This report was prepared for and published by The Pearson Centre for Progressive Policy. Terrance Hunsley is a Senior Fellow of the Centre.
Table of Contents
Executive Summary 3
Part One – Introduction 6
Part Two – Waves of Change 7
Scenarios of tech effect 7
Other waves of change 8
Part Three – Where to start. Aim High! National policy goals 12
Part Four: Adapting the Policy Infrastructure 14
A – Empowering Workers with Human Capital 14
Performance of the education system 14
Student financing 15
Skills Training and Employment Support Services 16
Returns on Investment (ROI) in Education 16
Competencies in demand 17
New opportunities for marginalized and disadvantaged workers 17
Teachers and trainers 18
Recent government consultations on training/education 18
Recommendations for education and training policies: 18
B – Empowering Workers with Social Capital 21
Recommendations to increase the power of workers 22
C – Ensuring Adequate Incomes 24
Recommendations for ensuring adequate incomes 24
D – Climate change… 27
Recommendations for workers and climate change 28
E – Workers and Democracy 29
Recommendations for strengthening Canadian democracy 30
In Summary 32
Researchers and business leaders and other leaders agree that technology will have a major impact on work and workers. Change is accelerating. The policy architecture needs to be adjusted.
And there are other forces external to technology. Workers and families are adapting to effects of past and present changes; the baby boom, the explosion of female labour force participation, social and cultural diversification, globalization of business and finance, and more recently, “social globalization”.
Assertive national action is required in an era when consensual democratic action is difficult. The concentration of wealth, a changing power balance between governments and global business, global tax avoidance, and the power of nondemocratic economies are all challenging the policy and power scope of the democratic nation state.
This report focuses on workers and society, and recommends policy adaptations to prepare and protect workers, compensate for inadequate adaptive policies in the past and improve living standards.
A unique proposal is that national policy goals be articulated with the intent of having them remain in place as governments change. For that reason, the goals need to be fundamental to the fabric of Canadian society. The articulation of national policy goals is suggested to strengthen social consensus and the bonds of citizen and country and guide policy. Flowing out of these goals are policy recommendations which need to be put in place proactively.
• All Canadian workers will be educated, trained and accredited to the best of their ability and personal goals. Fundamental to this is expanding digital literacy and cross-functional competencies including continuous adaptation and entrepreneurism.
• Canadian workers will have a voice to advance their interests. Fundamental to that is empowering workers by building their social capital.
• Canadian workers will have wages that will allow for a decent living standard. Fundamental to that is offsetting earnings inequality through the gradual elimination of low wage employment, while not impinging on the capacity of businesses to define their work needs, or on workers’ flexibility.
• Canada will be investing in environmental adaptation and coordinating worker policies with these goals.
• Canada will strive to have working conditions in other countries comparable to Canadian standards.
• Canadian tax revenues will be made available to implement national goals.
1. Implementation of the recommendations of the Economic Strategy Tables and Growth Council for a $15B/year increase in spending on adult training, to be a minimum, given Canada’s low current investment.
2. Eliminate the lifetime limits on loan and grant support for personal investment in education and training. We should retain the requirement to repay student and training loans, but with partial forgiveness with ongoing tax contributions.
3. Establish Work-Business Sector Councils to monitor working conditions as well as business conditions and recommend improvements in both.
4. Establish a Workers’ Retirement Savings Option to invest RRSP’s in the CPP Investment Fund.
5. Adjust the combination of minimum wages and the Canada Workers’ Benefit to bring low wage income above the OECD-defined threshold of 2/3 of median income in the economic region.
6. Convene a Commission to consider empowering cities in areas of environmental regulation, quality of life, and working condition.
7. Utilize Basic Income to rebalance and stabilize the bottom half of the income ladder at 30% of national income (currently 27%) based on equivalized disposable income.
8. Expand the CRA personal taxpayer account to provide a comprehensive real time report on the financial relationship of the individual and the government, including contributions, credits, benefits received, debt to government, and prorated value of major public services.
9. Increase taxation of capital, beginning with a progressive tax on estates.
Part One – Introduction
No other country is in a better position than Canada to go ahead with the evolution of a national purpose devoted to all that is good and noble and excellent in the human spirit – Lester Pearson, on the occasion of Canada’s Centennial
This is a time of disruption, and as Lester Pearson pointed out, Canada can benefit. While leader of two minority governments in the 1960’s, he introduced universal health care, student loans, and the Canada Pension Plan. He also supported the development of community colleges which, combined with universities, have put Canada at the front of the line in postsecondary educational attainment. With another minority government in place, his work might once again inspire cooperative federalism.
Several studies on the future of work were reviewed in an earlier Pearson Centre paper , and more are cited herein. Building on their analysis, this report focuses on adapting the policy infrastructure to help workers and society thrive in the emerging economy.
Part Two briefly summarizes waves of change. Part Three touches on broad goals and aspirations. Part Four presents proposals to support and empower workers.
Part Two – Waves of Change
Those who study economic disruption say that the process will create more efficiency and produce more wealth; that demand will increase and new work will be created. But occupations, work arrangements, and business processes are experiencing disruptive changes:
• Digital technology, robots, artificial intelligence (AI), 3d printing, biotechnology, nanotechnology, and other advances in the pipeline, are changing the way we live and work. Big data, algorithms and AI are combining to enhance or replace human judgement. Businesses can now be managed by an app.
• International commerce is concentrated in the supply chains of a few dozen corporations, and work can be easily moved to anyplace in the world, or be reconfigured.
• Jobs and occupations can be fragmented into tasks and assigned, coordinated and supervised by computers.
• New forms of work are being created.
Scenarios of tech effect
There is a cascade of smart products (like Alexa), services (like the Cloud), and remote service coordination (like Uber). There is a world of information (Google), effortless communication and shopping. (Amazon)
Successful companies generate massive revenues from worldwide sales. Many have accumulated enormous financial resources. Older companies use digital services, cloud computing and AI to transform their supply, distribution and marketing functions, and to reduce costs. Online shopping, for example, is transforming the retail industry. The automobile industry is reinventing itself with new energy and autonomous vehicles.
The impacts flow through to jobs. Speculative studies suggest that 12% to 50% could be eliminated, with various underlying assumptions and time frames. Programmable tasks will be automated or robotized when the cost of the technology is lower than wages, and the satisfaction of consumers is maintained.
• Retail marketing, logistical management, supply management, and customer service management are all subject to automation.
• New occupations are being spawned in areas like medical diagnostics and procedures.
• Remote functional specialization services are cutting across organizations in security, human resource functions, accounting, tech support, etc.
• Work in the underworld is being transformed. Cybercrime is taking on new forms and mechanisms, and finding new applications. So too are security, policing, and the underground economy.
• The reorganization of work is effacing long term employment and the security that was associated with it. Jobs are fragmented into small contracts. The work sponsor is often separated from the worker by layers of supply contractors. Work contracting itself is being automated through platforms that recruit, assign, control and remunerate.
Other waves of change
Technology is not the only driver of change. We are awash in overlapping currents from the past and present. Some older changes still affect workers’ opportunities and choices and need to be considered:
• In the 1970’s, women’s labour force participation exploded. In a ten year period, Canada went from two thirds of families having one earner, to two thirds having two earners. A massive and rapid transformation of work and family life. Governments saw the change coming, but did not prepare for it. We needed a system of universally accessible child care and early childhood education. It would have made adjustment much easier But federal and provincial governments bickered over cost and jurisdiction, and it didn’t happen. Canadian workers and families are still paying a high price in family stress and breakdown, work-life imbalance, lone parent poverty, gender earnings inequities, and foregone economic growth.
• The influx of baby boom job seekers contributed to high unemployment in the 1980s. To encourage job creation, governments permitted minimum wages to decline with inflation, and employers to fragment jobs into part-time and contract work to avoid paying social security contributions and benefits. Wage growth was depressed. Productivity growth stagnated. Canada developed one of the largest low-paid precarious workforces of the OECD countries and still has it.
• In the 1980’s, Canada welcomed free movement of capital, removal of trade barriers, and globalization of business. The economy is said to have benefitted, although that did not show up in productivity figures. Many employers abandoned their role of providing security and collective benefits, and moved jobs offshore. New jobs were created, many in service industry. But only band aid assistance was provided to production workers who lost their occupations.
• The benefits of global enterprise accrued to the upper third of the wage scale, which expanded with new occupations. But the wage of the median worker stagnated for three decades . In parallel, there was a drop in public trust and confidence in government. The trust barometer reached its nadir in the late 1990’s and has recovered only minimally since .
• Globalization, aided by technology, created massively rich corporations which now rival the power of national governments. Recent declarations from The Business Roundtable and the World Economic Forum are proposing a transformation in the role of corporations. They suggest that corporations should expand their purview from serving their shareholders through short term profits; to serving their stakeholders – including shareholders, customers, communities, employees, and society in general, through long term value creation. These are noble words, but they could imply that corporate executives envisage themselves in increasingly powerful roles, potentially supplanting the role of governments.
• We are floating along on the population ageing wave, with baby boomers flooding into retirement. A consequence is a rapid expansion of health care and its related service industry. Health and social care are likely to continue growing for the next two decades. On the other end of the working age scale, we have a shortage of young workers, which we are supplementing through immigration and temporary foreign workers.
• The population is becoming more socially and culturally diverse, which is enriching to our economy and society, but makes it more difficult to reach social consensus. It also brings out resentment and “identity politics”. In major cities, the workforce is now a majority of minorities, and these cities will be central to the evolution of democracy.
• Following upon economic globalization and geopolitical disruption, we are experiencing a form of social globalization. It is common for families to have members spread around the world, making us infinitely more mobile. The education system has become a growth industry by serving foreign students. Housing markets are shaken by buyers from other countries – sometimes as a ticket to residency status, a kind of foreign investment, or for criminal purposes. Citizenship shopping now feeds a substantial consulting industry.
• Adding crisis proportions to waves of change, we are rapidly approaching tipping points of environmental disruption. If we are to be responsible stewards of the planet, the creation of CO2 emissions, as well as the profligate use of plastics and other harmful materials, has to change. That is a big challenge to the Canadian economy which relies heavily on oil sales.
• International cooperation to protect workers and living standards will have to be implemented in the midst of growing economic power of nondemocratic countries. China is the poster child here, along with Russia and several of the oil-rich countries in the middle east. Even among democracies, we can witness power shifts toward authoritarian government.
• There is a slowing of economic growth globally. It began in the more developed economies about the time that globalization started picking up speed. And although some emerging economies enjoyed faster growth, those economies now appear also to be slowing down. In the past, governments have found it easier to implement social policy improvements when the economy was growing.
Democratic governments face real challenges. Policies that support workers require money and political support. But political discourse is polarizing. Social consensus is elusive. Government revenues are harder to collect because of tax avoidance, primarily by large corporations and the wealthy, but also by the underground economy.
There is a danger that we will try to respond to issues individually, as if they are stand-alone. They are not. They are intertwined. Our future work and life is intertwined with them.
There is also some risk that Canada could provide human capital to the global economy, yet lose the benefits of the talent, the community participation, not to mention the tax contributions, in our own country. Highly skilled workers will have much more opportunity to market their human capital in the digital economy; to work or pay taxes in other jurisdictions.
Part Three – Where to start. Aim High! National policy goals
Business leaders and politicians express strikingly similar goals and aspirations for society. So perhaps that is a good starting point for consensus on national goals.
At the heart of the global business empire, the American Business Roundtable professes that:
Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity.
In Canada, business leaders express similar goals:
Every Canadian, regardless of geography or demographics, needs to participate in the digital economy.…We also need to include everyone in the workforce: we can’t afford not to have women and men, people with disabilities, Indigenous people and new Canadians in our pool of talent .
The Conference Board of Canada states that social objectives of the country must be achieved, not after the economy grows, but integrated into that growth.
Organizations are starting to realize that building a diverse and inclusive workplace is no longer a nice to have – it’s a critical business imperative .
Jack Layton in his parting words:
Canada is a great country, one of the hopes of the world. We can be a better one – a country of greater equality, justice, and opportunity. We can build a prosperous economy and a society that shares its benefits more fairly .
Prime Minister Trudeau, on goals of public policy:
One of my favourite prime ministers, Wilfrid Laurier, often talked about patriotism and the unifying power of common goals and aspirations and I’ve thought about that a lot since getting into politics. In my conversations with Canadians right across the country, I’ve seen firsthand that there is so much more that unites us than divides us. Canadians expect us all to focus on our shared vision of a stronger Canada, and I intend to work hard to make that a reality. We all want safer communities, a cleaner planet, and a good quality of life. We want this for ourselves, for our neighbours and for our kids and grandkids. We seek hardship for none and prosperity for all. That is the world we’re working toward — and if we unite around these common goals, I know we can achieve them .
These aspirations can guide the development of national goals.
Part Four: Adapting the Policy Infrastructure
A – Empowering Workers with Human Capital
… the intrinsic value of human productivity and creativity and a human-centric vision of the future of work … recognizes people’s knowledge, talents and skills as key drivers of a prosperous and inclusive economy. World Economic Forum
Canadian education and training systems have the noble task of preparing youth and adult workers with the knowledge and competencies required for success in the labour market. They are also expected to cultivate life skills and socialization for success in, and contribution to, Canadian society.
Performance of the education system
Provincial and territorial governments are responsible for the public education system. The federal government has an important role in postsecondary education and adult training. Nonprofit and commercial services of guidance, mentoring, job placement and training are proliferating to serve a growing market.
Provincial governments have established good standards and have maintained them across differing regions and populations. We invest about 1.5% of GDP annually, compared to about 1.1% OECD average. There are gaps, particularly in the systems serving indigenous peoples. But progress is being made here as well.
High school students do well on international comparative testing (PISA). They score consistently above the OECD average in reading as well as science and math. They also show less of a gap between the performance of advantaged and disadvantaged students than is seen in some other countries, especially the USA. But despite remaining well-positioned in 2018 tests, average scores have been gradually declining, and we are falling behind several Asian countries and jurisdictions .
Girls perform as well as or better than boys in the education system and lead in enrolment and graduation in many professional and post-graduate streams. Men do better in the STEM (science, technology engineering and math) occupations. Men still earn more than women, mainly because of their dominance in higher paid occupations like construction and manufacturing, whereas women more frequently work in retail, health and social services sectors.
In Canada, 62% of 25-34 year-olds held a tertiary qualification in 2018 compared to 44% on average across OECD countries. The big difference is the college system, counting for about a third of graduates, compared to about half that in OECD countries. Still, less than half of full-time students finish their bachelor’s degree within the theoretical duration of the programme . About 25% don’t complete their program, for a wide range of reasons.
Colleges and universities are in high demand from a lucrative market of foreign students. This is a win-win situation for the country when some of those students apply to live here. About 13% of postsecondary students are foreign, and they pay as much as three times in fees as Canadians.
For students and workers and government to co-invest in their human capital makes sense. All will benefit. Student loan and grant programs are intended to provide adequate financial assistance . Through provincial, federal, and institutional aid programs, most of costs can be covered. Student loan debt is not considered onerous for those who successfully complete their learning programs within the optimal time frame. Those who drop out or take several extra years to complete will have interest accumulate. Some loan provisions permit interest holidays until the person attains a reasonable work income.
Some adult workers are eligible for student loans and grants. There is help for part-time study in an approved postsecondary institution, or for certain certificate or other non-degree programs. All financial assistance is subject to a lifetime limit. The assistance available does not make up for income lost from time off, although people in receipt of EI can pursue limited study and retain their benefits. This part of the system is underdeveloped and underfunded.
Skills Training and Employment Support Services
In past decades, governments implemented what they called “active labour market policy” (ALMP). With high levels of unemployment and therefore, economic dependency, they wanted to make it easy for employers to hire and fire, and for workers to be quicker to take advantage of any opportunity. They tended to create small work incentives, provide a minimum of training, and encourage unemployed people to accept whatever work was available. “LMDAs (Labour Market Development Agreements) are designed to help unemployed Canadians quickly find and return to work .”
That policy helped businesses to create many low paying jobs. It also helped to create a precarious work force.
Canada’s investment in supporting workers is small. At 0.22% of GDP (in 2014 numbers), Canada ranks 27th out of 31 OECD member states for which data is available.The relative investment in unemployed worker support has declined by half in recent decades. .
A paper on ALMP policies in OECD countries points out that countries like Canada, the USA and UK tend to spend less than half, per unemployed person in the labour force, as European countries.
Returns on Investment (ROI) in Education
The ROI in education is substantial, both for the individual through earnings, and for the government through tax revenues and reduced financial expenditure in other areas. The Conference Board suggests that each $1 invested in education generates $1.30 in benefits to the economy and society. A person with a bachelor’s degree will earn on average about $750k more than a high school graduate over the life course.
Competencies in demand
Between 2009-10 and 2016-17, enrolment in Humanities was down by 17%, while Business increased by 20%, Health by 25%, Science by 28%, and Engineering by 38% . So market signals are being heeded.
The OECD estimates that half of the labour force will require retraining for digital competencies .
Workers will also need cross-functional skills.
Canadian Education ministers have endorsed the following six global competencies to be included in all training:
• critical thinking and problem solving
• innovation, creativity, and entrepreneurship
• learning to learn/self-awareness and self-direction
• global citizenship and sustainability
New opportunities for marginalized and disadvantaged workers
New technology is offering devises that help to overcome disabilities. New work arrangements can offer flexible opportunities. Work can be done from home. Or for that matter, from group homes, or prisons . Training and work placements can be more easily integrated with assistive technology.
Again, the ROI for skills upgrading and related social support is higher than in the past. The likelihood of finding work in the (current) tight labour market is higher, and people will live longer than past generations, so will either pay back into or draw from public revenues, for more years.
Teachers and trainers
Canada has a relatively young teaching cadre, with 74% of teachers in the school system under the age of 50. This is influenced by a young age of retirement. Unfortunately, we have a relatively small supply of new teachers in the pipeline, as recent cohorts have found it difficult to establish themselves in the system. Provincial governments tried to save money by keeping new educators on a string of sequential contracts, which dissuaded new recruits.
Several teaching institutions are now offering either certificate or degree programs in adult learning and various training models. Adult learning is considered to be within the jurisdiction of provincial governments, although there is limited oversight, and the situation is rather a mishmash of provincial, federal and private sector funding, There is no composite national accounting for expenditures and program results. The provincial and federal governments have been collaborating with UNESCO in a first (2011 and second (2021) survey of adult competencies. In total, it remains an expanding but relatively unguided field.
Recent government consultations on training/education
Two high-level business/government/education system consultations have resulted in recommendations which are been variously implemented:
• Coop or work-integrated placements for every school student,
• School curricula should evolve with active involvement of business,
• STEM-related learning should be expanded
• Entrepreneurism should be part of all curricula
• Accessible, portable re-skilling with competency-based accreditation
• A digital education platform to support access and learning, including online availability
• Expansion of skilled trades
Recommendations for education and training policies:
A-1 The education system needs to expand and diversify while being better integrated as a total system, including private training and in-work training. Funding needs to be increased, accompanied by a social accounting system which identifies returns to government in higher tax revenues, as well as reduced liabilities in other public spending which will result from better education and training. For example, better health, reduced unemployment, reduced disability costs, longer work lives, reduced delinquent and criminal behaviour. The Economic Strategy Tables and the Growth Council suggest that spending on adult retraining should increase by $15Billion per year. This figure is still well under 1% of GDP so should be looked upon as a minimum.
A-2 Canada needs high quality, continuously-adapting teaching, using the latest technological assistance including AI and Virtual Reality technology. Teachers need to constantly upgrade their skills and technological capabilities. Exposure to the day to day reality of different occupations and skill sets, should be integrated into teachers’ learning programs. Standards for teacher training need to be high. Their motivational skills and dedication are crucial aspects of student learning. Teacher assessment should cover both individual and team competency, based as much as possible on the successful life courses of the students.
A-3 Students in earlier years should be counselled to expect to learn new competencies on an ongoing basis. They should learn how to plan and manage their career in concert with the changing market. Entrepreneurism needs to be a foundational competency.
A-4 All acquired competencies should be accredited to the individual and portable to other work. Workers should be able to access the system through a user-friendly app.
A-5 The lifetime limit on educational loans should be reviewed. Canadians are encouraged to borrow large sums of money to buy houses because houses are an important asset. So is education. Limits on loans should be set based on projected ability to repay.
A-6 Canada’s investment in workers needs to reciprocated to fulfill the social contract. A global digital economy presents opportunities to avoid taxes through informal work, through establishing a presence in a low-tax jurisdiction, changing citizenships, or moving assets. Business discovered it first, but new economy workers are discovering it now. Citizenship shopping has already begun and is growing, meaning that demand on citizenship benefits could escalate. The public investment in human capital is substantial. Maintaining educational and training debt to government makes sense, (from both workers and businesses). These debts can be forgiven over time in proportion to tax or other contributions.
B – Empowering Workers with Social Capital
Some workers have social capital. Professionals such as doctors, accountants, lawyers, dentists and pharmacists exercise power through associations that control entry into their professions and set fees.
Unionized workers also have social capital, more so in the public sector. Other forms of collective standard setting are seen in some industries such as realtor services.
In many such instances, public policy favours these groups. Professionals may be granted a form of self-governance, for instance. Professional corporations may be able to reduce their tax liability in ways that employed workers may not. Unions have some regulated protections, although they are not very effective in the global economy.
In a related way, people who invest financial capital also have influence, and because of lobbying, are treated better by the tax system than those who invest their time and labour. This really makes little sense, as the proportionate risk is as high for the worker who borrows to invest in training, and then invests his or her time and labour in a highly uncertain labour market.
Although the OECD attributes increased earnings inequality to technological change and globalization as well as public policy, an American academic suggests that public policy has a major effect . His analysis indicates that overall education and skills in the American workforce have been increasing, and that skills and competency are distributed much more equally than earnings. He points to professional associations protected by public policy, and professional corporations that are favoured by tax policy, as factors.
But most workers have little bargaining power, and it is evident in national statistics.
Since 1980, the bottom half of Canada’s earners have seen their earnings shrink when adjusted for inflation … only government transfers have kept them from being materially worse off. In a CBC interview, Frank Graves, President of EKOS Research points out that the bottom ninety percent have seen their average income stagnate since 1980… while the top 1% saw a 500% increase .
So in the global context of work, it falls upon the Canadian governments to enable Canadian workers to advance their interests .
Recommendations to increase the power of workers
B-1 The Employment Insurance program should be renamed to Work Insurance and expanded to cover all paid work, eliminating incentives to fragment work into part time or contract status. All paid work should require benefit contributions to retirement savings, social insurance, health and disability insurance, vacation, family leave, and education/training costs. All workers should accumulate work leave and training credits.
B-2 Recognized and measurable work competencies should be codified and accredited, as recommended in an earlier section.
B-3 Several years ago the federal and some provincial governments established industry sector councils to generate cooperation in tackling sector-wide challenges. Many of these have since been disbanded. National and Provincial Work and Business Sector Councils, made up of business and worker representatives, should be established and mandated to:
• Produce regular reports on wages and working conditions in the sector, with particular attention to gender pay discrepancies.
• Recommend reference wage scales for occupations in the sector.
• Evaluate counselling, accreditation, worker adaptation, health/disability insurance and retirement security, and recommend improvements
• Monitor working time trends and if it should become appropriate, recommend options for a progressive reduction of standard working time (work day, work week, or work year) in the sector, in order that all workers have an opportunity for decent work.
• Every worker in the sector would have a free membership in their council, receive their reports, and have a vote on worker representatives.
• Through a compilation of sector reports, the federal government should produce a Biennial Quality of Work report to be tabled in Parliament.
B-4 Most of minimum wage law is provincial and tends to be constant across the province at a level which can be paid in poorer economic areas. It is laudable to try to maintain constant standards but not when they mean a levelling down. Cities in prosperous economic regions should be empowered to establish higher minimum wage standards.
B-5 Public procurement should not encourage companies to pay low wages. Public procurement policy could specify that wages of suppliers should equal or surpass wages in the sector, as reported by sector councils.
B-6 Workers’ rights should be advanced in trade agreements. The current government has already made advances in this area, insisting that countries which benefit from trade arrangements improve their labour standards. But Canadian workers still compete with workers in countries that have lower wages and inferior labour protection. The government should continue making progress on this front.
B-7 Canadian workers should be encouraged to hold collective investments in the firms for which they are working and thereby accumulate shares which can lead to partial or full employee ownership .
C – Ensuring Adequate Incomes
An analysis conducted for the Friedrich Ebert Foundation shows that the increase in inequality in Germany between 1991 and 2015 noticeably curbed economic growth. . The OECD has also concluded that economic growth will be enhanced if earnings inequalities are reduced .
We have seen that economic growth in recent decades has not enhanced the earnings of the vast majority of workers.
It is time for Canada to have a proactive incomes policy, which can reduce inequality at the outset, and then adapt to changes in earnings over time by pursuing clear goals for the overall distribution of income across the population. The current government has made some progress in redistribution with changes to the children’s tax credit, but has not set out a clear goal in this area.
Recommendations for ensuring adequate incomes
C-1 The OECD points out that Canada (and the USA) has an outsized proportion of the workforce in low-pay jobs (22% versus an OECD average of 15%, with several countries below 10%). They use 2/3 of the median earnings for full time work as a measure.
The first objective should be to strengthen the position of low wage workers. To ensure that wages provide for a decent lifestyle, and that workers choose not to move into the underground economy, jobs which pay below the low wage threshold should be eliminated, upgraded or if absolutely necessary, subsidized.. The combination of minimum wage and the working income tax credit should exceed the 2/3 of median wage threshold based on median income in the economic region.
C-2 Workers should have a public option for retirement savings (PORS), by investing their RRSP savings in the CPP Investment Fund. They would enjoy equal or better returns than most mutual fund portfolios, and with significantly smaller fees, leading to better retirement income . Some large union pension funds are offering a similar option to members now. This is not intended to eliminate private sector plans, but to establish a basic adequate retirement security option which depends on the economic future of the country rather than the effect of global markets on individual portfolios. The private sector can compete with this.
C-3 Canada could set a national goal for income distribution. There should be limits on the top and bottom of the income distribution. Excessive wealth equals excessive power and that undermines democracy. A fair proportion of income for the bottom half of the income scale could be the goal. There are options for achieving this, but Basic Income seems like a good tool to establish a base. The amount could change as required to meet the objective… eg, for the bottom fifty percent of households to have 30% of the national total (equivalized) disposable income. Their current share is about 27% .
C-4. Taxation policy needs a sharper focus on capital. With increased mobility of capital, people and business presence, and with varying combinations of earnings, capital and other income, reported annual income is likely to become increasingly variable and manipulable. A combination of revenue and wealth is a more reliable measure of a person’s or business’ ability to contribute to public revenues.
A 2018 estimate suggests that Canadian baby boomers will inherit $750B over the next decade. Many will also pass it along during that time, so the overall figure will probably be larger. Other countries face similar similar intergenerational transfers of capital.
While being sensitive to income volatility, taxes on higher incomes and wealth will have to increase to achieve the income distribution policy objectives. Progressive taxation of estates is a good starting point. The valuation of the estate should cover assets held anywhere in the world. Anyone who would wish to renounce their citizenship should have their total assets taxed at the estate level upon leaving. Rules to prevent preemptive gifting would also be required.
D – Climate change…
This report obviously cannot address the massive global crisis which is climate change. But there are worker policies that interface with climate action.
Much work can be done from anywhere, permitting a decline in commuting. There can be less reliance on costly office buildings. Both reduce the demand on fossil fuels. Building codes and economic development agencies can encourage more distributed work.
Regulation can require new technology products to be carbon-neutral or better, including the energy used to get workers in place.
Shifting to a green economy will create work opportunities and demand for new skills. The education system should be gearing up now to prepare workers with green economy skills, including adult training and work placements. Canada is already providing some opportunities for indigenous communities to gain occupations in environmental management, and should continue on that path. Governments can encourage innovation with new technology in this area, and ensure that workers in the sector have opportunity to develop competencies with it. Governments can also encourage technological innovation in the health care sector, especially supporting ageing in place objectives. There is a virtuous circle here to enhance quality of life, enhance innovation, and improve workers’ incomes, while reducing future costs in serving the elderly.
As reliance on fossil fuels declines, as the environmental costs are built into pricing of transportation and production, and as new production materials and technology are developed, there may be a kind of “relocalisation” of production and distribution:
Evidence of reshoring is limited to date, but concerns are rising that robotics, automation, computerised manufacturing and artificial intelligence could in the future reduce the advantages of production in emerging economies, at the same time as technologies such as 3D printing could tilt the scales towards small-scale localised production .
This kind of change can be encouraged in education, green technology, and urban development policy.
There is a need for a new focus on city government and innovations in urban living. Cities are essential to achieving work objectives as well as environmental objectives.
Recommendations for workers and climate change
D- 1 The federal, provincial and territorial governments might wish to collaborate on a commission to investigate the potential for city action to achieve quality of life objectives, incorporating both worker and environmental dimensions, and benefitting from the energy, altruism and dedication of civil society.
E – Workers and Democracy
Increasing inequality, the power of technology, the power of global corporations, and the gradual disconnecting of work from a national economic context, pose dangers for democratic societies. So too does the rising power of nondemocratic societies, especially those which are investing heavily in technology. Public policies to invest heavily in workers, but with reciprocal responsibilities to society, can be a counterbalance.
However, to do something nationally requires a strong will to collaborate. Intergovernmental collaboration is often impeded, not only by conflicting political stripes of governments, but also by an intricate web of fiscal competition. There are embedded incentives for “beggar thy neighbour” decision-making. Provincial social assistance plans, health plans, educational expenditures, all interact with federal programs like Employment Insurance, the CPP, CPP disability, OAS/GIS, and a myriad of federal tax credits. Various kinds of program funding such as training, job placement, job creation, and other subsidies can affect federal, provincial or local coffers. Health and educational subsidies can be involved. History has witnessed several occasions where program objectives have been undermined by perverse incentives
There have been national efforts to try to deal with them. They were part of the proposals in the Meech Lake and Charlottetown Accords to establish national objectives to discipline federal (and provincial) spending decisions. The Chretien government sought arrangements eventually formulated in the Social Union Framework Agreement (which Quebec didn’t sign and was never fully implemented). The Harper government scuttled that initiative and sought to further separate funding instruments to keep watertight compartments in the “ship of state” That didn’t work either.
Increased government involvement in education and training supports, wage supplementation, income security, and supportive services, are likely to be impeded if perverse financial incentives are left in place. See recommendation E-4.
Recommendations for strengthening Canadian democracy
E-1 Canada should have public goals for worker preparation, opportunities and remuneration; aimed squarely at decent work for all Canadians in the labour force. Policy instruments should then adapt continuously to major changes, in order to keep the goals front and centre. These have been discussed in earlier sections.
E-2 Integrated Personal Accounts (IPA’s) could be established to inform the financial relationship between the individual and government. It might resemble an online bank app, which provides real time accounting of transactions, savings, investments, retirement savings, credit card debt, car loan and payments, mortgage status, credits available, etc.
The IPA could be linked to the CRA taxpayer account, and provide the following information:
• taxes and loan obligations
• tax credits and public benefits received
• benefit payments or credits potentially available: EI (WI), CPP, OAS projections,
• education, child care, and other subsidies received or available
• estimated prorated value of public services and benefits – schools, health care, food inspection, policing, etc
• accumulated credits for training and work leave
• contributions received by the government from all of the individual’s work income sources
• accumulated taxes paid from all sources, including estimated sales taxes
These accounts can be kept simple, but would help people to better understand the total taxes they pay and the benefits they receive or are eligible for. The accounts would help to keep people in the formal economy (to be eligible for benefits like worker tax credits and accumulate credits toward education obligations) .
This might sound a bit like big data government, but private interests like banks, google, facebook, collect far more information than that, and the government is more protective of private data than other organizations
E-3 City government could be delegated more authority for attaining work and quality of life (QOL) goals. Quality of life in Canadian cities will be a major factor in retaining and attracting workers and business in years to come. With increasing cultural and social diversity, the economic and democratic dynamics will be closely related to the political and economic context of the city. Cities are in position to take bold and practical action. They need to have their governing and tax powers extended, within the framework of public policy goals. A national commission to review the role of city governments is recommended.
E-4 There could be exploration of some kind of national social policy accounting and rebalancing fund. The principle of such a fund would be to rebalance financial impacts on the budget of one government from actions taken by another, both negative and positive. The status quo of program expenditures could be a starting point, and the guiding principle should be that all governments should gain or lose from program and policy expenditures and achievements in appropriate proportion. This could establish a better base for intergovernmental collaboration in policy areas where jurisdictions overlap. So for example, if extension of provincial training or child care services should relieve the federal government of EI or tax credit expenditures, or produce more tax revenues, an appropriate rebalancing of accounts could be done.
E-5 Canada needs to be active internationally (and is) in many dimensions related to workers and technology. (AI ethics, privacy, intellectual property, business transactions, worker mobility, labour standards, taxation, etc). We need smart and skilled people living and working here, regardless of where they are educated. We need to market our products and services, including our education systems, internationally. We need to protect our sovereignty while encouraging competition and level playing fields.
E-6 In relation to AI, it would be useful for Canada to build on the CIFAR Pan-Canadian Artificial Intelligence Strategy and the work done last year by the House of Commons Privacy and Ethics Committee and the International Grand Committee on Big Data, Privacy and Democracy. AI is poised to become a much bigger issue than it is now, especially with nondemocratic governments investing heavily in it. A strong national stance and active international work are in order. And it is important to keep a strong focus on workers.
E-7 Appropriate taxation of financial capital in the global context is not going to be easy. The OECD is pursuing a project with Canadian and other support called BEPS (intended to counter Base Erosion and Profit Shifting), actions by many businesses to avoid taxation. Canada passed legislation to participate, with royal assent in June of 2019. Canada should continue to encourage and participate in this, but with caution that the exercise does not result in the adoption of an inadequate base level taxation policy. The OECD has itself identified the taxation of income as problematic at present and more so in future, and has speculated on whether countries will need to resort more to taxation of consumption. A focus which includes both gross revenues and assets in the consideration of taxation may be useful.
Being mindful of the Pearson legacy, cooperative federalism is clearly needed. At the time of writing, there is a minority government in power. This might be an ideal time to engage all parties in the formulation of national goals. It cannot be expected that all parties will agree on the means, but there should be a chance for them to support legislation enshrining the goals.