Reality Check: But seriously, can governments create jobs?
Another day, another election promise. On Tuesday, the Conservatives promised to create 1.3 million net new jobs by 2020.
Is that a big number? A little number?
It’s in between: Between 2010 and 2015 Canada added 940,800 new jobs, according to Statistics Canada; the previous five years, the country created 851,800. The five years before that, 1.4 million.
The Tories discussed the projection before announcing it with Western University professor and Mowat Foundation chief economist Mike Moffatt.
“Overall, I think 1.3 million is aggressive (I suppose this is another way of saying ‘aspirational’), but is certainly far from impossible,” he says he told the party.
As Global News reported earlier this year, Canadian men’s participation rates have reached historic lows even as women’s participation rates stagnated over the past several years.
“If there’s another recession in the next 5 years (which is quite possible), then Canada will be lucky to hit half of 1.3M,” Moffatt wrote.
As University of Calgary economist Trevor Tombe notes, job growth over the next five years depends heavily on two things: population growth and participation rates.
Immigration — a lot of it — can help boost the economy. But in an aging population it may not be enough.
Participation rates have dipped since the recession, enough so that even in a high-population-growth scenario, Canada would only add 700,000 net new jobs, Tombe found.
Even if overall participation rates return to pre-2008 levels, that only bring us to about 1 million new jobs by 2020.
To meet the magic 1.3 million figure, Tombe writes, you’d have to have both significant population growth and a big increase in the percentage of older Canadians working, because that’s the age group projected to grow the most.
(It’s all on you, Gram. No pressure.)
But regardless of how many jobs are created between now and 2020, can the government really take credit?
Not so much. At least, not as easily as party promises claim.
Last year, a Global News investigation found the Ontario Liberals spent upwards of $765 million to create about 32,000 jobs — roughly the amount the province gains or loses within a month, over the course of seven years.
“This is part of the normal churn,” Laval University economist Stephen Gordon said at the time.
There’s a lot going on in an economy that’s well beyond even the most interventionist government’s control (think low loonie and tanking oil prices).
And it’s virtually impossible to test just how many of the new jobs in a given jurisdiction wouldn’t have been there had certain policies been in place — or how many more jobs would be there had different policies been adopted.
“We don’t really know how many of those jobs would have been created without that money. … Clearly other firms manage to create jobs without them,” Gordon said.
“Why not just take that $100,000 and give that to some random guy?”
Governments can play a big role in creating an environment conducive to economic prosperity, and they can help address economic distortions or inequities.
But “create” jobs?
“Most (but far from all) of what will happen to employment will have nothing to do whatsoever with the federal government,” Moffatt wrote.
“Good public policy is absolutely important to the economic well-being of the country, but over even a 5-year period outcomes are more the result of factors outside of the Federal government’s control.
“If the global economy is booming for 5 consecutive years, then Canada would probably hit the 1.3 million target if my Labrador Retriever were Prime Minister.”
But can he speak French?
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