Wednesday, December 14, 2016

November 2011 Posts

25 Posts from November 2011
Statistics Canada has released its newest numbers for federal government employment in census metropolitan areas and they show increasing concentration of federal government employment in the Ottawa-Gatineau area with reductions in most of the other CMAs.  Ottawa-Gatineau accounts for nearly one-third of federal employment, which in turn represents 19.4 percent of employment in the Ottawa-Gatineau CMA.  This is the highest share of total employment accounted for by the federal government among Canadian CMAs.  The next highest is Kingston at 8.7 percent, followed by Halifax at 7.7 percent.  The three lowest are Brantford at 0.3 percent, Barrie at 0.2 percent and Oshawa at 0.1 percent.  Of these 34 CMAs, Thunder Bay is ranked 16th in terms of its federal share of total employment while Sudbury is ranked 10th.  Federal employment has been one of the recent bright spots in Thunder Bay.  Between 1990 and 1998, federal employment in Thunder Bay dropped 29 percent but then began to recover and it now approximately where it was in the early 1990s.  It should be noted that in 2011, Sudbury had 2,194 federal employees compared to 938 for Thunder Bay.

Figure 1
 


Figure 2





As a result of my November 23rd post on municipal finances and my lament that more detailed revenue data was not available in City of Thunder financial statements, I received several suggestions about where such data might be available.  It turns out each municipality files detailed financial data with the Ministry of Municipal Affairs and Housing every year in a standardized Financial Information Return.  However, it is not an easy web site to track down (here is the link if anyone else wants to visit) and the returns are Excel files with multiple schedules that take a substantial amount of effort to go through and collect required data from.  Nevertheless, I have been able to update my time series for Thunder Bay for the period 2005 to 2010 and my thanks to David Muir, FCA and a retired provincial civil servant in Toronto, who shall remain anonymous, for helping point me to this data.  The information transfer role of the web is truly a marvelous thing.
Interestingly enough, last week also saw the release of a new study from the CD Howe Institute called Holding Canada’s Cities to Account: An Assessment of Municipal Fiscal Management by Benjamin Drachis and Bill Robson.  According to the authors:
“Cities are the most visible level of government for most Canadians, providing services such as waste collection, policing and transit. Yet their budgets are the most opaque of any level of government … Councillors and taxpayers who seek to hold these municipal governments to account face a daunting task.”
Needless to say, my experience leads me to concur with the authors of this report.  It is not easy to collect this data and once you find it, trying to get it into a form that you can analyze and interpret is not terribly convenient.  It is ironic that the level of government in Canada that is the most grass roots and the closest to the average citizen has the most convoluted set of financial statistics.  If the goal of municipal financial administrators was to confuse the public, they could not be more successful.  One does not envy the work that municipal councilors need to do to keep tabs on the finances of their municipalities.  For the average citizen, the lack of transparency is even more troubling.
Nevertheless, I am now able to update my October 25th post.  I was able to calculate an estimate for own-source municipal revenue consisting of user fees and service charges, business property taxation (commercial and industrial) and residential taxation.  Note that the revenues received from the dividend paid by TBayTel - as before- are excluded.  I am looking at simply the revenue obtained by charging property owners and users of municipal government provided services. Figure 1 shows that during the period 1990 to 1997, revenues (in dollars) from all three of these major sources was approximately the same.  However, starting in 1998, the revenue from both user fees and residential taxation began to soar while business tax revenues stayed relatively flat.  Over the period 1999 to 2010, the average annual growth rate in municipal revenue from residential taxation was 5.1 percent, from business taxation 1.6 percent and from user fees it was 6.6 percent.  What this has meant is residential taxation and user fees have over time become a bigger share of municipal revenue, and business taxation a smaller share.




As Figure 2 shows, this trend was apparent before 2005 and the updated numbers show that it has continued since 2005.  In 1990, residential taxation accounted for 34 percent of own source revenue, business taxation 35 percent and user fees 21 percent.  In 2005, residential taxation’s share had risen to 44 percent, user fees to 29 percent but the business taxation share had fallen to 21 percent. In 2010, residential taxation's share had risen to 46 percent, user fees had reached 31 percent and business taxation further declined to 20 percent.  Put another way, by 2010, for every dollar raised by business property taxes, the City of Thunder Bay was raising another $2.31 cents from residential taxation. 


Given these trends, it is amazing that a proposal was actually floated to shift even more of the burden to residential taxation and then to make the argument that it was based on the need for “equity”.  Equity for whom?  That such an argument was even contemplated reveals the lack of information and knowledge amongst ratepayers and probably even councilors in Thunder Bay as to the composition and distribution of the tax burden. 
Over the last decade, municipal revenues from residential property taxation and user fees in Thunder Bay have been growing at rates well in excess of inflation and population growth, and this during a time of substantial economic transition in the city’s economy.  After all, according to the conference Board, Thunder Bay’s GDP over the last few years has probably shrunk by about ten percent.  Jean Baptiste Colbert, the Minister of Finance during the reign of Louis XIV remarked that taxation was the art of plucking the goose with the minimum amount of hissing.  In the case, of Thunder Bay residential ratepayers, the goose has been plucked and well cooked.


Well, there was more bad news for Ontario’s sputtering economy from Statistics Canada last week when the release of average weekly earnings data showed that over the period September 2010 to September 2011, Ontario’s year-over-year earnings declined 1.3%.  Ontario was at the bottom of the growth chart in terms of average weekly earnings and one of only two provinces to show a decline – the other was Nova Scotia.  (See Figure 1)Every other province posted positive annual growth in its average weekly earnings.  According to Statistics Canada, the declines in Ontario were “spread across several service industries, most notably in finance and insurance; educational services; wholesale trade; health care and social assistance as well as public administration.”  

Figure 1 (Source: Statistics Canada Daily November 24th)


Figure 2

 



Ontario still has the third highest average weekly wages amongst Canada’s provinces but last year it was second highest.  While Ontario has had lower wages than Alberta for some time, it has now also been surpassed by Saskatchewan (See Figure 2).  If the current annual rate of increase continues, Ontario will soon be passed by Newfoundland too.  A long term perspective is provided by the accompanying Figure 3.  In 2000, average weekly earnings in Ontario (excluding overtime) were the highest of the ten provinces.  Ontario was passed by Alberta in 2004 and remained in second place until this year when it was passed by Saskatchewan. 

Figure 3




The charitable interpretation of all this is that the Canadian federation is rebalancing and that there is a movement towards a long-term equilibrium of more diverse economic opportunity across the country.  Ontario's dominance of the Canadian economy is giving way to a much more balanced federation. The less charitable interpretation especially given the low growth of real per capita GDP and Ontario’s poor labour productivity growth is that these numbers are simply another indicator of Ontario’s economic decline.


Northern Economist is celebrating its first year on the Web next week.  Its first postings were put online on November 30th last year.  The mission of the blog was to provide commentary and analysis of economic issues and policy from a northern Ontario perspective and nearly 200 posts later I think I can safely say the mission has been accomplished.  The posts have covered a wide range of issues - local, regional provincial, national and international and I have endeavored to especially cover economic issues at the regional level that might not necessarily receive much attention. 
I am of course pleased to watch the readership of this blog rise and on a monthly basis there are now several thousand visits.  Moreover, only about half of the visitors come from Thunder Bay and Northwestern Ontario - most of the remainder are spread out across Canada and the United States.  There are however visitors from around the world and I've attached a recent screenshot to illustrate the global audience for Northern Economist. Over the last few days, there have been  visitors from every province in Canada.  From the United States, there have been visitors from California, Washington State, Nevada, Iowa, New York and Washington, D.C..  Internationally, there have been recent visits from the UK, Poland, Belarus, Greece, Cyprus, South Africa, Malaysia and the Philippines.
To all the visitors to Northern Economist, I  thank you for your visits.  I look forward to another year of commentary and analysis.


 

The Ontario government released its fall economic statement yesterday (2011 Ontario Economic Outlook and Fiscal Review) and apparently after the silence of the election it is now more aware that the world economy is slowing and that Ontario will experience slower economic growth.  Indeed, this has been noted by no other authority than The Wall Street Journal, which writes:
Canada's largest province, Ontario, sharply downgraded its medium-term economic forecast on Wednesday, warning that modest growth would be the "new normal" for its economy for the foreseeable future.  Ontario, an economy that relies heavily on manufacturing to drive growth, now anticipates its gross domestic product to expand just 1.8% this year, below the earlier 2.4% projection. The revision is deeper in 2012, as the Ontario economy is set to advance by 1.8%, versus the 2.7% forecast in the original 2011 budget.  "For the foreseeable future, modest economic growth will be the new normal here in Ontario, as elsewhere," the recently re-elected Liberal government said in its economic update.  Still, the province said it expects its fiscal 2012 deficit, of C$16 billion (US$15.4 billion), or roughly C$300 million better than forecast. But at about 2.5% of GDP, the deficit marks a slight deterioration from the previous fiscal year and remains the deepest fiscal hole among Canada's 10 provinces.
Essentially, the fall economic statement shows a deteriorating economic situation but the government insists it is still on track to balance its budget by 2017-18 without lowering spending or raising taxes.  As well, the government says that it will not introduce major austerity measures and will go ahead with its initiatives in health and education and the Green Energy Program.  This is apparently a program of disciplined fiscal management and will help Ontario avoid what is going on in Europe as governments there float bond issues at ever higher interest rates.  According to the fall economic statement:

From 2007 through 2009, the interest rates on Spanish and Italian
government bonds were similar to those paid by Ontario. By early
November of this year, those countries pay from 2.4 to 3.2 percentage
points higher on 10-year government bonds. That means more tax dollars
are going to service debt instead of protecting schools and hospitals.
Disciplined fiscal management will keep this from happening in Ontario.(See 2011 Ontario Economic Outlook and Fiscal Review, p. 8).

Hopefully, Ontario will not become the new Spain or Italy when it comes to public finances.  We of course all hope that the provincial finance minister and the Ontario government are correct in their assessment.   Interestingly enough, the interest rate of Ontario bonds has reached its widest spread this year relative to Canadian government bonds.  An Ontario government 10 year bond now trades at about 1 percent higher than a Canadian government 10 year bond which is up from a 0.6 percent spread earlier in 2011.
The fall economic statement is essentially a stand-pat document that prepares the public with the information that the situation may be worsening but does nothing of a major nature to address it yet.  This is because the provincial government is going to wait for a plan from Don Drummond in January on restructuring and reinventing government and will make that the basis for their fiscal initiatives in the spring budget.  As well, given the constraints of a minority government, the provincial government is probably still hoping that the world economy may suddenly turn around and improve the economic outlook by spring.  The question is will the worsening global economic situation move faster than the Ontario government's ability to react?


The federal and provincial/territorial health ministers will be meeting in Halifax on Thursday and Friday and will be preoccupied with the sustainability of health expenditures and the coming negotiations over the renewal of the health care accord.  They should also be preoccupied with some of the large differences in real per capita provincial government health spending given the implications of such differences for the quantity and quality of health care.  In 2009, for example, Newfoundland spent 20 percent more than the national average while Quebec spent about 11 percent less.  Ontario tended to be a bit above the average until the late 1990s and has since slipped a bit below.  The question that arises is if you are spending twenty percent more than the national average, is the quality of your health care twenty percent better?  If not, are there substantial savings from adopting the practices of the lower spenders?  After all, if every province had its real per capita spending on health match Quebec’s, you would be looking at saving billions of dollars in government health spending. Read more in my latest post on Worthwhile Canadian Initiative.

We live in an age of accountability and numerous reports are often generated to demonstrate that government is indeed providing stewardship of public money.  Yet, oddly enough, there seems to be less and less effective information that the average citizen can conveniently access at the same time that there are more and more official reports.  Case in point: financial statements from the City of Thunder Bay.
I had constructed some time series data on municipal revenues in Thunder Bay using the summary financial statements and auditor’s reports for the period from 1990 to 2005.  In light of the debate over taxation that began in October with a discussion of shifting more of the burden to residential users, I decided to update those numbers.  The summary financial statements from the city of Thunder Bay I used to construct my data set prior to 2005 had a consolidated statement of financial position with a detailed municipal revenue breakdown that divided revenues into the following categories: (1) residential and farm taxation (2) commercial and industrial (3) current year’s tax write-offs (4) taxation from other government and 5) fees and service charges.  Since then, the summary financial statement has shrunk substantially in size.  Moreover, the consolidated statement of financial operations now only reports total taxation revenues without a breakdown.  This breakdown is also not available in the supplemental volume that supports the summary volume.
As a result, my October 25th post “Equity in Municipal Taxation” was only able to plot Thunder Bay residential taxation as a percent of total municipal tax and fee revenue for the 1990 to 2005 period.  I am unable to collect data for the period 2005 to 2010 to evaluate specifically if the share accounted for by either business or residential has changed substantially since then.  There has obviously been a change in accounting practices and the City of Thunder Bay feels that the detailed revenue breakdown is no longer necessary.  I would beg to differ.  Given the debate focused on shifting the burdens, the public has a right to know what the distribution of the burden currently is and how it has changed over time.  I am not interested in relying on public pronouncements from municipal officials as to what the business or residential share is without the ability to see and analyze the basic numbers myself.
The essence of democracy is that otherwise ordinary people should be able to publicly access the basic documentation of their government and understand where their money is coming from and where it is going.  It is not enough to simply publish reports to show accountability, one has to provide information that can be used.   I would like to see the data on the current breakdown in City of Thunder Bay taxation revenue that used to be provided so I can measure if there have been further changes in the distribution over the last five years. 


Winnipeg Free Press - PRINT EDITION
The role of MDs in health spending
by Livio Di Matteo
The recent release of National Health Expenditure Trends by the Canadian Institute for Health Information puts total health expenditure in Canada at $192.9 billion in 2010 and $200.5 billion in 2011 -- annual increases of 5.9 and four per cent respectively. This year's release was also accompanied by a report titled Health Care Cost Drivers: The Facts, which finds the period from 1998 to 2008 was one in which public health care spending grew at an average of 7.4 per cent annually -- double the rate of government revenue.
Physician spending was highlighted as one of the fastest-growing public-sector health categories of recent years, with half of the growth attributable to increases in physician fee schedules. Economists are not surprised that physicians have been able to negotiate generous fee increases given the period of physician shortages. However, it should be noted that the period since 2003 has seen a rebound in the number of physicians due to higher medical-school enrollment and the immigration of international medical graduates.
Governments are often conflicted when it comes to public health care. While more physicians means more services and access for the public, it also means more public spending. With health care sustainability once again moving into the forefront of policy discussion in Canada, physicians and their role as health-system gatekeepers will be coming under scrutiny. Indeed the cost and effectiveness of many procedures will likely be an area of examination.
One of the arguments used to restrict medical-school admissions in Canada in the early 1990s was that physicians were a primary cost driver in the health system because of their role as gatekeepers. Reduce the number of physicians and replace them with nurse-practitioner teams and it was felt cost savings would automatically ensue. The result was a physician shortage. Moreover, after a short pause, health-care spending continued to mount, driven by drugs, diagnostic technology and public-health initiatives. The recent increase in physician numbers makes up for the reductions of the 1990s but has also been fueling expenditure increases.
How does Manitoba compare? Between 1975 and 1998, the number of family physicians in Manitoba grew by 34 per cent and the number of specialist physicians by 49 per cent. The number of family physicians declined between 1991 and 1996, though the number of specialists continued to increase. Since 1998, the number of family physicians has grown by 15 per cent while the number of specialists has grown by seven per cent. Spending on physicians by the provincial government rose from $64.4 million in 1975 to reach $382 million by 1998 and then more than doubled to reach $856 million by 2009.
Growth in total numbers does not take into account population growth. When examined as the number of physicians per 10,000 people, the numbers show that the ratio of physicians to population stopped growing in Manitoba in the 1990s. Thus, while there are more physicians overall, given the increased demands of new diagnostic technology and a growing population, it may seem to many that there are not enough physicians to go around. As well, spending on physicians also needs to be adjusted for both inflation and population growth. When this is done, real per capita provincial government physician spending grew 49 per cent between 1998 and 2009, while total real per capita provincial government health spending grew 52 per cent. Given that physician spending constitutes only about 18 per cent of provincial government health spending in Manitoba, it means there has been a lot of growth in other categories too.
While physician spending is an important cost driver, the drivers of public health-care spending are also a complex interaction between physician decision-making, diagnostic and drug technologies, population growth and aging, and the cost and deployment of other health human resources used in treatment. Indeed, a positive correlation between physician numbers and health spending is not automatic. Across Canada, the top three spenders in 2009 when it comes to real per capita provincial government health spending were Newfoundland, Manitoba and Saskatchewan, and the bottom three were New Brunswick, PEI and Quebec. On the other hand, the top three provinces in terms of total physicians per 10,000 population were Nova Scotia, Quebec and Newfoundland, while the bottom three were Manitoba, Saskatchewan and PEI. Obviously, public health-care spending is complex and care needs to be taken that cost-control approaches to health-system sustainability use a balanced approach rather than setting simplistic targets.
Livio Di Matteo is professor of economics at Lakehead University.
Republished from the Winnipeg Free Press print edition November 21, 2011 A11

Like many municipalities in Ontario, the City of Thunder Bay faces the need to rebuild and maintain an aging network of physical urban infrastructure.  City administration would like to raise property taxes to pay for repairs to roads, bridges and sewers as part of a long-term asset management plan.  Given that the total value of the city's infrastructure is in the billions of dollars, we are looking at the expenditures of millions of dollars per year simply in maintenance alone.
The current council still has three years to go in its mandate which means after much wringing of hands and debate they will agree to a tax increase to fund the spending, gambling that the next election is still three years away and that most voters will have short memories.  As a result, there is no point in arguing whether or not the city should raise taxes.  They will. Indeed, given the crumbling infrastructure that is partly rooted in decades of tax competition between the former cities of Fort William and Port Arthur, it would not be responsible to ignore the needed repairs.
The real issue is management of the problem fiscally and the proper use of our tax dollars.  First, if they are to maintain credibility on issues of municipal public finance, our councilors are going to have to set priorities.  If maintaining our infrastructure is a priority, then they may have to rein in new spending on new infrastructure that will add to the deferred maintenance burden down the road.  On the one hand, we have an infrastructure maintenance deficit and on the other hand we are building a massive waterfront development project and are planning for a new arena. This will also require maintenance in the future.  On top of it all, they have been discussing shifting more of the burden to residential tax payers - something that has been in progress for a decade because of the decline of the industrial tax base.
Second, the pay as you go approach to municipal infrastructure should be revisited.  Infrastructure maintenance is a reasonably predictable activity and it should be possible to pre-fund this spending with funds set aside now to meet future spending.  Once this new tax increase goes through, it must be dedicated not to the city's general revenues but to an infrastructure maintenance fund and each year a portion of the additional tax revenue should also be set aside to build an infrastructure renewal endowment fund that would earn income to meet future needs in perpetuity.  Such a pre-fund would reduce the need for future tax increases.  In this manner, as the years go by, revenues for infrastructure maintenance will be in place in lock-step fashion as they are needed according to the asset management plan.  Sound management of the funds raised needs to be demonstrated.
Third, councilors will need to show that they are committed to rein in other operating spending.  Given the increase in water rates, user fees and hydro costs for homeowners, raising municipal taxes one and a half percent for infrastructure and then arguing that they also need another two to three percent increase for the operating budget while also maintaining the residential taxpayer needs to foot even more of the burden will demonstrate a disconnect with reality.  Municipal councilors are part of the tier of government that is closest to voters.  If they are not grounded in reality, then we truly are in trouble.

The Ontario legislature reconvenes this week and it will be a wake-up call for the electorate as the government begins to deal with the deficit.  Health and education together make up nearly 70 percent of provincial government spending in Ontario and apparently are going to be restricted to increases of three and one percent respectively (which means a lot of reductions for the remaining third of government spending).  Of course, given inflation and population growth, real spending on health and education will also decline even with the allowed increases. 
It might be instructive to take a look at exactly what increases in health care spending have been like in Ontario. Using the recently released National Health Expenditures 2011 by the Canadian Institute for Health Information, over the period 1999-2009, real per capita health spending in 1997 dollars in Ontario grew from 1,835 dollars to 2,558 dollars – an increase of 39 percent or almost 4 percent a year on average.  With inflation of 2 percent and population growth of about one percent, a three percent increase in the health budget means a spending freeze in per capita terms.  It means real per capita growth in health spending is about to go from 4 percent a year to zero.
Hospitals and physicians together now account for almost 60 percent of health spending. Given the size of the hospital and physician share and the recent increase in physician numbers, expect to have a lot of pressure applied to physicians and hospitals when it comes to cost control especially given that the government tackled the pharmacies last year.  Between 1999 and 2009, real per capita provincial government spending on physicians grew at 36 percent and hospitals at 27 percent – below the increase for health as a whole.  Where are the other culprits?  Well, real per capita spending on drugs by the provincial government over this period grew 71 percent, public health measures grew 105 percent and capital spending grew 117 percent.  A glance at the figures below shows the upsurge in real per capita spending that has occurred in these categories since the middle of the 1990s – at the end of the last period of restraint.
The provincial government will no doubt want innovative measures to rein in health care spending as articulated by their special advisor economist Don Drummond.  In the 2011 Benefactors Lecture at the CD Howe Institute last week, Don Drummond warned against across the board health spending cuts or radical measures that would inflame the public and block reforms.  He argued for measures that would get you more ‘bang for the buck’.  Among them (with my interpretation in brackets): reallocations towards health promotion (i.e, more spending on public health); better patient centered and information driven care (i.e, patients doing more for themselves); recalibrated reimbursement for hospitals, physicians and drugs (i.e, renegotiated fee schedules especially for the doctors and salary restraint for health care workers); widening the scope for private provision (i.e, more private care) and more intense focus on the minority of patients who trigger the bulk of health care costs (i.e, end of life care is very expensive).  
Given the size of Ontario's deficit gap, the health care sector will not remain untouched.  Whether the public will be inflamed by these types of measures remains to be seen.  Tackling the cost of end of life care will require a brave government indeed.  With the dynamic of a minority government, it is going to be a very interesting new parliamentary session at Queen’s Park.

 





In the art of politics, timing is everything.  My curiosity was certainly piqued earlier in the week when a story in the Ottawa Citizen reported that Ontario’s premier Dalton McGuinty was hinting that he was ready for a major policy reversal regarding the practice of provincial government grants and subsidies for business.  According to the story, he was listening “to all the arguments” on these grants which have been referred to as corporate welfare. 
In many respects, this would be a remarkable turn around given the Ontario Liberals campaigned on the strength of their economic strategy - a strategy of government investment in green energy in particular as a job creation program.  There have been enormous subsidies to producers of wind and solar energy in the form of generous prices for the electricity generated.  As well, there is the money in the regional development funds such as the Eastern Ontario Development Fund and the Northern Ontario Heritage Fund.
Why the sudden shift?  It turns out the Ottawa Citizen has apparently been investigating stories that the Eastern Ontario Development Fund has been favouring businesses in Liberal ridings since the fund was established.  Add to this Friday’s news that wood products company Global Sticks in Thunder Bay – a recipient of about seven million dollars in provincial funding – may be in some financial difficulty given that the most recent pay to employees has not been deposited and the plant seems to be quiet.  Global Sticks was supposed to create up to 130 permanent jobs when announced in May 2011, which amounts to about 54,000 dollars in government subsidy per job created – assuming that 130 jobs were actually created.  The cost per job to the government could indeed be much higher if fewer jobs were created. 
All of this news places the future of the Northern Ontario Heritage Fund in some danger.  The Northern Ontario Heritage Fund was created in the 1980s as one of the planks of a northern Ontario policy by the Peterson government.  It was in part intended to address the decades of resource rent outflows from the north that had they been retained might have been useful in northern development.  At one point in the first half of the twentieth century, revenues from timber and mining taxes were providing the government of Ontario with about 20 percent of its revenues – the equivalent of oil for Alberta today.  These all flowed into general revenues.  Ideally, the Heritage Fund should have been an endowment with the income generated providing funds for public infrastructure, culture and education projects in the north.  Instead, it is an annual expenditure of the government and can be terminated at any time.  The provincial government, given its deficit and the political damage caused by the Eastern Ontario Development Fund now has an incentive to reconsider the Northern Heritage Fund also.  After all, once one such fund gets created, everyone wants one and then they become expensive to run.  The price may suddenly have become too high.

In my November 15th post, I used Statistics Canada tax filer annual data for the 2000 to 2009 period obtained from the Canada Customs and Revenue Agency to examine recent income trends in Thunder Bay.  That same data source is also useful in doing some basic income comparisons of northern Ontario’s major population centers with themselves and Ontario as a whole.  The first figure plots median total income for Thunder Bay, Greater Sudbury and Ontario as a whole.  Being the median means that half of tax filers have incomes above the median figure and half are below.
Figure 1 shows growth in income for all three series but growth has been most pronounced in Greater Sudbury relative to Thunder Bay and Ontario.  Between 2000 and 2009, median total income grew 42 percent in Sudbury, 29 percent in Thunder Bay and only 22 percent in Ontario as a whole.  Despite the forest sector crisis in the north, it would appear that these two northern urban centers did better than Ontario as a whole when it came to income growth.  Part of the reason is undoubtedly that they are regional centers with a strong cluster of government, education and health services.  As well, the mining sector has been particularly robust, which has been a major benefit to the Sudbury area.


What is also interesting is the distribution of those tax filers across income categories.  Over time, there has been an increase in the proportion of tax filers reporting more than 50,000 dollars in total income as well as more than 100,000 dollars (Figure 2).  In Ontario as a whole, the percent of tax filers reporting more than 50,000 dollars grew from 19 percent in 2000 to 27 percent by 2009.  Growth was even more pronounced in Sudbury going from 18 to 29 percent.  The proportion of tax filers earning over 50,000 dollars a year was the lowest in Thunder Bay.  As for those earning more than 100,000 dollars, the percent was generally greatest in Ontario as a whole compared to Thunder Bay and Sudbury except for a brief spurt in 2007 and 2008 for Sudbury, which saw an increase that surpassed Ontario and Thunder Bay.


 

These numbers provide some interesting observations on the economy in northern Ontario, at least as defined by its two largest urban centers.  Relative to the province as a whole,  median income is generally higher in Thunder Bay and Sudbury though the proportion of very high-income earners is lower.  Sudbury has had a more robust economy than Thunder Bay as indicated by its more pronounced growth both in median total income as well as in its percentage of higher income earners.  While the economy of northern Ontario has taken a battering over the last decade particularly in the forest sector, its two largest cities have been islands of relative prosperity even when compared to the province as a whole.

The Ontario provincial New Democrats and Conservatives in Ontario’s minority parliament have stated that they will introduce a private member’s bill to take the provincial portion of the HST off home heating charges.  This would result in an 8 percent reduction on the cost of heating which the Finance minister Dwight Duncan has argued will result in a revenue reduction of 350 million dollars. 
Based on the distribution of heating expenditures (electricity and natural gas) in Ontario by income quintile according to the Statistics Canada 2009 Survey of Household Spending presented by my colleague at Worthwhile Canadian Initiative, the share of these foregone revenues that will go to the top twenty percent of income earners is more than three times the share that will go to low income households.  In essence, high- income households will get more because they spend more.
So why are the Conservatives and more to the point the NDP supporting what seems like a redistribution to higher incomes?  Well, I think it comes down to two reasons - both political.  The first is both parties made reducing the HST part of their campaign platforms and are now following through because it is the nature of the political game to oppose the government.  The second reason is that while more of the total savings from the reduction will go to the upper incomes, as a share of income it is relatively more important for the lower incomes.
Table 1 reproduces the table generated by my Worthwhile Canadian Initiative Colleague.  It shows the lowest quintile accounting for about 10 percent of total heating expenditure in Ontario households while the top quintile accounts for about 31 percent of the spending.  If these percentages are applied to the projected 350 million dollars in savings and used to generate HST Reduction Savings (see Table 2) one gets savings of 36 .1 million dollars going to the lowest quintile and 107.45 million dollars going to the top quintile.  Based on the 2006 census, there were 4,555,025 private households in Ontario, which works out to 911,005 households per quintile.  This allows us to estimate in Table 2 the average savings from the HST reduction per household. 


 

 

The results based on my calculations show that the savings would be on average $39.63 for the bottom quintile and $117.95 for the top quintile.  Obviously, the average high-income household gets more money.  However, low-income households spend more on necessities than high-income households and heating is a necessity.  Lower income households in a sense are more sensitive to the cost of heating even if the dollar amounts of their savings are smaller.   Put another way, 40 dollars to a low-income household earning 20,000 dollars a year is more significant than 118 dollars going to a household earning 188,000 dollars a year.  If you take the average savings per household and divide by income for each quintile and then multiply by 100, it turns out that the savings for all the quintiles represent less than 1 percent of average income.  However, the ratio for the lowest quintile is about three times that of the highest.  In relative terms the savings are more important for lower incomes than higher incomes.  Even with rebates designed to mitigate their regressive nature, consumption taxes can also be more of a burden for lower incomes because of cash flow issues – they are out the money when they purchase goods and have to wait months for a rebate.  That wait is more of an issue if you are earning 20,000 dollars a year as opposed to 100,000 dollars.
Why is this seen as good politics?  It seems like a win-win situation.  By advocating for a policy that in relative terms benefits the lower income groups, the opposition can claim that they are fighting for the interests of lower income groups and advancing an inequality fighting agenda against regressive consumption taxation.  At the same time, the larger dollar amounts in absolute terms accrue to the higher incomes.  While inequality agendas are directed to towards the lower incomes, they are usually less likely to vote.  It is higher income individuals that are more likely to vote and the larger dollar amounts are probably viewed as a more effective way to gain their attention.  Basically, if you are going to bribe taxpayers, the higher income earners are going to be more costly.
I guess I’m shocked that the Ontario’s opposition parties seem to think that a household earning 188,000 dollars a year can be bribed with only about 100 bucks.  The governing Liberals promised a Healthy Home Renovation tax credit that would cover up to 15 percent of the annual cost of improvements to allow seniors to live longer in their own homes – to a yearly maximum of $1,500 dollars.  Given the high propensity of seniors to vote, it seems like a more effective vote targeting mechanism.  But then, I suppose that is why they are the government and the other parties are not.


The first decade of the 21st century in Thunder Bay has seen the loss of employment due to the ravages of the forest sector crisis.  Yet, despite these large losses in employment there has been a remarkably robust housing market, retail expansion and substantial private and public sector construction activity.  Some additional evidence that the last decade has been one of economic surprises emerges from an examination of Statistics Canada data obtained from Canada Customs and Revenue Agency tax filer data for all persons who completed a T1 tax return or received a Canada Child Tax Benefit.  This is annual data for the period 2000 to 2009.
Keep in mind that between 2000 and 2009, average monthly employment in Thunder Bay fell by almost ten per cent as thousands of jobs were lost in the city’s pulp and forest products sector.  Yet, the tax filer data shows an increase in the number of tax filers between 2000 and 2009 of about 4.5 percent.  The number of filers rose between 2000 and 2003, declined from 2003 to 2005 but then began to grow.  Between 2000 and 2009, there was also an increase in the median total income reported by these tax filers of almost 29 percent – from $24,100 to $31,010.


Moreover, over these nine years, this median total income in Thunder Bay was about ten percent higher than for Canada.  Finally, there was more than a doubling in the percentage of tax filers reporting a total income of more than $75,000- from 4 to 11 percent.  Despite some serious blows, Thunder Bay’s economy has been relatively resilient and its income has expanded during a decade where employment has contracted. 

 


Statistics Canada Data Series: V1694371, v16943714, v16943718.

With the current preoccupation with balancing Ontario’s provincial government budget, attention will invariably turn to health care costs and in particular the contribution of physicians to those costs.  Data from the most recent releases of the Canadian Institute for Health Information are particularly instructive.  Between 1975 and 2009, spending on physicians under the provincial government public sector health plan has grown from 0.7 to 10.7 billion dollars while total provincial government health spending has grown from 3.1 to 45.6 billion dollars.  As a share of total provincial government health spending, the share devoted to physicians has grown slightly (See Figure 1) while that for hospitals has declined dramatically.  While there has been a physician shortage in Ontario in the past, recent years have seen increases in the number of physicians (See Figure 2) – both specialists and family physicians.  The stability of the physician expenditure share over time, combined with their recent increase in numbers suggests that physicians may be a target for health cost control on the near future.
However, looking at only the total number of physicians is simplistic and their numbers needs to be taken in context to their relative supply.  While the total number of physicians has grown since the mid 1990s, so has Ontario’s population.  When the number of physicians per 10,000 population is examined (See Figure 3), the results show that the number of specialists has managed to keep pace with population growth since the early 1990s but that is all.  There has been no recent growth in the number of specialists per 10,000 population – unlike the 1980s when there was an increase.  As for family physicians, their number per 10,000 population has declined since the early 1990s and they are still well below their peak.  This of course explains why many Ontarians are still without a family physician despite the recent increases in the number of physicians.  Over the last fifteen years, physician numbers per 10,000 population have barely matched Ontario’s population growth in the case of specialists and have declined in the case of family physicians. This means that access to physician services is still an issue for many Ontarians suggesting that the government will need to tread carefully with its cost control measures to avoid reducing access.

 



 




 


Last week’s provincial cabinet meeting apparently included a briefing by Don Drummond who was appointed last March to head a commission on the restructuring of government services in Ontario.  Apparently, he informed the premier and the cabinet that for the government to balance its budget by its 2017-18 target date, it will need to keep overall expenditure growth to one percent a year which means some serious fiscal readjustment especially for sectors such as health and education.  As a result, Queen’s Park wants to fundamentally re-invent the way that government works in order to make it more efficient.
Ontario’s fiscal situation is serious and it is important to stop adding on to a net debt, which is pushing the quarter trillion dollar mark.  Yet, after an election where the public finances were all but ignored, the government suddenly seems very eager to argue that its deficit targets require more serious action.  With expenditure growth of one percent a year, it would only require revenue growth of three percent a year for the budget to balance by 2017-18.  This is actually a reasonable revenue target given that annual revenue has been growing at an average of 4.5 percent a year since 2000.
It appears that the provincial government is now going to use the provincial deficit as a rationale to try to engage in another round of political and social experimentation that will be termed reinventing government.  Rather than balancing the budget through traditional expenditure restraint and revenue enhancement, it is opting for structural redesign of institutions like health and education.
If you want a preview of what some of the initiatives for redesigning government might be, it might pay to visit the Mowat Institute – a policy institute set up with funding by the provincial government at University of Toronto – and download their report Shifting Gears: Paths of Fiscal Sustainability in Canada which was released in October 2010.  The report argues that the path to sustainability is a “societal project that necessitates dialogue across the political spectrum”.  That certainly will be the case with a minority government.  Along with simply raising revenues or decreasing spending,  there needs to be more innovative and transformative changes.  In brief, the initiatives are:
• Transformative tax initiatives, such as harmonizing sales taxes.
• Transformative policy changes, such as raising the retirement age or requiring more years of service before public sector pensions can be collected.
• Expanding current program reviews and undertaking “whole of system” reviews that include other levels of government and that harmonise functions across governments.
• Applying a more rigorous fiscal lens to ordinary policy decisions that in the past were not thought of as fiscal items.
• Embracing the digitisation revolution which promises to radically transform how individuals access public services.
• Modernizing bureaucratic processes through consolidation and delegating to others those functions, which are not government’s core business of policy making, regulation and ensuring compliance.
• Adopting more service delivery models that rely less on direct delivery and more on new networks of government agencies, non-profit organizations, the private sector and individual citizens; improving governance, accountability and measurement of results in these areas will be crucial.
Given the size of anticipated savings, public appetite for change and institutional obstacles, the report concludes that the most likely avenues include:
transforming the practices in their largest spending departments, such as Health; bringing down the cost of wages and benefits in the broad public sector; introducing transformative policy changes that affect retirement and pensions; modernizing bureaucratic processes; and digitisation that allows individuals to access their own services in ways of their own choosing, with less intermediation by public sector bureaucracies. 
While this is always room for innovation in service delivery, it is not entirely clear what these initiatives will translate into for the Ontario government. They suggest that public sector, health care and education sector labour and retirement costs will be a target and that there will be fewer government workers with more services provided electronically, though my experience with information technology is that it is not exactly cheap.  It will all probably be creatively marketed as “citizen centered government services” and spawn a new Ministry of Transformative Government that will continually advertise the successes of this new age of government. 
It always makes one a bit nervous when grand transformative initiatives and revolutionary paradigms are advanced in place of the nuts and bolts work needed to balance budgets.  We can only hope the provincial government will be more successful in this new mission than it has been with its re-invention of the energy sector, where innovative new green energy sources have resulted in much more expensive electricity or its reinvention of health information services via the E-Health initiative. The real question is as follows:  If the government is successful in fostering cost savings through transformative innovation of government services, will some of the savings be passed onto the citizens or simply be used to fund new government initiatives?



The Far North Act: A Counterfactual

Originally appeared in The Chronicle-Journal, Thunder Bay, Ontario
Saturday, November 12, 2011
COMMENTARY
By Livio Di Matteo

One of the analytical tools used in economic history to assess the impact of an economic event is the counterfactual. How different might the world be if an event had not occurred, and instead, an alternate economic reality occurred? The comparison is between the world today and the world as it might be.
I ask this question in the context of the Far North Act because of its potential impact on the future economic development of Ontario’s North and particularly the economic opportunities for the First Nations in the Far North.
While put forward as a process for community-based land use planning and development, the Far North Act is also setting aside from development an interconnected area of conservation lands of at least 225,000 square kilometres — an area that is about 20 per cent of the landmass of Ontario. To put it into context, it is an area about twice the size of southern Ontario — which represents only about 10 per cent of Ontario’s land mass.
The Far North is vast and potentially rich in economic resources. Its exploitation could serve as a source of economic development for a region that has been chronically depressed over the last few decades. While one might argue that the North is so vast that 20 per cent of its land is not really a significant amount, the fact is we do not know if the most valuable or least valuable parts of the region in terms of resource potential will be sequestered.
To frame a counterfactual, how would the economic and indeed political history of Ontario and Canada be different if in 1774, with the passage of the Quebec Act, the British government had decided to set aside the lands of the area west of the Ottawa River, north of lakes Erie and Ontario, and south of the French River as a wilderness preserve in order to safeguard its natural heritage for future generations? Suppose Sir Guy Carleton and the British government had decided that this land was to remain free from agricultural settlers and development and serve as a vast nature preserve for future generations of the Empire.
Think of the implications. With the American Revolution, the United Empire Loyalists might not have settled in Ontario. There would have been no timber trade and no agricultural settlement, no Ontario wheat economy and no urban development. There would be no Toronto, Guelph, London, Kitchener or Hamilton or a host of other cities.
Future development would have bypassed the region entirely and occurred either to the north of it or even further west if at all.
Another possibility. During the War of 1812, the empty region could easily have been invaded, occupied and then developed by the Americans. Indeed, American history during the nineteenth century was one of expansionism and an empty region to its north would have been a likely target for annexation. There would likely not be a Canada, as we know it.
Think of all the millions of people currently living in southern Ontario, the cities, the dense urban development and think of it now as pristine wilderness forever preserving majestic stands of deciduous forest and white pine. Or, think of it as another rust-belt state in the U.S. Midwest.
Far fetched you might say? Not applicable given the differences in the expectations and standards of yesterday compared to today? Perhaps. Yet, think of it as simply an example of how history might have been different if a “Far West Act” had been passed for Britain’s Quebec colony. Then think of how the future of Northern Ontario’s economy might be affected by developments that we cannot presently imagine as a result of the Far North Act.
This is not to say that we should not preserve a large chunk of the natural heritage of the North for future generations. After all, think of what has been lost of southern Ontario’s rich natural heritage due to unhindered urban sprawl and development.
Yet, we must also think carefully about how future generations in the North are to earn a living. How will we be certain that the 225,000 square kilometres being set aside does not contain another nickel deposit the size of Sudbury’s or even vaster amounts of gold, iron ore, palladium or some other resource? What if a valuable resource is discovered on land after it has been designated as protected? What if First Nations decide to harvest timber on what they see as their traditional land but which the government has designated as protected? Then what? Exactly what kind of decision making and consultation mechanism with First Nations did the government have in mind when it passed the Act?
The North is land- and resource-intensive. That is its comparative advantage and it risks being hampered by such far-reaching legislation. Along with protected areas, failure to agree upon a land use plan means that development could be frozen for decades. Indeed, the uncertainty regarding what land is going to be off limits may discourage business investment. If similar legislation had been passed early on in the history of southern Ontario, Ontario’s future economic greatness might never have come to pass. Why should the opportunity for future growth be limited for Ontario’s North?
While land should be set aside for environmental protection purposes, there needs to be flexibility to ensure that economically beneficial resource development can occur and that the development is done in an environmentally responsible manner. This is not saying we should repeal the Far North Act. However, we need to ensure as the Far North Act is implemented, that sufficient consultation with affected communities occurs and that care is taken when categories of protected lands are designated so as to not hinder the economic development of the North and its First Nations. It is not enough for the provincial government to assume the Far North Act has been misunderstood and needs to be better explained. The provincial government actually needs to listen.
Livio Di Matteo is professor of economics at Lakehead University. Visit his Northern Economist Blog at http://ldimatte.shawwebspace.ca/.

On my recent trip to Montreal, I picked up the November 2nd issue of La Presse and was amazed to find a twelve page insert dealing with stories and advertising on Quebec's Plan Nord.  To put it in perspective, it would be like the Toronto Star deciding to devote a block of pages to the Northern Ontario Growth Plan.  Needless to say, the difference between the level of engagement in Quebec with its northern development compared with Ontario is astounding.  When push comes to shove, Le Plan Nord is being sold as an investment frontier with implications for Quebec's economic future.  The Northern Growth Plan in Ontario is really something that has only caught the attention of those of us in northern Ontario and even we don't really know what it means because nothing has been fleshed out.
Le Plan Nord is looking at 33 billion dollars in investment in Quebec's North - the area north of the 49th parallel - over the next 25 years to develop hydroelectric and mining resources.  This is an area that constitutes 1.2 million square kilometers or 72 percent of Quebec's land mass and that has a current population of about 120,000.  Mining investment in Quebec's north is currently looking at 11 projects, for a total investment of 20 billion dollars and apparently create 11,000 construction jobs and 4,000 additional mining and processing jobs.  In total, about 20,000 jobs are expected to be created by all of the development.  The plan is also about conservation.  Along with the development, there will be land set aside for conservation purposes. 
Unlike Ontario, where the Northern Growth Plan seems to have been decoupled from the Far North Act, in Quebec, development and conservation have been integrated - at least for the purposes of the initial plan.  The conservation goal is quite ambitious - the aim is to have 12 percent of the land in their far north set aside from industrial and commercial development by 2015 with up to 50 percent - some 600,000 square kilometers - set aside by 2035.  The comment has been made that this might be too ambitious.  Our Far North Act actually sets aside a smaller amount of land but has generated more controversy within the region.  I think part of this is because the Ontario government's lower key and lack of detail approach seems to be signalling that it is more interested in environmental concerns rather than actual northern economic development. The Quebec government on the other hand is asserting it wants conservation as well as development,  has both in the same plan, and is enthusiastic about development in the north.
However, there is not unanimous support within Quebec's First Nations for the Plan Nord.   It has been expressed that the consultation process does not sufficiently represent all the First Nation communities affected.  Nevertheless, the Cree First Nation's Chief Matthew Coon Come in the La Presse insert took out a full page ad and stated that "je suis heureux de déclarer, au nom de la Nation crie, que j'appuie et que j'approve le Plan nord."  In particular, Grand Chief Coon Come expresses support for the economic growth opportunities that the plan is expected to bring.
Le Plan Nord is not perfect and not everything that is planned will come to pass.  Nevertheless, it serves as an interesting comparison between the way in which northern development is being articulated and debated in Quebec - especially in its major urban center - and the way it is being largely neglected in Ontario outside of the north.  Given Ontario's weak economic performance over the last few years, one might think that there would be more excitement about a northern investment frontier that would create jobs, boost incomes and government revenues and help propel the Ontario economy to renewed prosperity.  Obviously, we need to think again.





Christine Lagarde, the head of the International Monetary Fund is in China today and warned that the global economy faces worsening financial stability and a collapse in aggregate demand that could result in a lost decade.  Until recently, the "lost decade" often referred to the Great Depression of the 1930s.  The use of such terminology at present is an indicator of just how serious matters are.  Why is the head of the IMF in China?  China is a rising economic power and may be best placed to help out in a role formerly played by the United States  - a role I would term as "global spender of last resort".  The American consumer was a major player in driving the world's export markets but with the massive wealth effects of the housing market collapse and the domestic debt crisis, is no longer able to backstop the world economy with its free spending ways. China has certainly been playing a more important role via its activity in international sovereign debt markets but whether it is willing or able to buttress world aggregate demand is another question.  While the Chinese economy is large, its per capita income is still quite low.
I would suggest that on the financial side, there is  a need for a global lender of last resort to stabilize financial markets, sovereign debt, and currencies and reduce the uncertainty of the current piecemeal approach to crisis management.   How this might be accomplished is beyond me.  On the commodity side, there is a need for a global spender of last resort to buttress the demand side and reduce the risk of secular stagnation.  As mentioned, that used to be the American economy and its consumers.  I’m not certain I see a replacement for the American role anywhere on the horizon. 
Ultimately, I think the difficulties of resolving the current world economic crisis also come down to a lack of political and economic institutions to deal with a more connected global economy.  When push comes to shove, the international efforts of summits and meetings to deal with the crisis of interconnected global financial and commodity markets seem more akin to the diplomacy of the slower moving 19th century than the world of the 21st century.  International meetings with their stately photo ops and long drawn out negotiations often feel and look more like the Congress of Vienna (1815) rather than a reflection of the current world.  The framework to deal with the complexity of the world economic system consists of short term crisis management housed in an international institutional structure last revised in the aftermath of the Second World War.   Of course, what should replace it is a good question.


There have been several releases of economic news over the last few days, which suggest that the Ontario economy is not doing particularly well.  First, there was the Statistics Canada release of employment numbers for October that show that employment fell in Ontario in October with a decline of 39,000 jobs driving the unemployment rate upwards by 0.5 percentage points to 8.1 percent.  Today, Statistics Canada released the Provincial and Territorial economic accounts, which show that in 2010 Ontario’s economy rebounded with 3 percent growth in GDP.  Nevertheless, this was below the Canadian increase of 3.2 percent.  Moreover, given that the contraction for the Ontario economy was -3.2 percent in 2009, it means that Ontario’s economy has not really grown in two years.  In politics, timing is everything and it would have been interesting to see what impact the release of these numbers would have had on the outcome of the Ontario election if they had been available a month earlier.
An examination of the employment numbers for Ontario regions show that October saw employment declines in seven of the eleven economic regions with Kitchener-Waterloo-Barrie as the hardest hit in percentage terms.  Other regions that were hit almost as hard were Ottawa, London, Northeastern Ontario and the Toronto-GTA area.  What is particularly interesting is that there were small increases in Muskoka-Kawarthas, Hamilton-Niagara and Windsor-Sarnia and a fairly large rebound of 2 percent in employment in Northwestern Ontario.  The rebound in Northwestern Ontario employment is even more pronounced if the October numbers are annualized as they show an increase in employment from October 2010 to 2011 of 6.4 percent.  Yet, the unemployment rate in Thunder Bay apparently went up in October from 6.0 to 6.9 percent. 
Employment in Thunder Bay between September and October 2011 also rose but the labour force expanded even faster. The labour force in Thunder Bay grew from 63,100 to 64,000 (an increase of 1.4 percent) while employment grew from 59,300 to 59,600 (only a 0.5 percent increase).  The more rapid expansion of the labour force has pushed up the unemployment rate but that by itself is relatively good news.  It means that the economy is perceived as buoyant enough to begin attracting entrants back into the labour force.  However, much of this activity appears to have been fueled by road and construction work if observation from driving around Thunder Bay recently is any indication, which suggests it could be relatively short-lived given the approach of winter.  As well, employment in Thunder Bay is still well below its March 2003 peak of 67,400 jobs.  There is still a distance to go when it comes to economic recovery in the city and by extension the region.


Statistics Canada Data Sources for Figure
v2539122, v2539155, v2539188, v2539221, v2539254, v2539287, v2539320, v2539353, v2539386, v2539419, v2539452, v2540574.


It has been a dizzying week around the world as fears of Greek debt default lead to yet another roller-coaster ride on world stock markets after Papandreou called for a domestic referendum on the European led rescue plan.  In the end, the call for a referendum was withdrawn as Europe threatened to end the bailout support and questioned Greece’s membership in the European Union.  Ultimately, Greek Prime Minister Papandreou won his non-confidence vote and will apparently appoint a coalition government to vote in and implement the latest bailout package.   He has apparently even offered to step down.
Irresponsible short-term behavior on the part of Greece designed to evade responsibility for its financial mess or a calculated stratagem?  What I think Papandreou accomplished was to use the major European countries as levers to actually try to implement the bailout package. After all, given the fragile political situation in Greece, trying to push through the bailout on his own would have been a political disaster.  What politician facing a situation of confidence votes in a minority parliament wants to lead a charge for austerity that will inflame a public that has already been facing the pain of economic austerity and adjustment over the last year?  Papandreou brought the matter to a head by proposing the referendum – one can imagine what the question on the ballot might have been – Yes or No – Do you want more tax hikes and cuts in government spending?  The resulting economic turmoil on world markets forced the hand of the European Union to basically tie cash assistance to implementing the bailout package and even questioned Greece’s membership in the EU. 
The result?  With France, Germany and the EU now wielding a stick, Papandreou now was able to demonstrate to the public, his party and the opposition that it is the rest of the world that demands more sacrifice.  It was a spreading of the blame and appears to have worked.  There was a revolt in his party, uproar in Greece, economic drama around the world and having survived the confidence vote the bailout plan will now move towards implementation.  I think Papandreou’s move has actually built support for the bailout package within Greece by forcing members of his party, the public and the opposition to take positions.  This may have been a high-risk strategy to provide a base to build a coalition government.  Will it cost him his job?  Maybe.  On the other hand, offering to resign in such a situation seems to also be a calculated challenge to opponents given the dire fiscal and economic situation.  Want the job?  Go ahead.  Make my day. 
I wonder what will happen in Italy this week?

Several days ago, I posted on Worthwhile Canadian Initiative regarding the relationship between days off from work and real GDP growth rates using Canadian data.  I found that there seemed to be an inverse relationship with higher GDP growth rates being associated with lower numbers of days off from work.  From the same Statistics Canada data source, I was also able to obtain some figures for Ontario and for Thunder Bay.  The results are quite interesting.
While days off due to illness and disability in Ontario track Canada’s fairly closely, Thunder Bay is once again different from both the province and the nation.  Full time workers in Thunder Bay seem to be more likely on average to be absent from work due to illness or disability.  As the time series chart shows, with the exception of 1998 and 1987, total days lost per worker in Thunder Bay are almost always above the totals for Canada or Ontario.  Over the period 1987 to 2010, total days lost per full time worker averaged nine for Canada, 8.5 for Ontario and 11 for Thunder Bay.  When it came to days lost for illness or disability, the averages were 6.9 for Canada, 6.3 for Ontario and 8.7 for Thunder Bay.  The averages for days lost due to personal or family reasons on the other hand are about 2 for Canada, Ontario and Thunder Bay, suggesting that illness and disability is the source of the difference.
So why is worker absenteeism more of problem in Thunder Bay?  It is possible that the resource and transportation intensive nature of the regional economy creates a more hazardous job environment and more workers are injured or become ill on the job.  There has certainly been evidence of this recently given some of the reported accidents in the construction and forest sector in the region.   A complete assessment of that argument would of course require data for other resource intensive communities to see if similar patterns hold.  Needless to say, knowing why workers in Thunder Bay are more likely to call in sick would be interesting information for social and labor groups in the community as well as potential investors and business people.


 

Apparently, Canadian pop music sensation Justin Bieber may be facing a paternity suit in California.  According to a report I saw in the Montreal Gazette, a 20-year old Californian claims that Mr. Bieber is the father of her three-month old baby - providing a new dimension to his song Baby - and that the tryst occurred backstage after a concert in October 2010.  Needless to say, Mr. Bieber’s representatives have strenuously denied the claims.  While one can suppose that anything is possible, in the absence of any proof the claim seems unlikely.  What is going on here?  It could be an effort to get attention.   It could be a prank – the suit was filed on Halloween – or it could be …rent seeking behaviour.
Once upon a time, merchants and nobles would lobby their kings for exclusive trading monopolies on the sale of salt or oil or other special favours, which allowed them to capture economic benefits while contributing little if anything to economic productivity.  This type of behaviour is known as rent seeking and in modern times often manifests itself via lobbying efforts that seek tariff protection or an expansion of copyright protection or other such exclusive privileges.  
Modern celebrities and their wealth can also be the target of rent-seeking economic behaviour.   A high profile performer such as Mr. Bieber can be a target for lawsuits designed to extract economic benefits.  After all, if the suit is successful, along with child support there will likely be all sorts of payments for damages for personal trauma of one kind or another.  Given his resources, he should be able to obtain excellent legal services and put an end to the lawsuit.  After all, if one such suit is successful, it would provide an incentive for the world to suddenly be inundated with “Bieber’s children.”  Many would have the incentive to say Justin Beiber is their father as outrageous as the claim might seem.  Who’s to say that Justin Bieber is not my father too?  With time travel, anything is possible. Never say Never!




Quebec, like the rest of Canada, is facing rising public health expenditures.  On November 3rd, I will be participating in an event at the Mont Royal Centre in Montreal sponsored by the Institut du Nouveau Monde, CIRANO and the Canadian Health Services Research Foundation (CHSRF) titled “Health, Everyone’s Concern”. The conference will inform Quebec society on the need to take action on fiscal equilibrium and health system sustainability as well as explore available options. The themes of the two day conference will include sessions on diagnostics and major issues in health, promotion of health and prevention of illness, the sustainability of public healthcare systems and, healthcare management and governance issues.  My session on the morning of day two of the conference will be a panel on the sustainability of public health care systems.  The moderator of my session will be Gillian Mulvale, Director Healthcare Financing, Innovation and Transformation of the CHSRF and my fellow panelists will be Claude Castonguay, Invited Fellow, CIRANO and former Quebec minister of Health and Social Affairs and Jeff Turnbull, Past President of the Canadian Medical Association.  It should be an exciting and informative panel discussion.

 



The aboriginal population of Northern Ontario is growing at a much faster rate than the non-aboriginal population and faces a number of economic and social challenges.  Along with education and the acquisition of human capital, another source of future economic welfare improvement must be the employment opportunities associated with resource development in Ontario’s north.  The Ring of Fire will likely be one such opportunity. However, the prospect of other future resource discoveries and associated economic development is now much diminished as a result of the Far North Act passed by the McGuinty Liberal government a year ago. This is unfortunate given the forecast increases in future demand for resources from the developing world - in particular, the Asia-Pacific region.
As a result of the Far North Act, some 225,000 square kilometers of Ontario’s far north will be off limits to resource development - an area that is roughly twenty percent of the province’s land mass.  While this action has ostensibly been done with the aim of protecting a large chunk of Ontario’s environmental heritage, it has not been welcomed by northern Ontario’s First Nations.  The Chiefs of the Nishnawbe Aski Nation headed by Grand Chief Stan Beardy unanimously opposed the Act, though in the aftermath of the October 6th election have stated they will continue to strive for a positive working relationship with the new provincial government.  
The opposition Progressive Conservatives have announced they intend to fight to have the Far North legislation repealed. In a report in Kenora’s Daily Miner and News, Minister of Natural Resources Michael Gravelle called the opposition's approach "not particularly helpful," saying his next move is to explain the importance of the act to Ontarians.  "I think the opposition is displaying a significant and deliberate misunderstanding of the Far North Act itself," he said. "This is beneficial, allowing us to move forward on unprecedented land use plans with First Nations. For the very first time, the First Nations land use plans are embedded in law. This will, I believe, provide the clarity that industry needs in the Far North."
This is going to be a contentious issue though how much the provincial government is willing to backtrack on the legislation is open to debate.  Given the messianic zeal with which the provincial Liberals have approached environmental and energy issues –even to the detriment of their electoral performance in this region – it is unlikely that they will retreat.  Nevertheless, they may be open to modifications if not for the repeal of the legislation.  For some additional discussion and analysis of this issue, you might want to visit Stan Sudol’s Republic of Mining web site for this story.