It’s going to take more than free-market ideology to create jobs

Posted on September 13, 2011 in Policy Context

Source: — Authors: – news/commentary
Published Tuesday, Sep. 13, 2011.    Jim Stanford

While young people get the short end of the stick, their prospects still depend on improving the condition of the overall labour market. Because it isn’t until employers face strong pressure to hire and expand that enough openings will be generated for youth and other new entrants to get a foot in the door. The long-run target must be full employment for the whole labour market. Only then will youth, new Canadians, and other harder-hit groups get a fair chance.

After all, it is not a lack of skills, or an inability to write effective résumés, that is holding back young workers. It is a profound shortage of jobs – pure and simple. To solve that problem, the next Ontario government needs to commit to a vibrant, expansionary macroeconomic strategy. The dismal experience of Europe has proven that a single-minded focus on austerity and debt reduction is economically self-defeating. We can’t pay off deficits until we put everyone – starting with our motivated and educated youth – back to work. The bigger the cutbacks, the worse the unemployment … and the deeper the debt.

Instead, the next government should emphasize continuing support for public services and infrastructure, partnership with private sector capacity expansions, and more support for training and adjustment programs to prevent displaced workers of any age from falling by the wayside of the labour market. We also need stronger regulations to protect young workers from abuse by contract agencies and other unfair employers.

Investing in education is a rational response to a downturn: If you can’t work, you might as well enhance your skills. Ontario’s made great progress in recent years on this score (in both schools and postsecondary institutions). And don’t forget, education itself is an important source of quality jobs in its own right. Since the trough of the recession, employment in Ontario’s education sector has grown by 28,000 positions.

Indeed, the same is true of public services in general. Health care, for example, has created almost 80,000 jobs in Ontario in the same period – far and away the biggest job-creator in the province. In total, public sector and non-profit agencies account for fully 45 per cent of the 265,000 jobs created here since the recovery began. These jobs, on average, require higher education, pay higher incomes, and demonstrate higher productivity than most new positions in the private sector (especially those lousy precarious jobs). So instead of seeing public services as a “burden” on the economy, we should see them as a source of growth and opportunity in their own right.

The Ontario Conservative Party’s platform calls for significant spending cuts to public services, combined with tax cuts and deregulation to assist the so-called “job creators” in the private sector. Yet hospitals and schools, in addition to delivering valuable services, have in fact been the biggest job-creators of all!

Of course, private sector industries must also step up their game, to generate the labour market momentum young people desperately need. It isn’t a shortage of cash holding back private business investment (which is the only category of domestic spending in our economy still lagging behind pre-recession levels). In fact, Canadian and Ontario companies are sitting on more uninvested cash than at any point in their history. In that context, more tax cuts for business is like pushing on a string.

What’s really needed here is a focused push to stimulate innovation and investment in targeted industries: high-tech, export-oriented sectors that are key to our future expansion. Across-the-board tax cuts and deregulation aren’t doing the trick. We must learn from other successful high-tech exporters (in Europe and Asia) with sector-focused strategies that carve out niches for Ontario-made products and services in dynamic, trade-intensive sectors. In addition to direct employment in these sectors, we’ll get the spin-off jobs (not to mention tax revenues) that result from successful tradable industries.

Ontario has made some important progress toward that goal in recent years, with strategies like green energy manufacturing, support for new-generation automotive and aerospace projects, and efforts to maximize the economic spin-offs from Ontario’s world-leading health-care and biotech research. We could do more in areas like public transit equipment, value-added resource processing, and telecommunications. Here, too, Conservative promises to cancel the green energy strategy, and prohibit all provincial subsidies to industry, would snuff out the few bright spots in an otherwise daunting industrial outlook.

To have any hope of pulling down stubborn youth unemployment, the next Ontario government’s top focus must be on job creation – in as direct and concrete a sense as possible. Not debt reduction. Not abstract free-market ideology. Just the jobs.

Jim Stanford is an economist with the Canadian Auto Workers union.

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