I might be an idiot, but what if we just push wages up? Statutory indexation, plus hiking the minimum wage. Then companies either go under of innovate to offset higher labour costs. Or at least are forced to share those profits with employees, which drives up consumption.
Ideally, one could even bolster unions so they could bargain with the said monopolies more effectively, especially in the private sector. Think giving them power over Employment Insurance to offer tailored benefits to members, thus driving sign ups, and broader bargaining being institutionalized across Canada.
Belgium does all of those. So does Sweden and Denmark. Last time I checked they had much higher rates of business investment and productivity than the United States, let aside Canada.
Thanks Daniil. Statutory indexation would be an interesting way forward. That and greater unionization in part reflect the European social partnership approach that is so lacking in Anglo-sphere business culture. It would be such a major departure from the norm here, but I don’t think that is a reason to write it off as a possible path.
Ottawa already has the Supplemental Unemployment Benefit Program that could be opened to unions, not just employers. Or even made compulsory like in Denmark. That alone would significantly boost union membership.
Thanks! I thought, though, that the kind of collective bargaining we see here is more confrontational than that seen in European settings. Sweden's (historical at least) model of tripartite consultation among state, employers, and workers, with management and unions coordinating wage policy, is a very different approach to what we see here, which is more workers vs management, at least as I understand it.
I couldn't agree with you more! But it seems the reason why this is the case is trivial.
In Canada most talks and certifications are conducted on the shop-by-shop bases, making employers resistant to unionization for the fear of being outcompeted by non-unionized shops.
Whereas in Europe certification and talks are held on the industry or national level, so higher standards apply to all workers, levelling the playing field for all employers. Australia and New Zealand used to do that until 70s, so it's not new to the Aglosphere either.
Regular elections to workplace health ans safety committees - which we already have in Canada - are used certify bargaining units on the national level in Belgium for example. Skilled Trades also work this way, with most trade schools being funded by governments after employers and unions/orders of a given trade sign a deal. Same with public sector bargaining: unions bargaining with public employers for national standards.
The government only operates as a conciliator, which many jurisdictions in Canada already practice.
None of this is new really, the question is that of scale.
Besides, you have mentioned both workplace democracy and labour market competition already. I can't wait for you to explore the topic a bit further! I am at your disposal with relevant sources and summaries on standby. Far more people would listen to what you people like you have to say after all! :)
Really good and interesting piece, Tom. I'm left wondering what investors/shareholders are doing with the cash that goes back their way! It certainly isn't reinvesting in innovative firms.
Thanks! I think the answer is, in part, real estate. I imagine a lot also goes abroad. We have a narrow investment income surplus thanks to primarily to the pension funds but that still means lots of income flows to foreign investors.
I should revisit Robin Naylor's History of Canadian Business - I really skimmed the chapters on Canadian finance of infrastructure and utilities abroad but there's a lot about that book that is consonant with the current moment.
Another problem is Canadian (and UK and Australian) employers' under investment in inducting and training their own employees.
Canadian employers invested just under $800 per employee in their employees’ learning and development in 1990 and increased this sharply to a peak of $1,249 per employee in 1993 (all figures are in constant 2014 $). But they cut this investment by nearly 46% over the next 20 years to $688 per employee in 2010 (Cotsman & Hall, 2015, pp. 20, 25). They increased investment to $705 per employee in 2012, $800 in 2014, and $868 in 2016 (Conference Board of Canada, 2018), still some 31% below its peak in 1993.
Thanx. The Conference Board of Canada reports are proprietary can cost over $1,000. I think I may have got Cotsman & Hall (2015) thru the University of Toronto's library. Conference Board of Canada (2018) is only a media release.
I have to say I am skeptical of this report. You present financialization of the Canadian economy as the main culprit, but then present the US economy as having less profit as share of GDP. Does this imply that the US economy is less financialized? It seems to me the financialization of the us economy is a reason for its recent outperformance especially as it concerns VC and tech. Canada already has a heavily government funded VC system that doesn’t seem to be doing the job. Another point on corporate profits, it seems likely US profits are underestimated in this data given the notorious use of tax havens and the higher base corporate tax rate incentivizing more offshoring of profits.
Thanks for the comment Lucas. On the underestimation of profits, you are certainly right that US profits would be higher. But the same is also true for Canada. I couldn't find recent data on a quick search, but this report from 2020 shows that Canadian corporations are keeping $381 billion in assets overseas in tax havens, and that the PBO estimates Canada loses as much as $25 billion to tax havens each year. https://cupe.ca/new-report-shows-canadian-companies-are-keeping-381-billion-offshore-tax-havens
In terms of US financialization, the US is highly financialized, though not exclusively. Our housing sector, for example, is more financialized than the US, and that is a major part of the problem we face, as it sucks in investment that should be going to more productive uses.
Interestingly, in some respects, the US's finance system itself is less financialized than Canada's. The huge number of smaller regional banks in the US means they serve an important role for small business lending, with decisions tailored more to local circumstances. That supports a higher level of business investment in capital expenditures than what we see in Canada with our highly centralized and highly extractive banking system. https://bpi.com/the-importance-of-regional-banks-for-small-business-lending-and-economic-growth
We need a "Big Fix" :)
Hah, yes indeed!
I might be an idiot, but what if we just push wages up? Statutory indexation, plus hiking the minimum wage. Then companies either go under of innovate to offset higher labour costs. Or at least are forced to share those profits with employees, which drives up consumption.
Ideally, one could even bolster unions so they could bargain with the said monopolies more effectively, especially in the private sector. Think giving them power over Employment Insurance to offer tailored benefits to members, thus driving sign ups, and broader bargaining being institutionalized across Canada.
Belgium does all of those. So does Sweden and Denmark. Last time I checked they had much higher rates of business investment and productivity than the United States, let aside Canada.
Thanks Daniil. Statutory indexation would be an interesting way forward. That and greater unionization in part reflect the European social partnership approach that is so lacking in Anglo-sphere business culture. It would be such a major departure from the norm here, but I don’t think that is a reason to write it off as a possible path.
Appreciate the reply!
Ottawa already has the Supplemental Unemployment Benefit Program that could be opened to unions, not just employers. Or even made compulsory like in Denmark. That alone would significantly boost union membership.
Social partnerships are also common in Skilled Trades, think the Union Training Innovation Program or mutuelles de formation in Québec.
We already elect representatives to health and safety committees, at least in Ontario and Québec and broader collective bargaining dominates public sector wage setting.
Minimum wages are already indexed to inflation in quite a few jurisdictions.
All of those models already exist both federally and provincially. It’s just the political will to scale them that is lacking.
Thanks! I thought, though, that the kind of collective bargaining we see here is more confrontational than that seen in European settings. Sweden's (historical at least) model of tripartite consultation among state, employers, and workers, with management and unions coordinating wage policy, is a very different approach to what we see here, which is more workers vs management, at least as I understand it.
I couldn't agree with you more! But it seems the reason why this is the case is trivial.
In Canada most talks and certifications are conducted on the shop-by-shop bases, making employers resistant to unionization for the fear of being outcompeted by non-unionized shops.
Whereas in Europe certification and talks are held on the industry or national level, so higher standards apply to all workers, levelling the playing field for all employers. Australia and New Zealand used to do that until 70s, so it's not new to the Aglosphere either.
Regular elections to workplace health ans safety committees - which we already have in Canada - are used certify bargaining units on the national level in Belgium for example. Skilled Trades also work this way, with most trade schools being funded by governments after employers and unions/orders of a given trade sign a deal. Same with public sector bargaining: unions bargaining with public employers for national standards.
The government only operates as a conciliator, which many jurisdictions in Canada already practice.
None of this is new really, the question is that of scale.
Besides, you have mentioned both workplace democracy and labour market competition already. I can't wait for you to explore the topic a bit further! I am at your disposal with relevant sources and summaries on standby. Far more people would listen to what you people like you have to say after all! :)
Thank you! It is definitely something I'd like to dig more into!
Really good and interesting piece, Tom. I'm left wondering what investors/shareholders are doing with the cash that goes back their way! It certainly isn't reinvesting in innovative firms.
Thanks! I think the answer is, in part, real estate. I imagine a lot also goes abroad. We have a narrow investment income surplus thanks to primarily to the pension funds but that still means lots of income flows to foreign investors.
I should revisit Robin Naylor's History of Canadian Business - I really skimmed the chapters on Canadian finance of infrastructure and utilities abroad but there's a lot about that book that is consonant with the current moment.
The continuities are so fascinating. I've not read it but would probably enjoy it. I'll add to my ever growing to read list!
This is a wonderful and clear summary of where we're at. With no punches pulled.
Thanks Jon!
Another problem is Canadian (and UK and Australian) employers' under investment in inducting and training their own employees.
Canadian employers invested just under $800 per employee in their employees’ learning and development in 1990 and increased this sharply to a peak of $1,249 per employee in 1993 (all figures are in constant 2014 $). But they cut this investment by nearly 46% over the next 20 years to $688 per employee in 2010 (Cotsman & Hall, 2015, pp. 20, 25). They increased investment to $705 per employee in 2012, $800 in 2014, and $868 in 2016 (Conference Board of Canada, 2018), still some 31% below its peak in 1993.
Conference Board of Canada. (2018, January 31). Canadian employers' investment in employee learning and development continues to rise. https://www.newswire.ca/news-releases/canadian-employers-investment-in-employee-learning-and-development-continues-to-rise-671937453.html
Cotsman, S., & Hall, C. (2015). Learning and development outlook, 13th edition. Conference Board of Canada. http://www.conferenceboard.ca/e-library/abstract.aspx?did=7542
Thanks Gavin. I mentioned investment in employee training but I hadn't seen these sources before. I'll have a proper read.
Thanx. The Conference Board of Canada reports are proprietary can cost over $1,000. I think I may have got Cotsman & Hall (2015) thru the University of Toronto's library. Conference Board of Canada (2018) is only a media release.
That's a great piece, Tom.
Thanks Matthew!
I have to say I am skeptical of this report. You present financialization of the Canadian economy as the main culprit, but then present the US economy as having less profit as share of GDP. Does this imply that the US economy is less financialized? It seems to me the financialization of the us economy is a reason for its recent outperformance especially as it concerns VC and tech. Canada already has a heavily government funded VC system that doesn’t seem to be doing the job. Another point on corporate profits, it seems likely US profits are underestimated in this data given the notorious use of tax havens and the higher base corporate tax rate incentivizing more offshoring of profits.
Thanks for the comment Lucas. On the underestimation of profits, you are certainly right that US profits would be higher. But the same is also true for Canada. I couldn't find recent data on a quick search, but this report from 2020 shows that Canadian corporations are keeping $381 billion in assets overseas in tax havens, and that the PBO estimates Canada loses as much as $25 billion to tax havens each year. https://cupe.ca/new-report-shows-canadian-companies-are-keeping-381-billion-offshore-tax-havens
In terms of US financialization, the US is highly financialized, though not exclusively. Our housing sector, for example, is more financialized than the US, and that is a major part of the problem we face, as it sucks in investment that should be going to more productive uses.
Interestingly, in some respects, the US's finance system itself is less financialized than Canada's. The huge number of smaller regional banks in the US means they serve an important role for small business lending, with decisions tailored more to local circumstances. That supports a higher level of business investment in capital expenditures than what we see in Canada with our highly centralized and highly extractive banking system. https://bpi.com/the-importance-of-regional-banks-for-small-business-lending-and-economic-growth