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A Dozen Myths about Jobs

What are the best ways to save or create good jobs in a place like BC? A lot of what we hear is bunk. First of two.

By Ben Christopher 7 Sep 2011 | TheTyee.ca

Ben Christopher reports for The Tyee.

Myth 1: Education doesn't pay.

"There are all these stories about people like Bill Gates and Mark Zuckerburg who are college dropouts," says Thomas Lemieux, a professor of economics at UBC. Or there's the "famous one about PhDs driving taxis."

As the price tag on a post-secondary degree continues to tick upward, the idea that education is no longer a significant investment in one's economic future sounds more and more believable. Just last week, The Tyee ran a story mulling over this very question.

But according to Lemieux, that just isn't the case.

"If you're looking for one thing to predict that someone will do better in the labour market," says Lemieux, "it's pretty hard to find a better indicator than education."

Looking at the average difference in annual income between those with various levels of education, Lemieux, along with UBC colleague W. Craig Riddell and University of Montreal researcher Brahim Boudarbat, found that the average holder of a bachelor's degree can now expect to make 32 per cent more than someone of similar work experience who holds a high school diploma. That's compared to a difference of 25 per cent in 1980.

In other words, the premium on education not only persists, but has increased over the last two and half decades. The same was true of high levels of education and vocational training as well.

"There are many more things to higher education than the monetary pay-off," says Lemieux, "But of the policies that a country can introduce to help people to compete and to have good jobs in a globalized workplace, the list is short. Education is one of the leaders."

Myth 2: Oil and gas is a big BC employer.

Petrochemical extraction is a dirty business. Responsible for just under a third of greenhouse gas emissions from the entire province, one might be tempted to assume, if for no other reason than a sense of proportion, that for as much as it emits, the industry is a big employer too.

But according to Marc Lee from the CCPA, the myth of B.C.'s big oil and gas workforce is just that: a myth. And it's a myth with consequences.

"A lot of the decisions around oil and gas are justified because it's said that they create jobs," says Lee. "But it's a false promise, by and large, and it's one that doesn't include the full pallete of impact across society."

So exactly how many jobs can we thank the fossil fuel industry for?

The base number of workers employed directly by oil and gas companies is about 2,800, according to figures found at BC Stats.

Counting all those employed in various support activities -- the surveyors, the electrical engineers, and the many other contractors who hold jobs auxiliary to exploration and extraction but who work for independent companies -- requires a little guess work. The only relevant figures available lump the oil and gas support workers together with their counterparts in mining. There are many more B.C. mining jobs to be found than those in petrochemical extraction -- about five times as many. Assuming that roughly the same proportion applies to the number of support workers in either industry, one can reasonably assume that about 2,000 people work in support of the oil and gas industry.

Trickier yet is the task of estimating how many jobs exist as an indirect result of petrochemical extraction in B.C. When the nearly 5,000 workers already accounted for buy groceries, gas, clothing, for example, some grocery stores, gas stations, and department stores will hire more workers than they otherwise might have. How many more? According to Marc Lee, assuming a one-for-one relationship between direct and indirect jobs (that is, between oil workers and the waiters hired to serve them breakfast) provides a "generous estimate of the employment impact of the industry."

Adding 2,800 to 2,000 to 4,800, we come to 9,600 jobs directly and indirectly attributable to the oil and gas industry.

To put that number in context, 10,000 jobs is less than half a per cent of all of the jobs in British Columbia.

While those nearly 10,000 employees, and the many families who depend upon their livelihood, are by no means disposable, according to Lee, a gradual transition away from that industry would not have to come at the expense of B.C. workers overall.

"If we went a different route -- for example, by retrofitting buildings for efficiency, renewable energy, investing in public transit," says Lee, "we would actually create way more jobs per dollar of investment than oil and gas."

Myth 3: Tax carbon, kill jobs.

The carbon tax has had to weather some choppy political seas since it was introduced in 2008. Slammed from the right as an onerous burden on business, then slammed from the left as a regressive shift in the tax code, it seems that both sides of the political spectrum can agree that the carbon tax is bad for business, bad for workers and bad for jobs.

According to a 2007 study conducted for the European Commission Taxation and Customs Union comparing carbon-reduction tax regimes in Sweden, Denmark, Netherlands, Finland, Slovenia, Germany, and the U.K., taxes on carbon emissions can actually have the opposite effect on employment.

While higher energy costs can be a constraint on businesses and consumers alike, the study showed that businesses were surprisingly flexible in their ability to reduce emissions and improve efficiency. To the extent that some of these reduction efforts involved new investment, it's plausible that not only can carbon taxes reduce emissions without harming job growth, they may even stimulate the economy.

“You can't assess the impact that a carbon tax is going to have on the economy just based on the carbon tax itself," says Matt Horne, director of the B.C. Energy Solutions program at the Pembina Institute. "It's going to depend on what you do with the money."

The revenue collected through a tax on carbon can be used in a number of ways. Whether the government chooses to spend the windfall on infrastructure, offer rebates on investment or research, or, as is the case of B.C.'s tax regime, cancel the tax out with cuts to personal and corporate income, will ultimately determine the overall impact of the tax on jobs.

The carbon tax, in other words, determines the costs and cost-bearers within an environmental tax regime. How the government spends that money determines the beneficiaries.

Looking at the current economic climate, Stewart Elgie of the University of Ottawa and Stephanie Cairs from Sustainable Prospect make the case for robust spending in the areas of low carbon infrastructure and research and development of clean technologies. With the government investment creating jobs in the short-term, such spending, they say, could help ease the transition away from a carbon-intensive economy, while priming private investment in the nascent green technology sector.

"The U.S., for example, is devoting 12 per cent of its stimulus package, or $94 billion over ten years, to energy efficiency, renewable power, and other green investments -- far more than Canada on a per capital basis," write Elgie and Cairs. "To compete, Canada needs to provide similar levels of support."

Myth 4: We're doing well at eliminating gender-based discrimination in the workplace.

A decade into the 21st century, the fact that a significant wage gap between men and women still exists might seem hard to believe.

And sure enough, some people work extra hard not to believe it.

Take the 2010 article from Penelope Trunk, "A Salary Gap Between Men and Women? Oh, Please." If summary is even necessary, Trunk dismisses the idea that men and women receive different salaries for any reason other than the latter's choice to stay home and get pregnant.

"There is no longer a salary gap between men and women" Trunk assures the reader. "This is not a controversial statement."

As it happens, the statement is not only completely controversial, but also completely wrong.

According to a report published last spring by Marie Drolet of Statistics Canada, in 1992, the average Canadian woman with a full time job took home about 72 cents in annual pay for every dollar earned by a male with the same job, education, and work experience. Looking at the same metric over a decade and a half later, in 2008, how many cents to the dollar does the average Canadian woman with a full time job take home?

About 72 cents.

Adjusting for the fact that women, on average, work fewer hours than men (an other issue entirely) the figures look better. But not much better.

Earning 83 cents for every one of those representative male dollars in hourly wages, that gap has narrowed by a mere 2.2 per cent over the course of the last decade. To be sure, the moral arc of the universe is long.

This is not to say that progress has not been made. Looking at a longer span of time, beginning in 1988, that wage gap has declined by over seven per cent. According to Drolet, the narrowing of the gap can be attributed to a number of things including the entrance of some women into high pay sectors and positions up until recently considered the exclusive domain of men, longer tenure of women workers, a sharp increase in the level of education attained by the average woman and, unfortunately, a decline in real wages for lower income men.

The good news is that as the average woman in Canada attains levels of education and work experience, what Drolet calls "observable characteristics" similar or higher to the average man, the gender wage gap has narrowed.

The bad news is that as arguments that characterize the average woman as less employable or productive than the average man become increasingly unconvincing, the wage gap remains.

"If females commanded the same returns to these characteristics as males," writes Drolet in a separate study with Michael Baker, referring to characteristics such as education, experience, and occupation title, "we would expect them to receive higher -- not lower -- wages than males."

Myth 5: Government is big, bloated, and full of lazy workers.

Particularly during economic hard times, stories of government excess proliferate. When families everywhere are tightening their belts, the rhetoric goes, why are government employees always the last to feel the pinch?

In truth, B.C. government employees have been feeling the pinch since at least 1980.

Using data on public sector employment provided by Statistics Canada, CCPA economist Iglika Ivanova points out that public sector employment relative to the provincial population has fallen by 10 per cent. In fact, by 2008, with just under 90 employees for every thousand citizens in the province, British Columbia had the lowest public sector employment rate of any province in Canada.

This, says Ivanova, reflects a long-term and bi-partisan determination on the part of successive B.C. governments to trim deficits and cut the public payroll.

The 403,601 workers on that payroll include anyone employed by one of the three levels of government, members of the military, public schools employees, hospital workers, or those toiling away for one of the Crown corporations in the province.

"Simply put," writes Ivanova in a 2010 study, "B.C. entered the recession with one of the leanest public sectors in the country."

Those who bemoan the size of the government often assume its workers are unproductive. While it may be true that the carrot and stick of potential profit and bankruptcy can incentivize efficiency, it does not follow that public workers cannot provide their services cheaply and well.

According to SFU public policy professor Doug McArthur, despite the decline in relative government employment throughout the province, much of B.C.'s economic performance in the years leading up to the recession were driven by public, rather than private, investment.

"There's a belief that the BC economy has been driven by private sector investment," says McArthur. "This ignores the fact that a very large part has really flowed through government coffers or from government resources."

Myth 6: Raise the minimum wage and you get minimal jobs.

Since the minimum wage became a fact of Canadian life in 1918, controversy has raged over its efficacy. Those who oppose an economy-wide floor on wages -- the businesses, and the various policy makers and economics who love them -- tend to approach the debate with an air of righteous rationality.

"Reality isn't the way you wish things to be," wrote two analysts from the Fraser Institute, scolding the Clark government for its announced wage hike last March. "The wishful thinking of politicians and policy-makers can't overcome the unpleasant reality that minimum wage increases are job-killers."

The argument against minimum wage regulation stems from a very basic lesson of economics. Even if you've never taken ECON 101, you understand this lesson intuitively: raise the price of something and, all things being equal, people will buy less of it. What's true of apples at the grocery store is true of labour, say minimum wage opponents. Make it more expensive for businesses to hire new workers and, all things being equal, fewer workers will be hired.

It is, as they say, simple supply and demand.

Not so, says Iglika Ivanova, economist and researcher with the CCPA. While higher prices for apples might lead a shopper to switch to oranges, employers do not necessarily enjoy that luxury of easy substitution when faced with higher wages. A manager may opt to automate a certain job or ask remaining employees to work harder in the face of higher payroll costs, but in most sectors, there are finite limits on the disposability of workers.

"Unless you are going to go out of business," says Ivanova, "you have to employ someone."

More importantly, she says, the decision to hire or fire an employee is a complex one. And of the myriad factors that influence that decision -- which can include prevailing interest rates, taxes, currency values, and other business costs -- one stands clear above the rest:

"The biggest driver of investment decisions is expectations for the general economic environment," says Ivanova. In other words, reasonable variations in the lowest wage paid may be secondary in importance before the fundamental question: "Do businesses think there will be a market for their product?"

There is some evidence that a statutory minimum not only benefits society, but can help businesses as well.

When a company begins to pay a higher wage to its least paid workers, it can improve morale and productivity. Similarly, as a study by Alan Krueger, President Obama's recent pick for his chief economic advisor, concluded, minimum wage hikes can reduce the time it takes businesses to fill positions along with overall turnover.

While Ivanova concedes that the minimum wage only applies to a small portion of the overall labour force -- in 2009, 2.3 per cent of workers received the minimum, of which less than half were adults -- one percent of the all workers in B.C. is still a "significant concern."

"The people who are employed at minimum wage jobs usually have very low total income so when you introduce the minimum wage, you give these people more income," says Ivanova. Ultimately, because the poor tend to save significantly less of every dollar earned than the rich, a minimum wage can be both moral and economically sound policy.

To read six more myths about jobs in B.C. click here.  [Tyee]

Read more: Labour + Industry

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