxes (HST) Cut corporate and business taxes even further No new stimulus Plan to sell off public assets and privatize
15
Wage squeeze for federal and provincial workers across Canada
Federal: Legislated wage increases, freeze departmental spending.
BC: Two year freeze bargaining mandate; net zero increase in overall wages.
Manitoba:Two year wage freeze public employees.Ontario: Two year wage freeze.Quebec: Offering 7% over five-years.NB Policy for two-year wage freeze.
16
Public sector wages only just recovered
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
90%
95%
100%
105%
110%
Public and Private Sector Real WagesMajor Agreements, Adjusted for Inflation 1988 = 100%
Public Sector Private Sector
17
CFIB attacking public sector—again
18
Reality is average wages are comparablewage “advantages” from pay equity, experience
Total - Age Groups
15 to 24 years
25 to 40 years
41 years and over
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
Average Wage and Salary2006 Census Data, all Occupations
Men and Women FT/FY Workers
"Private" Sector "Public" Sector
Total - Age Groups
15 to 24 years
25 to 40 years
41 years and over
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
Average Wage and Salary2006 Census Data, all Occupations
Women FT/FY Workers
"Private" Sector "Public" Sector
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Corporate taxes: further cuts and revenue lossespaid, partly for, by public sector wage freezes
Federal Federal Ontario OntarioRate Loss
(billions)Rate Loss
(billions)2009 19% 14%2010 18% -$0.6 b 12% -$1 b2011 16.5% -$2.8 b 11.5% $-1.5 b2012 15% -$5.2 b 11% -$1.9 b2013 15% -$5.8 b 10% -$2.6 b
Meanwhile….• Department spending freeze to save Ottawa $1.8 billion a year
20
Public spending strongest economic impact?
Source: Center for Spatial Economics, Informetrica, Federal 2010 Budget (p. 281)
Child
car
e
Hea
lth c
are
and
...
Publ
ic In
fras
truc
...
Educ
ation
Inco
me
tax
cut
Corp
orat
e ta
x cu
t
-
5
10
15
20
25
30
35
40
45
$-
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
$4.5
Public Investment Yields Strongest Economic Impact(per $1 Million invested or spent)
Jobs GDP
Jobs
Gen
erat
ed
$mill
ion
GD
P im
pact
21
All Canadians, especially lower income, lose out from cuts to public spending
Canada’s Quiet Bargain, Canadian Centre for Policy Alternatives, 2009
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Thank you!
For more information:
CUPE Economic Climate for Bargaining, TableTalkhttp://cupe.ca/economics
Progressive Economics Forum blog:http://www.progressive-economics.ca/relentless/
mf/cope491