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Six More Myths about Jobs

Rounding out our even dozen, reality checks on youth employment, corporate tax cuts, and more. Second of two.

By Ben Christopher and David Beers 9 Sep 2011 | TheTyee.ca

Ben Christopher reports for The Tyee. David Beers is editor of The Tyee.

[Editor's note: The first six of "A Dozen Myths about Jobs" ran on Wednesday. Find that first half of this series here.]

Myth 6: Youth job prospects are improving again in BC.

When the global downturn hit late in 2008, younger British Columbians got nailed especially hard. But they could be forgiven for believing that their fortunes are now rising. After all, the B.C. government's web site boasts:

"British Columbia's economy bounced back in 2010, expanding 4.0 per cent after posting a 1.8 per cent decline in real GDP... in the previous year. The recovery was broadly based, with both the goods and service sectors making significant gains."

But here's the hard truth about finding work if you are between 15 and 24. For youth, B.C.'s jobless rate is nowhere near as low as it was in 2008, when the figure was 8.5 per cent. Since then, in fact, it's kept getting worse and stayed there, hitting 13.3 per cent in 2009, rising to 13.8 per cent in 2010, and still stuck at the same 13.8 per cent, according to Statistics Canada's Labour Force Survey for July, 2011.

"The number of unemployed youth... in B.C. increased by 3,800 from the last month, bringing youth unemployment up to 51,500," says the report. Bad times widened the wedge between job prospects for young and not-so-young. When the recession hit, explains StatsCan:

"The unemployment rate for the prime working age group increased only by 2.9 percentage points between 2008 and 2010, increasing the gap in unemployment rate between youth and prime age workers to 7.0 percentage points by 2010."

Myth 7. High tech is a dynamic source of employment in BC.

High tech is an alluring buzz phrase but a difficult job category to define. BC Stats lumps into the high tech sector "both goods and service-producing industries" including everything from manufacturing pharmaceuticals and electronics, to publishing software, making maps, taking X-rays, and all kinds of consulting. Even what we do at The Tyee fits the broad category. If high tech is so inclusive yet cutting edge a sector, it must be churning out jobs in B.C., right?

Sorry, no.

Just about all of B.C.'s high tech job growth in the decade before 2009 was wiped out by the recession, according to BC Stats. And high tech jobs as a percentage of all B.C. jobs has remained pretty flat year after year, hovering below five per cent even as its share of GDP has risen faster than most other sectors.

Right now about 107,000 people in B.C. have high tech jobs, according to one measurement in a 2010 BC Stats forecast of where the sector is headed by 2019. By that year, B.C. is expected to have added just 25,400 more high tech jobs, which will mean high tech still won't have budged as a percentage of overall employment, staying just below five per cent of the total.

Next time a politician claims they are big on boosting B.C.'s high tech sector, remember that a 50 per cent increase in the projected number of new high tech jobs in the next eight years would only mean 12,500 more jobs -- about half of one per cent of what BC Stats believes will be B.C.'s jobs total in 2019.

Myth 8: Want a resource industry job? You'll be working for a mega-corporation, riding BC's global commodities windfall.

Actually, it's not true that resource industries in B.C. are dominated by just a few large companies -- when it comes to jobs, at least. Last year, six out of 10 people in British Columbia employed in the resource sector worked for a company with 100 or fewer employees.

By the way, did you think two decades of rising global demand for B.C. resources has caused jobs to rise in that sector? It hasn't. Not even a bit. "Employment in resource-based industries has been flat since 1990," reads a bold-faced headline in this B.C. government report.

Myth 9: When BC's government does a deal with industry to create jobs, it follows up to make sure.

Don't get B.C. independent MLA Bob Simpson going on this one. It drives him crazy. In 2002 and 2003, Simpson heard the BC Liberal government vow that its revitalization of the forest industry would create lots of new jobs in the woods and in the mills. Instead, "we just saw a lot of gobbling up of companies, and mergers, and we actually lost 10,000 jobs in the sector," says Simpson.

It's one thing for a government to make policy errors, says Simpson, but what really rankles him is when politicians announce they are granting licences, subsidies or other benefits to a firm in order to create jobs, and then fail to hold the company -- or themselves -- accountable when those jobs don't materialize.

Simpson, who represents Cariboo North in B.C.'s interior, points to an Oct. 19, 2005 B.C. government press release announcing the award of four forest licences to CH Anderson and Partners, a deal then-forests minister Rich Coleman promised would create "hundreds of new jobs and long-term investment for B.C.'s Interior."

Simpson cites as well a Nov. 7, 2005 B.C. government press release pledging, "Two large forest licences awarded to Ainsworth Lumber Co. will see innovative new uses for mountain pine beetle-timber, the creation of up to 750 jobs and significant long-term investment in the Interior, Forests and Range Minister Rich Coleman announced today."

Neither CH Anderson nor Ainsworth built any plants following the timber licences awarded to them in 2005.

"There's no accountability mechanism for government on their job creation claims," gripes Simpson. "The Auditor General doesn't look at it, the Controller General doesn't look at it. Governments can make any claims they want."

Myth 10: Modern managers are offering employees more work-life balance. They believe that flexibility is key to productivity.

Not if British Columbia companies are like the other North American firms Forbes magazine examined. Their conclusion:

"Companies from Genentech to Google trumpet employee benefits like subsidized child care, free cafeteria meals and on-site doctors. At the same time, they and everyone else are trying to get more work from fewer employees using production-enhancing technology. BlackBerrys, wireless Internet access and cellphones are the most visible examples, but in fields like manufacturing, better equipment and more efficient software is putting the squeeze on employees as well."

Okay, but at least all those gizmos allow some of us to work at home and gain more flexibility, allowing us to be happier, more productive, and therefore more valued by our employers, right? Forbes begs to differ:

"Whether or not they actually are, telecommuters are hardly ever perceived as being as productive as their in-the-office co-workers. They are often passed over for promotions, raises and special projects because they are less visible, and a lack of incentive and recognition contributes to low productivity levels."

Myth 11: The BC Liberals' record on job creation puts the NDP's to shame.

BC Liberal MLA John Les, who is helping Premier Christy Clark on her promised jobs agenda, has posted a blistering attack on NDP leader Adrian Dix, noting that "B.C. was last in job growth in Canada from 1991 to 2001" and claiming that "despite the worst economic recession in over 30 years" the BC Liberals have created way more jobs than the NDP.

Why is he so worked up? Because Dix says the opposite, telling anyone within earshot that before Gordon Campbell was elected, the New Democrats presided over a more robust job economy.

The BC Federation of Labour has issued a release supporting Dix, asserting that "Job growth in the 1990s was stronger than in the 2000s." Brace for a flood of figures as the BC Fed draws on BC Stats data in showing its math:

"1. The NDP government led by Mike Harcourt was sworn into office on Nov. 5, 1991 -- or more than eleven months into the calendar year. For the year 1991, the average number of employed British Columbians was 1,557,500.

"2. The BC Liberal government led by Gordon Campbell was sworn into office on June 5, 2001 -- a little more than five months into the calendar year. For 2000 (the last, full-calendar year of NDP government), the average number of employed British Columbians was 1,930,800.

"3. The difference between the average number of jobs in B.C. in 2000 and 1991 (1,930,800 minus 1,557,500) is 373,300. That is the number of jobs created in British Columbia under New Democratic Party governments in the 1990s.

"4. The average number of employed British Columbians in 2010 was 2,256,500. The difference between the average number of jobs in B.C. in 2010 and 2000 (2,256,500 minus 1,930,800) is 325,700. That is the number of jobs created under the BC Liberals in the 2000s -- which is 47,600 fewer than the number created in the 1990s under the NDP.

"5. However, NDP job-creation in the 1990s was over a nine-year period -- from 1991 to 2000 -- which means the average annual number of new jobs under the NDP (373,300 divided by nine) was 41,500.

"6. BC Liberal governments oversaw the creation of a total of 325,700 new jobs over a 10-year period -- from 2000 to 2010 - which means the average annual number of new jobs under the BC Liberals (325,700 divided by ten) was 32,600 - 8,900 per year fewer than under the NDP in the 1990s.

"7. The 373,300 new jobs created under NDP governments in the 1990s represented a total increase of 24.0 per cent over nine years -- or an annual average increase of 2.7 per cent.

"8. The 325,700 new jobs created under BC Liberal governments in the 2000s represented a total increase of 16.9 per cent over 10 years -- or an annual average increase of just 1.7 per cent."

While the BC Fed concludes that NDP job growth outperformed the BC Liberals by 2.7 per cent to 1.7 per cent, Dix has put the difference at 2.2 per cent versus 1.5 per cent.

When it comes to calculating which party presided over more job growth, you can create wiggle room depending on the precise time frame you choose. So, while the number crunching by the BC Fed may seem nerd-like in detail, at least the dates and calculations are plain to see and sourced to the B.C. government's own figures. Which makes it a whole lot harder to say the BC Liberals record on job creation puts the NDP's to shame.

Myth 12: Cut taxes on corporations and they will invest more in creating jobs.

The two consistencies of life are said to be death and taxes. Over the last few decades, corporations seem to have found the antidote.

From decade to decade, from province to province, the long term trend in the rate at which corporate income is taxed has moved almost exclusively in one direction: down. B.C. has followed the national trend closely; the province's corporate income tax rate has declined from 16.5 per cent to 10 per cent since 2001, costing B.C.'s treasury up to $8.5 billion over that span according to the BC Federation of Labour. When the federal rate falls to 15 per cent in four months, corporations operating in B.C. will pay a total income tax rate of 25 per cent.

Such are the necessities of the modern market economy, says Jock Finlayson, executive vice president and chief policy advisor at the B.C. Business Council.

"If B.C. had provincial taxes that were two or three times higher than Ontario or Alberta or somewhere else, then you'd have a very substantial out-migration of business activity in capital."

Treat corporations too unkindly, so goes the story, and they'll simply pick up and move.

It's a sad story, says Erin Weir of the CCPA. But it's not necessarily true.

"There are many reasons other than taxes that a business would choose to locate somewhere," says Weir. The education and productivity of local workers, access to particular market, the existence of useful infrastructure, and prevailing wages and interest rates may, and often do, trump the tax rate that a company will pay on income as a deciding factor in where to set up shop.

But even if a company decides to stay in a higher tax jurisdiction, it's possible that those high tax rates will be passed on to their employees in the form of lower wages and lower employment, right?

Possible, but not certain.

When corporate income is taxed, that money comes from somewhere. Where, exactly, is a complicated issue, says David G. Duff, tax expert at the UBC Faculty of Law.

The options are limited, says Duff. Responding to an increase in income tax, a company can either pay lower dividends to shareholder, hire fewer workers or pay existing employees and managers less, or keep prices higher than it otherwise would.

"Economists have debated this stuff like crazy," says Duff. "There's literature all over the place and I don't think anybody has any clear answer. It very much depends on the market."

The political implications are enormous. If the tax largely falls on shareholders or upper management employment, the corporate income tax is hugely progressive. On the other hand, if the tax largely effects consumers and low pay workers, it's more regressive and, most likely, worse for job creation.

That isn't really an argument against the tax, says Weir.

"The best case scenario is that corporate taxes are an incredibly progressive source of revenue," says Weir. "The worst case is that corporate taxes are fairly similar to a lot of other taxes."

With so much complexity involved, says Duff, "the truth is somewhere in between."

What is unambiguously clear is that cutting corporate income tax is no sure recipe for job creation. If you're looking for a specific experiment run in B.C., consider what happened after the BC Liberals finally gave the banking sector what it wanted. In 2008 the government killed its corporation capital tax -- a tax on the capital assets of large financial institutions operating in B.C.

That took $117 million a year out of government revenues, but how many banking jobs did that save or increase? Well, actually, since the tax was repealed, B.C. has lost over 1,600 big bank positions, as Will McMartin detailed in a Tyee story earlier this year. But the banks seem to be getting fatter, handing out record bonuses in 2009 and lately exceeding earnings forecasts.

If banks decided not invest their tax savings in employing more people in B.C., what about other non-financial corporations?

Since 2008, the amount of cash stashed away by Canadian non-financial corporations rose by $83 billion. The total cash cushion of roughly $470-billion is worth about 30 per cent of all the wealth produced in Canada last year.

That's a lot of cash that could be spent stimulating the economy, says Weir.

"Right now the economy is weak enough that there's a limited number of good investment opportunities and in that kind of environment, business will often just hold cash," Weir explains. "I argue that it would actually be better if the government were to collect a little bit more revenue through corporate taxes and invest that money directly in the economy."

The longer time elapses after all those tax cuts to corporations, the more jobs data become available to compare with the promises originally made. For example, we now know that as the Campbell government kept whacking away at corporate taxes from 2001 to 2009, private investment in machinery and equipment in B.C. grew by a flaccid 0.26 per cent per year, according to BC Stats. 

Is the mantra that tax cuts spur job-creating investment by corporations just a myth, then?

The Globe and Mail concluded just that in April of this year.

"An analysis of Statistics Canada figures by The Globe and Mail reveals that the rate of investment in machinery and equipment has declined in lockstep with falling corporate tax rates over the past decade," said The Globe's caption to this sobering graph.  [Tyee]

Read more: Labour + Industry

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