Social Policy in Ontario

It is the best of economic times, it is the worst of economic times — both at the same time in Ontario.

It is a question of perception, protectionism and politics.

Statistically, the provincial economy is the strongest in decades. Ontario’s 5.5 per cent unemployment rate is the lowest this century, economic growth has been best in the West since 2014, interest rates are low and the budget is balanced.

Tell that to vulnerable workers. Or the venerable Ontario Chamber of Commerce.

The chamber’s latest index of business confidence in Ontario shows companies feeling bleak. Nearly half of members surveyed, or 48 per cent, “are not confident in Ontario’s economic outlook,” roughly double the 23 per cent who feel positive, according to last week’s report.

Blame the minimum wage increase ($14 on Jan. 1), new laws that promise better scheduling for precarious workers, and government red tape, the chamber argues. But that’s only half the story — or more precisely, their story.

Invited to speak at an event marking the report’s release last week, I couldn’t help suggesting the chamber cheer up. I’m not alone.

Even before my turn at the microphone, a BMO economist made the same point by reciting economic findings that belie the chamber’s soundings. Other economic analysts are also more upbeat.

A Bank of Canada survey of senior managers last month noted they “plan to expand operations to accommodate sustained demand . . . (and) a rebound of investment and employment.”

The Conference Board of Canada’s latest survey concluded that “optimism about investment spending and financial conditions has reached its highest level in two years.” Pessimism? Pshaw. It found “optimism surrounding planned investment is recovering even more quickly in Ontario.”

How to reconcile the chamber’s ongoing gloom with relentlessly upbeat predictions elsewhere? Its report pointed the finger at “economic policy from government.”

No matter the good old days of the past few years, members aren’t looking in the rear view mirror at past performance, chamber president Rocco Rossi told me later. They are trying to predict bumps in the road ahead, which means that any good economic news is yesterday’s news.

But if you look back at business sentiment a year ago, the chamber’s members offered similarly misplaced doomsday predictions: 41 per cent of members were not confident about the province’s outlook, compared to only 24 per cent who were upbeat in the 2017 Business Confidence Survey. Yet in that same year the unemployment rate declined by nearly a full percentage point, the economy grew by a robust 2.8 per cent, Ontario balanced its budget, and the government announced major cuts to hydro rates for businesses and consumers.

Even the latest uproar over the minimum wage appears to be a battle of perception versus performance — or virtual reality versus economic reality. Opponents pounced last week when Statistics Canada released its January employment data, weaponizing the wage hike to claim evidence of mass firings in their wake. Yet job losses were spread across the country (where wages were unchanged), and Ontario’s seasonally adjusted unemployment rate actually decreased from 5.6 to 5.5 per cent.

ON THE BRIGHT SIDE, if you’re a business owner with a permanently pessimistic outlook, you may eventually be proven right by the business cycle. It’s always possible that the good times — or at least the best times — are ebbing in Ontario due to the political uncertainty ahead, for predictions about protectionism are impossible to make.

Only Donald Trump knows for sure whether NAFTA negotiations will unravel in the months to come. But the protectionist impulse is hardly confined to presidential caprices.

New York has been flirting with Buy America provisions since early last year, prompting a furious lobbying effort by Ontario, Quebec and Ottawa. Last spring, a planned Buy America provision mysteriously vanished from the state budget, prompting Premier Kathleen Wynne and her team to claim victory — prematurely.

Now, Buy America is back, scheduled to kick in on April 1.

Then as now, Wynne is threatening retaliation unless Ontario gains an exemption — an unlikely scenario, given that Gov. Andrew Cuomo signed the measure into law last December, and it enjoys bipartisan support. Hostility breeds reciprocity, which is why Wynne will tell the National Governor’s Association summit in Washington next week that the province’s $160-billion infrastructure program will be in play.

Trade wars are easy to start, but difficult to end. If it’s easy to unravel bilateral ties between friendly neighbours in Ontario and New York, it’s not hard to imagine bigger problems pitting Ottawa against Washington over NAFTA.

That’s good reason for gloom in good times. Far better than worrying about wage hikes that are likely to have minimal impact on employment levels.

https://www.thestar.com/opinion/star-columnists/2018/02/12/wage-wars-trade-wars-and-virtual-economic-reality.html