Tories’ job-creation scheme falls short

Posted on September 15, 2014 in Debates – Opinion/Editorials – Finance Minister Joe Oliver announced with great fanfare the government would cut EI premiums for small business. Analysts, taxpayers and workers were underwhelmed.
Sep 15 2014.   Editorial

For one tantalizing moment, it looked as if Joe Oliver was going to cut employment insurance premiums.

The anticipation quickly died. All the federal finance minister announced was that the government was giving small business owners a two-year payroll tax break. Workers will have to wait until 2017 for lower EI premiums. So will large companies that do most of the hiring.

Beginning next January, enterprises with fewer than 20 employees will pay 15 per cent less into the EI fund. But the workers they hire won’t get any payroll tax relief. Neither will the other 19 million members of Canada’s labour force.

“Small businesses drive Canadian prosperity,” Oliver explained at a hardwood flooring outlet in west Toronto. “Our new Small Business Job Credit will lower taxes for business owners and make it easier for them to create jobs for Canadians.”

The Canadian Federation of Independent Business, which had been lobbying for EI relief for months, was delighted. Its president estimated that the credit would 25,000 new jobs over two years.

Economists – even those friendly to the Conservative government – were skeptical. Business leaders warned that the tax break could actually deter job creation. Small employers would stay small, they argued, to qualify for the EI premium break.

Oliver, who is anticipating a $6 billion-to-$8 billion surplus next year, could have done much more – and chosen better means – to spur employment growth:

He could have made his tax credit contingent on hiring. As it now stands, entrepreneurs can pocket the savings without creating a single job.

He could have cut EI premiums across the board, injecting broadly based stimulus into Canada’s sluggish economy.

He could have opened the EI program to the 63 per cent of jobless who don’t qualify for coverage. That would have spurred consumer spending and induced to retailers to hire.

But none of these options fit the government’s political agenda. Prime Minister Stephen Harper aims to use the tidy surplus his government has amassed to unveil a series of small, targeted tax breaks similar to last week’s credit, saving his big announcement – a $2.5-billion-a-year affirmation that a re-elected Tory government will deliver on 2011 campaign pledge to let couples with children to split their income – for the Tory platform.

That rules out all-inclusive EI relief or significant EI reform. It rules out any possibility of help for the long-term jobless, laid-off workers who need retraining and young people seeking an economic foothold. Moreover, it means Ottawa will keep collecting $2 billion a year more in EI premiums than it distributes in benefits.

The Conservative campaign team has a lot riding on this formula. At the moment, Canada is losing almost as many jobs as it creates, economic growth is sub-par, household debt levels are worryingly high and business are sitting on piles of unused cash, waiting for the outlook to stabilize. The government has just over a year to turn things around – at minimum to provide credible evidence it is on the right track.

If Oliver’s announcement was the prototype, the Tory strategy may need a few adjustments. The owner of the flooring company where the minister made his announcement told reporters he didn’t expect to use his credit to hire new employees. Most economists gave the scheme a thumbs-down. Most voters, hoping for a little EI relief themselves, were disappointed.

The Tories will have to try harder than this to justify their 2015 slogan: “We’re Better off with Harper.”

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This entry was posted on Monday, September 15th, 2014 at 8:43 pm and is filed under Debates. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.

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