ECONOMIC GROWTH AND LABOUR MARKETS

1
ECONOMIC GROWTH AND LABOUR MARKETS

• Jack M. Mintz
• C. D. Howe Institute
• And
• J. L. Rotman School of Management,
• University of Toronto

2
Contribution of Labour Markets to Economic Growth

• Participation in work force
• Employment
• Aging
• Matching demand and supply for skills
• Immigration
• Talent

3
Overall

• Canada in the past decade has had a substantial
  increase in its labour force with high rates of
  female participation
• Services employment has grown and dominated
  industry in industrialized economies
• Canadas unemployment rate has declined but
  remains higher the US and Australia
• Much of Canadas unemployment is temporary in
  nature (less than one year)

4
Labour Force 2003
5
Regulations and Labour Markets

• Canada is average among OECD in terms of
  employment restrictions such as job security and
  conditions of employment and less restrictive on
  average in terms of industrial relations laws
  (collective bargaining, participation in
  management).
• However, within North America, provincial
  employment laws are most restrictive for many of
  the provinces.

6
Employment Standards(Huberman)
7
Talent

• Canada has well educated work-force.
• Education testing has shown that Canada has one
  of the top five education system with Alberta,
  Quebec and British Columbia the most highly
  ranked.
• Some soft spots high school drop-outs,
  proportion of post-graduate degrees and
  skill-training
• Government support for university education has
  increased since 1998 once taking into account all
  subsidies and tax measures.

8
Gross Rates of Return, Effective Subsidy Rates,
and Effective Tax Ratesfor Median University
Graduates, 1998 and 2003(Collins and Davies)
9
Taxation and Work

• Canada has relatively high marginal tax rates on
  work effort once including taxes and clawbacks
  for income-tested programs.
• Rates are as high as 60 including for those with
  relatively modest income.
• High marginal tax rates not only affect work
  effort but also returns to human capital,
  participation in work force.
• Aging will result in higher taxes as governments
  will need to fund social services for the elderly
  (OECD estimates a 9.4 percentage increase in the
  gap between spending and taxes as a share of GDP
  (although this is over-estimated to some degree).

10
Taxes and Work Effort
11
Worker Productivity and Capital Investment

• Capital investment has a significant impact on
  worker productivity.
• Canadas investment rate per worker is low by
  international standards (except in Alberta).
• The effective tax rate on capital (corporate
  income and other capital-related taxes) is high
  in Canada relative to the rest of world.

12
Capital Per Worker 2005
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Reform Measures

• Education skills and high-school drop-outs
• Labour restrictions -- trading off protection
  with cost of employment
• Employment insurance experience-rating
• Taxation reducing high marginal tax rates to
  encourage both participation and skill-training.
• Improve capital investment to create more demand
  for workers.