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Economy

Future-proof Canada's economy by investing in youth hard-hit by pandemic – Corporate Knights Magazine

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By Puninda Thind, George P.R. Benson, Daniela Pico, Dominique Souris, Ana Gonzalez Guerrero, Rita Steele, Alyssa McDonald

The COVID-19 pandemic has upended our global economic and social systems and laid bare their inequities. Some of our society’s most vulnerable populations and most undervalued professions have been hit hardest during this crisis. While youth are largely presumed to have avoided many of the worst health impacts of the coronavirus, the pandemic has affected them severely in other ways.

The youth unemployment rate in Canada rose to 29.4% in May, up from 16.8% in March. Young people who have kept their jobs since the onset of COVID-19 have experienced steep reductions in the number of working hours. And Canadian youth aren’t alone. A recent  International Labour Organization survey on youth unemployment found that young people around the world have been severely and disproportionately affected by the COVID-19 crisis, especially young women. For those young people who are still pursuing education, the pandemic is likely to result in unprecedented new inequalities upon graduation.

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All of this is compounding one of the greatest workforce challenges of the 21st century: the skills gap for young workers, in Canada and around the world. Youth are on the frontlines of major transformations across the global economy, including digitalization, automation and climate action. Skills-proofing will be essential as the speed of change and disruptions transforms the future of work. As the latest Jobs of Tomorrow report from the World Economic Forum notes, demand for jobs in the care and green economies in particular is on the rise. It’s important to ensure that young people are equipped and empowered to combat longstanding challenges to our society, particularly the threat of climate change.

There are more young people in the world than ever before, and they are critical members of the global society driving ideas, innovations and movements. Investing in, training and retraining young people now can help get them back to work immediately while building a more just, inclusive and resilient Canada – one that’s on a path to carbon neutrality. Prior to the COVID-19 pandemic, Canada had been preparing for a skills revolution, as noted by Employment and Social Development Canada, RBC, the Brookfield Institute and many others. The Canadian government has already made some meaningful commitments, such as investing in creating green jobs and training opportunities for Canadian youth in the natural resources and clean technology sectors.

In light of this, as youth leaders and allies from across the country, we have written an open letter to the Government of Canada, urging leaders to invest in youth training and skills development, as well as ensuring equitable access to these opportunities, as part of its COVID-19 response and economic recovery plan. This proposal lays out the rationale for this investment and breaks it down into three streams of recommendations:

  1. Invest in future-proofed and essential skills for youth entering the workforce and people whose work is in transition.
  2. Invest in sector-specific skills and technical training to address the most pressing problems facing our society, particularly the climate crisis.
  3. Invest immediately in job-creation programs, such as expansion of the Student Work Placement Program (SWPP) and increased funding for developing innovative work-integrated learning (WIL) opportunities for students.

Young people are crucial to economic recovery efforts. We believe that we have a once-in-a-generation opportunity to reshape the foundations of Canada’s economy, prepare our youth to thrive in the future of work, generate widespread prosperity and lay the groundwork for a safer, cleaner, more equitable world. Our letter presents detailed solutions to build back better by increasing Canada’s collective human capital.

We believe that now is a time to significantly increase these efforts to achieve a resilient, inclusive economic future. During these challenging times, the best investments will be made in people.

Puninda Thind is a sustainability professional, climate justice organizer and World Economic Forum Global Shaper.

George P.R. Benson is a resilience thinker and practitioner working on economic development, urban planning and climate change.

Daniela Pico is a community builder, marketer and entrepreneur. She is director of external relations at Riipen, a technology company on a mission to end graduate underemployment; a World Economic Forum Global Shaper; a mentor with Girls in Tech; and a connector with League of Innovators.

Dominique Souris works to enable youth to create just and climate-resilient futures as the co-founder and executive director of Youth Climate Lab, a youth-for-youth global organization focused on transformative climate action.

 Ana Gonzalez Guerrero is the co-founder of and managing director at Youth Climate Lab, where she works alongside youth to build a more inclusive and sustainable future.  

Rita Steele is a sustainability professional, food systems activist and World Economic Forum Global Shaper who is passionate about transforming the global supply chain into systems that centre equity, justice and the environment and support a circular economy.

Alyssa McDonald is an organizational psychology consultant who advances sustainability through her work with the Canadian Collaboration for Sustainable Procurement and the World Economic Forum’s Global Shapers Community.

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Economy

Bobby Kennedy And The Ownership Economy – Forbes

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In recent decades, populist presidential campaigns have arisen from the left (Bernie Sanders) and the right (Pat Buchanan). Both of these campaigns had limited appeal across the political spectrum or even attempted to engage Americans of diverse political views.

Over the past year in his independent presidential campaign, Bobby Kennedy Jr. has sought to bring together members of both major political parties, with a form of economic populism that expands ownership opportunities. In contrast to Sanders, Kennedy’s goal is not to grow the welfare state or state control over the economy. His economic populism is free-market oriented, aimed at building a broader property-owning middle class. It is aimed at widening the number of worker-owners with a stake in the market system, through their ownership of homes, businesses, employee stock and profit sharing, and other assets.

Whether Kennedy’s economic strategies can achieve the goals of ownership and the middle class he has set, remains to be determined. But his “ownership economy” is one that should be discussed and debated. Currently, it is largely ignored by the legacy media—or subsumed by the parade of articles speculating about of how many votes he will “take away” from President Biden or President Trump.

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I wrote about Kennedy’s heterodox jobs program late last summer. In the eight months since, he has sharpened his jobs agenda, and connected it to a broader platform of worker ownership. It is time to revisit the campaign’s economic themes, briefly noting three of the subjects Kennedy often speaks about in 2024: the abandonment of vast sections of the blue collar economy, low wage workforces, and the marginalization of small businesses.

Abandonment Of Blue Collar Economy

“Compensate the losers” is the way that political scientist Ruy Teixeira characterizes the Democratic Party approach to the blue collar economy since the 1990s. According to this approach, workers whose jobs are impacted by environmental policies (oil and gas workers) or trade polices (heavy manufacturing workers) will be retrained for jobs in the green economy or in advanced manufacturing or even as white collar fields like information technology (the oil worker as coder). Since the 1990s a vast network of dislocated worker programs and rapid-response programs have arisen and are prominent under the Biden administration.

As might be expected, retraining hasn’t proved so easy in practice. One example: here in Northern California, the Marathon Oil
MRO
refinery closed in October 2020, laying off 345 workers. The federal and state government immediately came in with the union offering a range of retraining and job placement services. A study by the UC Berkeley Labor Center found that even a year after closure, a quarter of the workers were still unemployed. Those that were employed earned a median of $12 less than their previous jobs. Other studies similarly have identified the gap between theories of skills transference and re-employment and the realities for most blue collar workers—including the realties of alternative energy jobs today that usually pay considerably less than oil and gas jobs.

Each refinery closure or plant closure has its own business dynamics, and in many cases, like the Marathon Oil refinery, the facility will not be able to avoid closing. Re-employment cannot be avoided. Kennedy has spoken of improving the re-training and re-employment process for laid off workers, implementing best practices in retraining with the participation of unions and worker organizations.

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Manufacturing jobs as a share of total jobs have been in decline for the past four decades, and even as he urges trade policies for reshoring jobs, Kennedy recognizes that manufacturing going forward will be a limited part of the blue collar economy. The blue collar jobs of the future will increasingly be in the trades and services. Kennedy has enlisted “Dirty Jobs” host Mike Rowe to highlight the importance of the trades, and identify policies that can improve conditions and wages for the trades. Among these policies: a greater share of the higher education federal budget redirected from colleges into training in the trades, and support for the workers who seek to enter and remain in the trades.

Improving the economic position of blue collar workers also means expanding employee stock ownership and profit sharing. While worker cooperatives have failed to gain traction in America, forms of employee stock ownership and profit sharing are being implemented in companies with significant blue collar workforces, such as Procter & Gamble
PG
, Southwest Airlines
LUV
and Chobani. Kennedy poses the challenge: Let’s have workers-as-owners more fully share in the economic success of their employers.

Inflation Impact On Low Wage Workers

In nearly all of his talks on the economy, Kennedy addresses the issue of affordability, and how inflation has undercut wages of America’s lower wage workforces. He posts regularly on the increased cost of food, transportation, and housing, the financial strains on working class and middle class families, the number of workers who live paycheck to paycheck. When the March national jobs report was issued earlier this month, he noted the slowdown in year-over wage growth (at 4.1% the lowest year-over increase since 2021) and the increase in part-time jobs.

Kennedy recognizes that many of the low wage workforces are in such sectors as long-term care, retail, and hospitality, in which profit margins for employers are tight, and employers have limited flexibility individually to raise wages. Kennedy continues his calls for a higher minimum wage, reducing health care costs, strengthening protections and benefits for workers in the gig economy. He urges a reconsideration of trade and tax policies and the need for immigration policies that secure the nation’s borders. Kennedy’s strict border policies reflect both the “humanitarian crisis” he sees with the drug cartels and migrants, as well as the impact of unchecked immigration on the wages of low wage service and production workers.

Home ownership has a special place in Kennedy’s ownership economy, as part of bringing more workers into the middle class, and he has stepped up his advocacy on home ownership. Across society, widespread home ownership stabilizes communities, promotes civic involvement, serves as a hedge against social disorders.

Small And Independent Businesses

During the pandemic, Kennedy warned that economic lockdowns were devastating the small business economy. Today, in a regular series of podcasts on small business, he highlights the ongoing small business struggles. Just this past week, the National Federation of Independent Business, the nation’s largest small business organization, released a survey showing small business optimism is at its lowest level since 2012.

As with home ownership, Kennedy characterizes widespread small business ownership in terms of the social values as well as the values to the individual owners. Small business drives enterprise and service to others, in providing goods and services that customers value and will pay for. It drives job creation, including for individuals who do not fit easily into larger employment venues. A Kennedy Administration will prioritize rebuilding the small business economy, particularly in rural and inner city communities.

Kennedy’s small business agenda goes beyond a laundry list of small business grant and loan programs. As with the wage question, Kennedy seeks to tie a vibrant small business economy to underlying trade and tax policies. He also seeks to tie this economy to reforms in federal government procurement policies, which he describes as ineffectual.

Economic Challenges And Alternatives

The middle class society and economy of the 1950s that Kennedy grew up in and is central to his worldview was the product of unique economic forces and America’s dominant position in the post-World War II period. There is no way to get back to it, and recreating it will be more difficult than in the past, in the now global economy, and with rapidly advancing technologies.

But a broad middle class of worker-owners, is the right goal, and private sector ownership the right approach. People may find Kennedy’s strategies insufficiently detailed or unrealistic or even counterproductive. But Kennedy raises thoughtful challenges and alternatives to the economic platforms of the two main parties—just as he is raising serious challenges on a range of other issues.

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Economy

Biden's Hot Economy Stokes Currency Fears for the Rest of World – Bloomberg

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As Joe Biden this week hailed America’s booming economy as the strongest in the world during a reelection campaign tour of battleground-state Pennsylvania, global finance chiefs convening in Washington had a different message: cool it.

The push-back from central bank governors and finance ministers gathering for the International Monetary Fund-World Bank spring meetings highlight how the sting from a surging US economy — manifested through high interest rates and a strong dollar — is ricocheting around the world by forcing other currencies lower and complicating plans to bring down borrowing costs.

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Economy

Opinion: Higher capital gains taxes won't work as claimed, but will harm the economy – The Globe and Mail

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Open this photo in gallery:

Canada’s Prime Minister Justin Trudeau and Finance Minister Chrystia Freeland hold the 2024-25 budget, on Parliament Hill in Ottawa, on April 16.Patrick Doyle/Reuters

Alex Whalen and Jake Fuss are analysts at the Fraser Institute.

Amid a federal budget riddled with red ink and tax hikes, the Trudeau government has increased capital gains taxes. The move will be disastrous for Canada’s growth prospects and its already-lagging investment climate, and to make matters worse, research suggests it won’t work as planned.

Currently, individuals and businesses who sell a capital asset in Canada incur capital gains taxes at a 50-per-cent inclusion rate, which means that 50 per cent of the gain in the asset’s value is subject to taxation at the individual or business’s marginal tax rate. The Trudeau government is raising this inclusion rate to 66.6 per cent for all businesses, trusts and individuals with capital gains over $250,000.

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The problems with hiking capital gains taxes are numerous.

First, capital gains are taxed on a “realization” basis, which means the investor does not incur capital gains taxes until the asset is sold. According to empirical evidence, this creates a “lock-in” effect where investors have an incentive to keep their capital invested in a particular asset when they might otherwise sell.

For example, investors may delay selling capital assets because they anticipate a change in government and a reversal back to the previous inclusion rate. This means the Trudeau government is likely overestimating the potential revenue gains from its capital gains tax hike, given that individual investors will adjust the timing of their asset sales in response to the tax hike.

Second, the lock-in effect creates a drag on economic growth as it incentivizes investors to hold off selling their assets when they otherwise might, preventing capital from being deployed to its most productive use and therefore reducing growth.

Budget’s capital gains tax changes divide the small business community

And Canada’s growth prospects and investment climate have both been in decline. Canada currently faces the lowest growth prospects among all OECD countries in terms of GDP per person. Further, between 2014 and 2021, business investment (adjusted for inflation) in Canada declined by $43.7-billion. Hiking taxes on capital will make both pressing issues worse.

Contrary to the government’s framing – that this move only affects the wealthy – lagging business investment and slow growth affect all Canadians through lower incomes and living standards. Capital taxes are among the most economically damaging forms of taxation precisely because they reduce the incentive to innovate and invest. And while taxes on capital gains do raise revenue, the economic costs exceed the amount of tax collected.

Previous governments in Canada understood these facts. In the 2000 federal budget, then-finance minister Paul Martin said a “key factor contributing to the difficulty of raising capital by new startups is the fact that individuals who sell existing investments and reinvest in others must pay tax on any realized capital gains,” an explicit acknowledgment of the lock-in effect and costs of capital gains taxes. Further, that Liberal government reduced the capital gains inclusion rate, acknowledging the importance of a strong investment climate.

At a time when Canada badly needs to improve the incentives to invest, the Trudeau government’s 2024 budget has introduced a damaging tax hike. In delivering the budget, Finance Minister Chrystia Freeland said “Canada, a growing country, needs to make investments in our country and in Canadians right now.” Individuals and businesses across the country likely agree on the importance of investment. Hiking capital gains taxes will achieve the exact opposite effect.

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