MOWAT RESEARCH #164 | APRIL 2018

Race to the Top Developing an Inclusive Growth Agenda for Canada

BY SUNIL JOHAL & ARMINE YALNIZYAN Acknowledgements The authors would like to thank Elaine Stam for her design work on this report, as well as Kiran Alwani and Sara Ditta for their research assistance. They would also like to thank Brian Murphy, Craig Alexander, Andrew Parkin and Reuven Shlozberg for their review and contributions to the paper. Any errors or omissions are the sole responsibility of the authors.

Authors

SUNIL JOHAL ARMINE YALNIZYAN Sunil Johal is Policy Director at the Mowat Armine Yalnizyan is a leading voice in Centre. He is frequently invited to speak about Canada’s economic scene. She helped define the future of work, technology and social policy the Canadian Centre for Policy Alternatives’ at conferences in Canada and abroad. He has Inequality Project from 2006 to 2017. Armine is contributed expert commentary and advice well-known for her weekly business commentary on regulatory and policy issues to a range of on CBC Radio’s Metro Morning and CBC TV’s organizations and media outlets, including On The Money; and contributions to Maclean’s the G-20, World Economic Forum, Brookings Magazine, Globe and Mail, and Toronto Star. Institution, Globe and Mail, Toronto Star, CBC Armine is an economic adviser to the federal Radio and Television, CTV News, The Guardian, government’s foresight department, Policy Maclean’s, Ottawa Citizen, Policy Options, TVO and Horizons, on the future of work and the economy, the OECD. He holds degrees from the London and is President of the Canadian Association School of Economics, Osgoode Hall Law School for Business Economics. She holds a bilingual and the University of Western Ontario. economics degree from Glendon College, York University and Université de Bordeaux, and a Masters of Industrial Relations from University of Toronto.

MOWATCENTRE.CA @MOWATCENTRE 439 UNIVERSITY AVENUE The Mowat Centre is an independent public policy think tank SUITE 2200, TORONTO, ON located at the School of Public Policy & Governance at the M5G 1Y8 CANADA University of Toronto. The Mowat Centre is Ontario’s non-partisan, evidence-based voice on public policy. It undertakes collaborative applied policy research, proposes innovative research-driven recommendations, and engages in public dialogue on Canada’s most important national issues. ©2018 ISBN 978-1-77259-064-7 Contents

1 Executive Summary 1

2 Introduction 2 Why are we talking about inclusive growth now? 3 Inclusive growth in the digital age 6 What’s at stake? 9

State of Play: Inclusive Growth 3 in Canada and Ontario 12 Key metrics 13 Summary 34

Policy Options to Drive Inclusive Growth 36 4 Pre-distribution: Shaping how markets perform 37

Redistribution: Shaping government policies 45

What Next? An Inclusive Growth 5 Agenda for Canada 55 Preparing for success and measuring progress 57

6 Conclusion 59 Income inequality is at or near record high-levels across advanced economies, and the digital revolution is raising concerns that access to well-paying, secure employment will become even more challenging. RACE TO THE TOP TO RACE 1 on developing aninclusive growth agendaforCanada. government policiesare developed (redistribution), before concludingwithspecific recommendations then explores avariety ofoptionsthatcanshapebothhowmarkets (pre-distribution) perform andhow inclusive growth, rangingfrom incomeinequality tohouseholdincomesthegenderwagegap.It inclusive growth. Itbeginsby assessingCanada’s record across arangeofkey metricsrelated to This report seekstoprovide guidancetopolicymakers lookingtoputCanada on apathtowards more for various reasons, unlikely toresolve these challengesinthefuture, asthey have inthepast. growth gainsfromanother commodityboom,export-led orfurther increasing women’s employment are, related toincomeinequality, wagestagnationandanincrease inprecarious employment. Relianceupon significant. Thepathforward toamore inclusive modelofgrowth We isuncertain. faceclearchallenges For Canadianpolicymakers, thelikelihood ofaprolonged periodoflittleornogrowth (i.e.,“slowth”) is capital, andthrive. fierce. Themostinclusive jurisdictions willbewell-positionedtowintheglobalwarfortalentand jobs. Inourincreasingly digital,globalworld,thecompetitionforjobsandinvestment isgrowing more and thetransitiontoanincreasingly digitaleconomyinafairmannerthatgenerateswell-paying, stable intelligence andpeer-to-peerplatformsposetoughnewquestionsaround howtomanagedisruption gains beshared more broadly andequitablythroughout society? Disruptive technologieslike artificial Consequently, theconversation forpolicymakers hasturnedto“inclusive” growth. How caneconomic free tradepolicieshave notbeenbroadly shared, andtheloomingthreat oftradewars. in theUnitedStatesandEurope, agrowing recognition thatmanyofthebenefitsglobalizationand tenor ofdisquietaboutthefuture hasarisenfrom theexperiencesofBrexit, ariseinpopulistsentiment pursued fordecadeshave notyieldedbroadly-shared prosperity formanyoftheircitizens. Ageneralized Governments around theworldare comingtogripswiththerealization thatthegrowth modelsthey SUMMARY EXECUTIVE

1 | THE MOWAT CENTRE 2 INTRODUCTION We are entering a world of technological advances that would have seemed fantastical only a generation ago. The promises of new technologies and the anxiety that uncertainty and change naturally bring with them mean that the future of work is a top of mind issue for Canadians and policymakers. The uncertain impact of robotics, the gig economy and artificial intelligence on our economy are overlaid against troubling trends in income inequality and growth in precarious work.

Even coming off the strongest economic performance in the G7 set of nations, and unemployment rates that are the lowest of the past 40 years, Canadians are worried about their own personal finances, whether housing costs or debt repayment.1 Looking forward, 2017 may mark an outlier in terms of economic expansion.2 Canada’s economy appears set for a prolonged era of “slowth” (i.e., no or little growth) as compared to historical long-term trends. Gross Domestic Product (GDP) growth over the next 50 years may only reach half the rate it was over the past 50 years (1.5 per cent compared to 3.1 per cent).3

Globally, a generalized tenor of disquiet about the future has arisen from the experiences of Brexit, a rise in populist sentiment in the United States and Europe, a growing recognition that many of the benefits of globalization and the free trade policies of the past three decades have not been broadly shared, and the looming threat of trade wars.

Yet, we have faced similarly challenging circumstances in the early part of the 20th century and created broad-based prosperity for many. We can face the challenges of today and develop a more inclusive growth agenda that works for Canadians from all walks of life and all manner of different life experiences. Doing so will, however, take concerted action from governments, business and individuals.

1 Nanos Research (2017) “The majority of Canadians are concerned about the gap between the rich and poor and housing affordability.” http://www.nanos.co/wp-content/uploads/2017/11/2017-1106-Bloomberg-OMNI-Populated-report-with-Tabulations.pdf. 2 According to the 2018 federal budget, Canada’s 3.0 per cent GDP growth in 2017 is projected to decline to 2.2 per cent in 2018, and then an average growth rate of 1.7 per cent between 2019 and 2022. Department of Finance (2018) “Equality and Growth: A strong middle class.” https://www.budget.gc.ca/2018/docs/plan/toc-tdm-en.html. 3 James Manyika et al. (2015) “Global Growth: can productivity save the day in an aging world?” McKinsey Global Institute. https://www. mckinsey.com/global-themes/employment-and-growth/can-long-term-global-growth-be-saved. The federal government projects real GDP growth of 1.7 per cent per year between 2023 and 2055. Department of Finance (2017) “Update of Long-Term Economic and Fiscal Projec-

2 | RACE TO THE TOP 2 | RACE TO tions 2017.” https://www.fin.gc.ca/pub/ltefp-peblt/2017/report-rapport-eng.asp. maximizing economicgrowth. andtaxationaskeyintervention mechanisms for to growth, emphasizing thereduction ofpublic consensus, focusedonamarket-driven approach order hademerged, theso-calledWashington soared. stretched asunemployment ratesandinflation shocks of1973and1979,thewelfare statewas replaced by floatingrates.Combinedwiththeoil major currencies cametoanendin1971andwas Bretton Woods systemoffixed exchange ratesfor Against thisbackdrop ofsocialprogress, the QPP (1965)andMedicare (1966). Allowance (1945),OldAgeSecurity(1951),CPP/ (1940), theNationalHousingAct(1944),Family programs suchasUnemployment Insurance advanced economies)withtheintroduction of of thewelfare stateinCanada(anymanyother The 1940sthrough the1960ssawemergence progress. the standard measure ofnationaleconomic at theconference, andGDPwasadoptedas FundMonetary andWorld Bankwere born economic depression. TheInternational the tumultoftwoworldwarsandanintervening encourage economicgrowth, stemmingfrom consensus around key publicpoliciesthatcould in theemergence ofabroad international In 1944,theBretton Woods conference resulted Why are wetalkingaboutinclusive growth now? com/2011/07/07/bretton-woods-collapse.html#67dc5d936792 four-decade traumaofitscollapse.” Forbes. https://www.forbes. sity Press, p126;andNathan Lewis(2011)Bretton Woods andthe Anton Hemerijck(2013)“ChangingWelfare States”Oxford Univer- tem, 1972-1981.” https://www.imf.org/external/about/histend.htm; Fund6 InternationalMonetary “TheendoftheBretton Woods Sys- social-architecture.ca/wp-content/uploads/FramingPaper.pdf. (2015) “RenewingCanada’s Social Architecture.” MowatCentre. http:// 5 ThomasGranofsky, MilesCorak, SunilJohalandNoahZon history/. 3,2011.http://foreignpolicy.com/2011/01/03/gdp-a-brief-January 4 ElizabethDickinson(2011)“GDP:abriefhistory.” Foreign Policy 6 By1980anewinternationaleconomic 4 5 , Canadians trustgovernment institutions. for too many in society is certainly akeyfor toomanyinsocietyiscertainly factor. current economicparadigmisnolongerworking figures, thenotionthatglobalizationand a numberofcausespotentiallyunderliethese their nationalgovernment. population inOECDcountrieshave confidencein trust ingovernment. Only42percentofthe economies, there isanescalatingcrisisof on economicgrowth. Across developed about theequityofanagendafocusedsolely Yet, there hasbeenincreasing skepticism world aswellintheworld’srichestnations. model, promoting itsadoptioninthedeveloping OECD were strong proponents ofthisgrowth organizations suchastheIMF, World Bankand and privatization. Untilrecently, international decades, prioritizingtaxcuts,de-regulation and otherdeveloped countriesforthelastfour has characterized ofCanada theeconomicstory The “trickle-down” approach towealthgeneration globalization-of-discontent-by-joseph-e—stiglitz-2017-12. Project Syndicate. https://www.project-syndicate.org/commentary/ pdf; JosephE.Stiglitz(2017)“The GlobalizationofOurDiscontent.” http://www.oecd.org/inclusive-growth/Policy_Brief_Time_to_Act. 9 OECD(2017)“Timeto Act:MakingInclusive Growth Happen.” trust2017/trust-in-canada/. 8 Edelman (2017) “Trust inCanada.” https://www.edelman.com/ http://www.oecd.org/inclusive-growth/Policy_Brief_Time_to_Act.pdf. 7 OECD(2017)“Timeto Act:MakingInclusive Growth Happen.” has occurred, butthatithasnotbeenwidely growth acknowledgesimplicitly thatgrowth conversation: inclusive. Theterminclusive adjective tothegrowthadding animportant such astheIMF, World BankandOECDare now Many government andinternationalorganizations more challenging. access towell-paying, secure employment even increasing thatthedigitalrevolution willmake across advanced economies,andconcernsare Income inequalityisatornearrecord high-levels 7 Only43percentof 8 While 9

3 | THE MOWAT CENTRE 4 | RACE TO THE TOP » Roughly1/3ofworkers inOntarioare engaged » Wage stagnationisanendemicfeature of » According totheOECD, thetop1percentof example: inclusive growth hasemerged asaconcern.For and wagestagnationstarklydemonstrateswhy issues suchasincomeinequality, precarious work A review ofthelandscapeforCanadiansacross are adragoneconomicgrowth. documented howincreases inincomeinequality shared. Infact,boththeIMFandOECDhave fin.gov.on.ca/en/economy/ltr/2017/ch3.html#s8. Trends.” InOntario’s Long-Term ontheEconomy Report ofFinance(2017)“ChapterIII:Employment14 OntarioMinistry fits-all-9789264235120-en.htm. http://www.oecd.org/social/in-it-together-why-less-inequality-bene- 13 OECD(2015)“InItTogether: WhyLessInequalityBenefitsAll.” review-final-report/chapter-4-vulnerable-workers-precarious-jobs. . https://www.ontario.ca/document/changing-workplaces-Report ers inprecarious jobs.” InTheChangingWorkplaces Review –Final ofLabour(2017)“Chapter 4:Vulnerable12 OntarioMinistry work social/OECD2014-FocusOnTopIncomes.pdf. Countries: Was thecrisisagamechanger?”http://www.oecd.org/ 11 OECD(2014)“Focus onTop IncomesandTaxation inOECD http://www.imf.org/external/pubs/ft/sdn/2011/sdn1108.pdf. “Inequality andUnsustainableGrowth: Two SidesoftheSameCoin?” oecd.org/social/Focus-Inequality-and-Growth-2014.pdf; IMF(2011) 10 OECD(2014)“Focus onInequalityandGrowth.” https://www. since themid-1990s. employment growth inadvanced economies forms ofworkaccountfor60percent in precarious formsofwork. countries since1985. roughly onparwiththeaverage forallOECD between 1997and2016,adjustedforinflation. Ontario have seenessentiallynowagegrowth professional andnon-managementworkers in life formanyCanadians.For example,non- and 2007. of overall pre-tax incomegrowth between1975 earners inCanadaaccountedfor37percent 11 Canada’s incomeinequalityis 13 12 Non-standard 10 . https://www. 14 - this measure. ranked 17thoutof29advanced economiesby the pastfive years. Inthe2018update,Canada GDP percapitaandlife expectancy)fallover measures suchasmedianhouseholdincome, Development Index(acompositerankingof 103 countriesitsurveyed sawtheirInclusive in 2017whichfoundthatmore thanhalfofthe The World Economic Forum released areport » Alongsidedevelopments inthelabourmarket, docs/WEF_Forum_IncGrwth_2018.pdf. Data Highlights.” World Economic Forum et al.(2018)“TheInclusive Development and Index2018,Summary rum.org/docs/WEF_Forum_IncGrwth_2017.pdf ;Richard Samans 2017.”opment Report World Economic Forum 16 Richard Samansetal.(2017)“TheInclusive Growth andDevel- tal_Health_FINAL_Version_ENG.pdf. commission.ca/sites/default/files/2016-06/Investing_in_Men Investing inMentalHealthCanada.” https://www.mentalhealth Mental HealthCommissionofCanada(2016)“MakingtheCasefor uploads/2015/07/Access_to_Oral_Care_FINAL_REPORT_EN.pdf; able People LivingInCanada.” http://cahs-acss.ca/wp-content/ Sciences (2014)“Improving AccessTo OralHealthCare For Vulner- document-revised-10-03-16.pdf; CanadianAcademyofHealth http://childcarecanada.org/sites/default/files/ECEC-2014-full- care inCanada2014.” Childcare Resource andResearch Unit. Friendly etal.(2015)“Earlychildhoodeducationand 15 Martha limited accesstomentalhealthservices. least $50Bwhilethemedicare systemprovides mental healthproblems costtheeconomyat avoid visitingthedentist duetocosts;and 1 in4children; 6millionCanadiansayear childcare spacesare onlyavailable forroughly stagnation orinequality. For example,regulated that couldoffsetsomeoftheeffects ofwage gaps remain inthecoverage ofsocialprograms 16 . http://www3.weforum.org/ . http://www3.wefo 15 - - - standard employment. which grewatanannualrateof2.3percentbetween1997and2015–abouttwiceasfast In Ontario,about27percentoftheworkforcein2015wasengagednon-standardemployment, in Canadatoday. workers, consultants,andcontingentworkers) make upabout 20to30percentoftheworkforce workers,Non-traditional workers freelancers,independentcontractors,remote (includingpart-time 18 StatisticsCanada(2017)“LabourinCanada:Key results from the2016Census.” TheDaily. 2025-Randstad-Part1.pdf. 17 Randstad(2016)“Workforce 2025:thefuture oftheworldwork.” http://content.randstad.ca/hubfs/workforce2025/Workforce- should betaken intoaccountinaformaldefinition.) wages, incomevolatility, workarrangements lackofbenefits,personalpreferenceforcertain definition ofwhatconstitutesaprecariouslyemployed worker (i.e.,whatcombinationoflow However, thereisalackofharddataontheprecariouslyemployed inCanada,andnoofficial 2025. companies say thatthey anticipatethenumberofcontingentworkers toincrease35percentby this numberisexpectedtoriseinthenearfuture.Accordingasurvey, 85percentofCanadian Not onlyarenearlythreeoutof10workers inCanadacurrentlyemployed innon-standardjobs, involuntary,wages andnobenefits,workingpart-time agencies,etc.). workingfortemporary workers inOntariowerevulnerableandengagedprecariouswork(i.e.,workingfull-time withlow design appropriate, targeted policy interventions forworkers engagedinprecariouswork. design appropriate,targetedpolicyinterventions per centto56.2formen,andfrom46.443.7women. women aged25to54workingfull-timedeclinedsignificantlybetween2005and2015–from63.3 economic prospects. findsomethingbetter–indicatingadesirefor only engagedinthistypeofworkuntilthey gigs.Critically,rather thanshort-term are morethanhalf(53percent)oftherespondentssaidthey type ofworkforover ayear, demonstratingthattheseareoftenfull-time employment sources, oftheseworkersage of45.Theirsurvey foundthatabouthalf(48percent)hadbeendoingthis that 90percentoftheseworkers have collegeoruniversity degrees,and71percentareunderthe research/rise-precarious-employment. https://www.cpacanada.ca/en/the-cpa-profession/about-cpa-canada/key-activities/public-policy-government-relations/economic-policy- 22 Francis Fong (2018)“Navigating precarious employment inCanada:whois really Professional atrisk?”Chartered AccountantsCanada. cations/Ontario%20Office/2017/04/CCPA-ON%20sharing%20economy%20in%20the%20GTA.pdf. Greater Toronto Area.” CanadianCentre forPolicy Alternatives, Ontario.https://www.policyalternatives.ca/sites/default/files/uploads/publi 21 SheilaBlockandTrish economy?A survey ofworkers oron-demandservice andconsumersinthe Hennessy(2017)““Sharingeconomy” 2025-Randstad-Part1.pdf. 20 Randstad(2016)“Workforce 2025:thefuture oftheworldwork.” http://content.randstad.ca/hubfs/workforce2025/Workforce- https://www.ontario.ca/document/changing-workplaces-review-final-report/chapter-4-vulnerable-workers-precarious-jobs#ref-52. ofLabour(2017)“Chapter 4:Vulnerable19 OntarioMinistry workers inprecarious jobs.”. InTheChangingWorkplaces Review –FinalReport en/171129/dq171129b-eng.htm?HPA=1. Gigs foreveryone? Non-standard employment ontherise: 20 A Canadian Centre for Policy Alternatives report ongigeconomyworkers ACanadianCentreforPolicy Alternatives inToronto report found 17 Data from the 2016 census reveals that the proportion ofCanadianmenand Datafromthe2016censusreveals thattheproportion 21 19 Ontario’s ChangingWorkplaces Review estimatedthat30-32percentof 22 Thisgapwillneedtoberemediedinorder http://www.statcan.gc.ca/daily-quotidi

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5 | THE MOWAT CENTRE Inclusive growth in the digital age Aggregating economic growth at a national or global level masks the challenging local or personal situations that affect large portions of society. The richest 42 people in the world 2 have as much wealth as the poorest 50 per cent of the globe.23 This should sound alarm bells about what the hyper-concentration of wealth will mean for social compacts that rely upon shared values and experiences. This concentration of wealth is seen most clearly with the rise of digital titans such as Amazon, Facebook and Google. Amazon controls roughly 40 per cent of e-commerce in America, while Facebook and Google take home about two-thirds of digital ad revenues.24 Anti-trust approaches that worked in the days of Standard Oil have yet to be adequately updated to tackle these 2 new firms and their quasi-utility status.25 The prospect of technological change potentially disrupting many sectors of the economy to the detriment of many workers is also looming. Projections for job losses due to advances in artificial intelligence, robotics, and digital platforms for on-demand work range from as low as 5 per cent up to 47 per

23 Larry Elliott (2018) “Inequality gap widens as 42 people hold same wealth as 3.7bn poorest.” The Guardian, 22 Janu- ary 2018, https://www.theguardian.com/inequality/2018/ jan/22/inequality-gap-widens-as-42-people-hold-same- wealth-as-37bn-poorest. 24 The Economist (2018) “New Titans and how to tame them.” 18 January 2018, https://www.economist.com/news/ leaders/21735021-dominance-google-facebook-and-ama- * http://www.oecd.org/social/OECD2014-Focu- zon-bad-consumers-and-competition-how-tame. sOnTopIncomes.pdf 25 Caroline Holland (2018) “Taking on Big Tech Through ** https://www.theguardian.com/inequal- Merger Enforcement.” Medium. https://medium.com/read- ity/2018/jan/22/inequality-gap-widens-as- write-participate/taking-on-big-tech-through-merger-enforce-

6 | RACE TO THE TOP 6 | RACE TO 42-people-hold-same-wealth-as-37bn-poorest. ment-f15b7973e37. 2030. to automationof100percenttheirtasksby of jobsare likely tobeeliminatedgloballydue McKinsey estimatesonly5percent is important. impactonjobsandtasks between technology’s market was20.2percent. year; buttheaverage annualhire rateinthejob cent ofemployees were laid-offinCanadaevery Between 2003and2013,anaverage of5.8per cent inadvanced economies. a-future-that-works. com/global-themes/digital-disruption/harnessing-automation-for- ture thatworks.” McKinsey GlobalInstitute.https://www.mckinsey. 29 JamesManyikaetal.(2017)“Harnessing automation forafu x/11-626-x2016060-eng.htm. 2013.” Statistics Canada.http://www.statcan.gc.ca/pub/11-626- Canada’s Economic Regions: ExperimentalEstimates,2003to 28 Wen Cietal.(2016)“Economic Insights:Hires andLayoffs in a-future-that-works. com/global-themes/digital-disruption/harnessing-automation-for- ture thatworks.” McKinsey GlobalInstitute.https://www.mckinsey. 27 JamesManyikaetal.(2017)“Harnessingautomation fora fu uk/downloads/academic/The_Future_of_Employment.pdf. erisation?” University ofOxford. https://www.oxfordmartin.ox.ac. “The Future ofEmployment: HowSusceptibleare Jobsto Comput future-of-work; CarlBenediktFrey andMichaelA.Osborne(2013) global-themes/employment-and-growth/technology-jobs-and-the- work.” McKinsey GlobalInstitute.https://www.mckinsey.com/ 26 JamesManyika(2017)“Technology, jobs,andthefuture of that globalconsumptionwillgrow by $23trillion globally. estimate thiswouldwipeout$15trillioninwages of thepaidhoursworked world-wide.They jobs, eliminatingtheneedforabout30percent automate almosthalfofexistingtaskswithin suggests adoptionofavailable technologycould the onesthathave beendestroyed? McKinsey as muchinthenewlycreated tasksandjobsas is leftinthetasksthatremain. Canpeopleearn A key variable inthisconcerniswhatskillmix task destructionandcreation iswhatmatters. jobs tothemix.Thenetresult betweenjoband skills andjobs,butalsoalways addnewskillsand technologies always eliminatetheneedforsome tasks andskillsthatwecan’t yet imagine.New is easiertoestimatethanthecreation ratefor 27 29 However McKinsey alsoestimates 28 Thedestructionrate 26 Thedistinction - - - and disruption? ensure thatdecentworkisanoutcomeofchange words, whatdeliberatestepscanwetake to benefits andsomemeasure ofsecurity?Inother we create are well-paying jobsthatcomewith becomes howcanwemake sure the jobsthat governments, businessandcitizens thequestion and anxiety many workers.among uncertainty For is anopenquestion,likely contributingto created inthefuture, thequalityofthosejobs be While millionsofnewjobswillcertainly emerging markets. globally, mostlyfrom increased demandin what-the-future-of-work-will-mean-for-jobs-skills-and-wages. mckinsey.com/global-themes/future-of-organizations-and-work/ for jobs,skills,andwages.” McKinsey GlobalInstitute.https://www. 30 JamesManyikaetal.(2017)“What thefuture ofworkwillmean 30

7 | THE MOWAT CENTRE 8 | RACE TO THE TOP become more commonplaceevery day, whetherAmazon’s seasonalworkforce Examples oflarge organizations withoutsourced ortemporary, contingentworkforces What wewantasconsumersoftenpitsusagainstwhatworkers. potential. place-based realities; andregulatory regimes that,by definition,mustlagtechnological uneven bargaining power;blurringjurisdictionalboundariesasdigitalrealities viewith shared experiences;awave ofcorporateconsolidationthatisacceleratingalready as consumersvsourselves asworkers; more customized, me-time,fewer collective, dynamics thatmake inclusive growth more complicatedtoachieve: pittingourselves As therealities ofaborderless digitalplatformeconomyevolve, they unleash » www.theatlantic.com/magazine/archive/2018/04/learning-to-love-big-business/554096/. 35 David Atkinson andMichaelLind(2018),“IsBigBusinessReallyThat Bad?”,TheAtlantic Magazine,April2018 https:// Canadian Centre forPolicy Alternatives. https://www.policyalternatives.ca/publications/reports/no-temporary-solution. 34 ErikaShaker andRobinShaban(2018)“NoTemporary Solution:Ontario’s shiftingcollegeanduniversity workforce.” https://www.theguardian.com/technology/2016/dec/09/uber-drivers-report-sweated-labour-minimum-wage. 33 Felicity Lawrence (2016)“Uber istreating itsdrivers assweatedlabour, says report.” TheGuardian, 9December2016, 2014, https://www.theguardian.com/money/2014/may/04/amazon-seasonal-work-homeless-jobs-unemployment. 32 JanaKasperkevic (2014)“HomelessandworkingforAmazon: thetrapofseasonaljobcycle.” TheGuardian, 4May 31 See:David Weil (2014) “The Fissured Workplace.” Harvard University Press. and benefits,longerjobtenure, andmore career thansmallbusinesses. opportunities At thesametime,macroeconomic datashowbigbusinessestendtooffer betterwages benefits isadollarnotspentwithlocalfirmthatmay treat itsworkers better. with firmsthatfranchise,outsource orhire temporary, employees part-time without are multi-nationalsthathave ofleanworkforces. perfected the art Every dollarspent Increasingly thecompaniesproducing anddelivering consumerproducts andservices often alowwage. the cheapestproduct thatworksfortheirneeds.Theflipside ofevery cheapprice is have control over whatthey spendandhowthey spendit,andmostwilltendtowards make asconsumersoftenundermineourlong-terminterests asworkers. Consumers tomarketservices inthefastestandcheapestway possible,therationalchoiceswe when corporationshave becomehyper-efficientatproducing anddelivering goodsand Uber’s independentcontractordrivers Uber’s in uncomfortable ways. in uncomfortable well-paying jobs)are fundamentally opposed,andare constantlysetagainsteachother Consumer interests andworker (i.e.wantinglow-costgoodsandservices) interests (i.e. It’s complicated.

COMPLICATING FACTORS 33 oreven sessionalinstructors atuniversities.

At atime 32 31 or

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in amore straightforward way. totackleinclusiveclass isacleareffort growth federal government’sgrowing on focus the middle growth asa“pathforward” forCanada,andthe spoken directly ofinclusive abouttheimportance to bemore inclusive. PrimeMinisterTrudeau has intentions tobroaden theireconomicmandates Canadian governments have already statedtheir governments canbeheldaccountable. leading toexpectationsofchangeforwhich models ofgrowth. Words are atleastastart, to talkabouttheneeddevelop more inclusive escalate, impellinggovernments across theglobe approaches toeconomicgrowth continueto anger abouttheinequitiesflowingfrom current Economic anxietyaboutthefuture ofworkand growth agenda. tomovemust start forward withaninclusive thoughtful policyresponses tothoseroot causes to understandtheroots ofpopulismanddevelop one. Governments seeking andpoliticalparties making thecaseforpopulismamore attractive economic growth patternsanddistributionsare the interests ofaneliteclass.Increasingly, our assetagainst the commonperson,particularly Populism aboutgivingvoice is,atitsheart, to What’s atstake? intv-amanpour-justin-trudeau-canada-unga/index.html. http://www.cnn.com/2016/09/20/world/CNN, 26September2016, Araujo (2016)“JustinTrudeau: Growth canworkforeveryone.” changes-structure-and-mandate-cabinet-committees; Madalena ca/eng/news/2016/08/22/prime-minister-canada-announces- mandate ofCabinetcommittees.” 22August 2016,https://pm.gc. Prime MinisterofCanadaannounces changesto structure and 36 JustinTrudeau, PrimeMinisterofCanada(2016)“News-The create andsustaininclusive growth thatbenefits of Ontariohasalsospoken abouttheneedto 36 TheGovernment more inclusive growth initiatives. released reports orhostedconferences callingfor Bank, IMFandWorld Economic Forum have ring. Inthepasttwoyears alonetheOECD, World have alsoputtheirhatsintotheinclusive growth the digitalage,there are ahostofnewandold to beattheforefront ofinclusive growth in Forbe theSwedenof21stcentury? Canada atforgingefforts inclusive societies.Whowill such asSwedenandDenmarkenvytheir In thepastwe’d oftenturntotheNordic countries paying positions? benefit from atmore opportunities fulfilling,well- routine tasksthrough automation,willpeople time? Aswefree uppeople’s timefrom mundane, the unpredictability oftheirschedules andtravel it make workers’ lives easierby smoothingout consumers live easierinmanyrespects, butcan technology? Technology has proven tomake intelligenceandmobile use ofbigdata,artificial harnessed. Howcanweimprove lives through the existthathaveopportunities notyet been policymakers. At thesametime,newpotential age ofdigitaldisruptionisanewchallengeforall Developing aninclusive growth agendainthe everyone. and Beyond.” https://live.worldbank.org/inclusive-growth. (2017) “Inclusive Growth andtheRisingMiddleClassinEastAsia sues/2017/05/30/Inclusive-Growth-Framework-44951; World Bank IMF Working Papers. https://www.imf.org/en/Publications/WP/Is Kireyev and Jingyang Chen(2017)“Inclusive Growth Framework.” weforum.org/docs/WEF_Forum_IncGrwth_2017.pdf; Alexei P 2017.”Development Report World Economic Forum. http://www3. growth/; Richard Samansetal.(2017)“TheInclusive Growth and 38 OECD(2018)“Inclusive Growth.” http://www.oecd.org/inclusive- aC.aspx. tions/013017PremierKathleenWynneRemarksROMAKeynoteMedi https://www.roma.on.ca/ROMA-Docs/Conference/2017-Presenta Premier ofOntario–Keynote 2017Conference.” Remarks:ROMA Rural OntarioMunicipalAssociation(2017)“KathleenWynne, that-creates-shared-benefits-the-hallmark-of-ontario-in-2016.html; December 2016,https://news.ontario.ca/opo/en/2016/12/growth- that Creates Shared Benefitsthe HallmarkofOntarioin2016.” 29 37 OfficeofthePremier ofOntario(2016)“NewsRelease-Growth 37 Arangeofinternationalorganizations 38 -

9 | THE MOWAT CENTRE 10 | RACE TO THE TOP » Proposes theframeworkforaCanadian » Lays outpolicyoptionsthat mightpromote » AssessesCanada’s onarangeof performance Specifically, thisreport: towinningtheracetop. on thetrajectory policyoptionsforputtingCanada setting forth process ofunpackingthesechallengesand challenges toaddress. the Thisreport starts inclusive growth agenda. and redistribution perspective. inclusive growth, from bothapre-distribution indicators related toinclusive growth. It cannot be assumed that we can reverse or even offset pressures towards greater inequality through the mechanisms that have worked in the past. 11 | THE MOWAT CENTRE 11 | THE MOWAT 12 | RACE TO THE TOP 3 past 40years, even phasesofrobust GDPgrowth, hasmateriallyreversed inequality. households historicallycannotplay asimilarlylarge offsettingrole inthefuture. Indeed, nothinginthe that themechanismsoffsetinequalityandcreated more forindividuals and opportunity What may benewforreaders istoseehowlong-termtrends inthesevariables leadtothesuggestion like. This isn’t justadiscussionofinequality, thoughitdoesincludethat. following seriesofmetricsprovides acomprehensive frameworkofwhatinclusive growth mightlook middle class. Nosinglevariable will provide forthesephenomena, butthe anadequateshorthand trends inthedistribution ofbenefitsfrom GDPgrowth andtrends thatmightforetell thefuture ofthe First, there isnodefinition ofwhatinclusive growth is. Whatfollowsisaway tomeasure andassess jurisdiction, compare? to developments inthemiddleclassand“inclusive growth”? AndhowdoesOntario,Canada’s biggest Canada isnotlike theUSinmanyregards. ButisCanadatheexception toglobaltrends whenitcomes CANADA AND ONTARIO INCLUSIVE IN GROWTH STATE OFPLAY: Source: Statistics Canada, CANSIM Table 380-0063. Labour andCorporateShareofGDP|Canada,1961-2017 FIGURE 1 » The primary driver ofthistrend» Theprimary isnotrising exception? seen modestgainssince.WhyisCanadasuchan but reached itslowestpointin2005andhas is slightlysmallerthanitwasagenerationago, the pastdecades. share oftheeconomyhasbeenshrinkingover In manyrichnationsaround theworld,labour’s SHARE OFGDP LABOUR Key metrics ment-and-social-policy/The-Labour-Share-in-G20-Economies.pdf. Share inG20Economies.” https://www.oecd.org/g20/topics/employ- 39 InternationalLabourOrganization andOECD(2015)“TheLabour

corporate sectorinrecent years. and profitability ofthe hasbeenwaninginparts GDP alsoriseswhentheprofit share declines, notingthatthelabourshareor so,it’sworth of Given itsmodestgrowth over thelastdecade as ashare ofGDP, butgrowth inpensions. wages andsalaries,whichcontinuetodecline 2

39

InCanada,thelabourshare

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16 2 » Profits (netoperatingsurplus)have been » Thegrowth intheshare and oftemporary

outpace theoverall declineinprofitability. tobacco production) thatcontinuetostrongly andalcoholicbeveragetransportation, and construction, educationandhealthcare, air pockets ofresilience (finance, real estate, since therecession, andthere are enduring margins ofthecorporatesectorare upoverall compensation. Bothrevenues andoperating of fixed capital,anotherformofcorporate corporations have increased theirconsumption declining asashare oftheeconomy, though polarizes incomeswithinthelabourshare. contract jobsalsorestrains incomegrowth, and

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13 | THE MOWAT CENTRE 14 | RACE TO THE TOP » Butthefallinglobalcommoditypriceshas Income |Canada,1976-2016 Inequality, Measuredby theGiniCoefficient,AdjustedforHouseholdSize, ThreeMeasures FIGURE 2 2 Source: Statistics Canada, CANSIM Table 206-0033. wide. not beenenoughtooffsetthatpinch,economy- The bullishbankingandreal estatesectorshave growing organically through consumerdemand. competition formarket share thatisnot have seenprofit margins squeezed by rising industrial sectorslike utilitiesandretail Other gas extraction,miningandquarrying. industrialsectorssuchasoiland important led toadrop inoperatingprofit margins for

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coefficient. the last16years ormore, asmeasured by theGini record, ithasnotbecomeappreciably worsein income inequalityisatnearitshighestlevel on compared withotheradvanced economies.While againas Canada hasaratheroffbeatstory composition oftheeconomyhave shifted. andtheindustrial of earnedopportunities over thepast40years asthedistribution Incomes have becomemore unequallydistributed INCOME INEQUALITY quotidien/170802/dq170802a-eng.htm.] Key results from the2016Census.” http://www.statcan.gc.ca/daily- [Statistics Canada(2017)“Families, householdsandmaritalstatus: holds were peoplelivingalonein2016,upfrom 7.4per centin1951 percentage ofpeoplelivingalone isrising(28percentofhouse because themajorityofCanadians live withothers;thoughthe data measure trends inhouseholdincome,notindividual 2018) themostrecent incomedataavailable wasfor2016.These Income datalagby atleast18months.At timeofpublishing(April utilized measure inthestudyoftrends inincome distribution. at thetailsofdistribution,butitisperhapsmostcommonly suited to measuring changesinthemiddleofdistributionthan all theincome).Theformulausedto derive thisnumberisbetter income across theentire population)and 1(asinglepersonhas 40 Itsvalue rangesbetween 0(completelyequaldistributionof

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2 of 2 2 - » Withouttheboomeffect oftheoil-and-gas » Irrespective ofthestrength ofthesemarket- » Robustincomegrowth from jobopportunities » Whiletaxes andtransfers more thanoneadult, whichare themajority. byadditional labourforce women inhouseholdsof participation time, aggregate householdincomeshave risenasaresult ofthe level by adjustingforhousehold size (one,ormore people).Over 42 StatisticsCanadameasures householdincomesatthenational personal incometaxes paid. ments. After-taxincomesinclude income from allsources minus (“transfers”)market from income plusincomesupports govern- turns oninvestments, andprivate pensions.Total incomesinclude 41 Market incomesincludeearnings,self-employed income,re- » Over time,women’s risingeducationand future. unclear whatwilloffsetincomeinequalityin inthepaidlabourmarket,participation itis led energy sectorandwomen’s increasing in significantlylessincomeinequality. driver ofgrowth inhouseholdincome toresult 2000s, nothinghasbeenasufficientlystrong driven forces over the courseofthe1990sand also diminishedmore recently. inequality, usingthismeasure. Thiseffect has have offsetacontinuedincrease inincome Saskatchewan andNewfoundlandLabrador in theresource-rich provinces ofAlberta, effect hasplateauedinthelastdecade. thereby improving householdincomes. employment rateshave ledtobetterpay, The key componentisearnings. returns oninvestments andprivate pensions. in market incomes.Thisincludesearnings, reversed itsdirection, whichisdriven by trends of incomeinequalityinCanada,they have not 41 reduce thelevel 42 This

15 | THE MOWAT CENTRE 16 | RACE TO THE TOP leaves littleroom forreal-life interactions. 18 to34spendhoursaweekonline(compared to24.5hoursforallCanadians),which from us. This meansweincreasingly don’t mix,mingleandgo toschoolwithpeoplewhodiffer creating low-andhigh-incomeneighbourhoodswithfewer mixed incomeneighbourhoods. At thesametime,incomeinequalitiesare increasingly manifesting inspatialdimensions, deliver ourfood,walkdogsandassemblefurniture. platforms withinthepastyear) survey foundthat8percentofAmericansreported takingontasksthrough digital This atomizationcoincideswiththeongoingemergence of thegigeconomy(a2016 recent decades. attendance atreligious andunionmembershipshave services alldropped significantlyin which historicallyprovided asenseofbelongingandattachment. Voter turnoutrates, islands untothemselves, unmoored from thepolitical,socialandculturalinstitutions One ofthefeatures ofmodernlife isthemannerinwhichmore andmore peopleare experiences, morechallengestothesocialecosystem The RiseoftheI-World: Morecustomized realities,fewercollective » id=2795110. 48 Walter Quattrociocchi (2016)“Echo ChambersonFacebook.” SSRN. https://papers.ssrn.com/sol3/papers.cfm?abstract_ nity_Equation_Update_Low-Res.pdf. income inequalityandpolarization.” UnitedWay Toronto andYork Region.https://www.unitedwaytyr.com/file/2017_Opportu - Equation47 MihaelaDinca-Panaitescu in theGreater etal.(2017)“TheOpportunity Toronto Area: An updateonneighbourhood www.pewinternet.org/2016/11/17/gig-work-online-selling-and-home-sharing/. 46 Aaron Smith(2016)“Gig Work, Online SellingandHomeSharing.” InInternet&Technology, Pew Research Center. http:// more-time-online/article34360751/. March 2017,https://www.theglobeandmail.com/news/national/concerns-raised-as-report-suggests-canadians-spending- suggestsCanadiansspendingmore45 AlyThomson(2017)“Concernsraisedasreport time online.” TheGlobeandMail D.44 See:Robert Putnam(2000)“BowlingAlone:TheCollapseandRevival ofAmericanCommunity.” SimonandSchuster. The Daily http://angusreid.org/religion-faith-public-square; StatisticsCanada(2017)“CanadianMegatrends: Unionizationratesfalling.” tion=ele&dir=turn&document=index&lang=e; David Korzinski (2017)“Religion,Faith andthePublicSquare.” AngusReidInstitute 43 ElectionsCanada(2017)“Voter Turnout atFederal ElectionsandReferendums.” http://www.elections.ca/content.aspx?sec the comfort ofone’s ownhomearethe comfort thebasisforoursocialconnections. as wegoonlinetobeaffirmed,notchallenged,by newperspectives orideas. constant stateofflux. at cross-pollination oflived experiencesandviewpointsare crucialtoovercoming this of theindividualandare constantly linked andre-linked innewways? Deliberateefforts societal andeconomicrelationships whenthoserelationships are increasingly atthelevel How canweadaptpoliciesandprograms premised understandingof uponaparticular time willonlybecomemore stagnantandprone tofailure. homogenization ofideasmeansalessdiverse andlessrobust socialecosystemthatover

COMPLICATING FACTORS . http://www.statcan.gc.ca/pub/11-630-x/11-630-x2015005-eng.htm. 47 Our online lives further exacerbatetheechochamberofourlived Ouronlinelives further experience, 43 Increasingly, mobiledevices, laptopsandflat-screen enjoyed TVs from 46 andanarmyofcontingent,just-in-timeworkers who 45 44 Canadiansaged 48 This , 21 . 2 2 Source: Statistics Canada, Custom Tabulation from CanadaIncomeSurvey. After-Tax IncomePolarization (P90:P10Ratio)|CanadaandOntario,Non-Seniors,1976-2015 Source: Statistics Canada, Custom Tabulation from CanadaIncomeSurvey. Market IncomePolarization (P90:P10Ratio)|CanadaandOntario,Non-Seniors,1976-2015 FIGURE 3 relates theincomesof90thpercentile tothatofthe10thpercentile, asaratio. of income,measured by theratiooftopincomestobottomincomes,continuesrise.Thismeasure While theGinicoefficienthasremained relatively constantforalongperiodinCanada,thepolarization OFINCOMES POLARIZATION transfers (income support programs)transfers andincometaxes. (income support non-senior households, comparingpolarizationin market incomesto thatofafter-tax incomes,whichincludetheredistributive functionsof 49 Becausethesetrends are driven primarilyby theevolution ofearningsthrough onlylook at thelabourmarket, the followingcharts 2 2

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17 | THE MOWAT CENTRE 18 | RACE TO THE TOP » Notwithstandingregional variations, today’s » InCanadamarket incomestendtogrow far Source: Statistics Canada, Custom Tabulation from CanadaIncomeSurvey. After Tax (2015$’s)by Decile |Non-SeniorEconomic Households,CanadaandOntario Percentage ChangeinAverage Incomes betweenthePeriods of1976-79and FIGURE 4 2 2 Saskatchewan and Alberta in2013). Saskatchewan andAlberta the mostrecent datapoint(Manitobain2006, of after-taxincomepolarizationearlierthan Only three provinces have seenhigherlevels senior householdsin2015,followedby Ontario. polarization ofafter-taxincomeamongnon- in CanadaandOntario.BChadthemost level onrecord amongnon-seniorhouseholds after-tax incomepolarizationisatthehighest trends. recessionary spikes, butdoesnotreverse the The taxandtransfer systemmoderatesthe steeply, asmore peoplebecomeunemployed. the bottomofincomedistributionfallmore This ismostlybecausetheincomesofthoseat more polarized duringrecessionary periods. 2 » Bycomparison,average after-taxincomesof » Thebiggestconcerninthistrend isnotincome adjusted androunded tothenearest $100.) to $206,100inOntario.(Allfigures are inflation- and 2015across Canada,andfrom $202,300 rising from $187,400to$198,000between2008 had more thanregained thelostground by 2015, took aoneortwoyear hitaftertherecession, but non-senior householdsinthetop10percent from approximately $9,500 to $7,500 Canada-wide. $7,500 between 2008 and2015in Ontario, and fell from approximately $10,000to approximately the bottom10percentofnon-seniorhouseholds after-tax terms.Theaverage after-taxincomesof loss ofincomessincetherecession, even in in thebottom10percenthave seenthegreatest both market andafter-taxincometerms.Those Canada, andthebottom50percentinOntario, 40 percentofnon-seniorhouseholdsacross levels (adjustedforinflation)thebottom incomes thatwere, by 2015,stillbelow2008 growth atthetopofincomespectrum,but 2012-15 forIncome » We holdconstantthevalues ofdecile latter agrowing ofsociety—largely portion rest. shoulders thefatesofchildren andseniors—the non-senior working-agepopulation,onwhose concern shouldbetheentire populationorthe to measure themiddleclass,andwhetherour due tothedegree ofdisagreement over how caveats.”some important Theequivocation is answerforCanadais:“yes...but with The short in theUSandotherrichindustrialized nations. middle class is shrinking in Canada, as it has been There hasbeenmuchdebateastowhetherthe SHRINKING MIDDLECLASS taken intoaccount. average, than40years ago,wheninflationis of non-seniorhouseholdshave lessincome,on For Canadaasawhole,thebottom40percent incomes inbothperiods.) comparison isbasedonafouryear average of in thelate1970s,adjustingforinflation.(This today thaninasimilarnon-recessionary period of Ontario’s non-seniorhouseholdsare lower After-tax incomesofthebottom50percent generational trend ofincomepolarization. These mostrecent trends reinforce a longer, people intothetopover time? bottom, “grow themiddleclass,” andmove more then. Was thatenoughtoshiftpeople outofthe doubled inreal (inflation-adjusted)termssince (top 30percent).Theeconomyhasmore than the middle(middle40percent),orattop more peopleatthebottom(bottom30percent), and compared toagenerationago,there are over time.Thishelpsclarifywhether, over time households thatfitineachincomecategory over time,andlookattheproportion of thresholds in1980,adjustthemforinflation » Thetrend ofashrinkingmiddleismost » Onetrend thatcouldinfluencethe growth inthe » Whenmeasured by market incomes(thatis, income threshold. past, whichnudgesthem intothehigherearning with dual(ormore) earnersascompared tothe other isthegrowing numberofhouseholds the bottomhalfofincome distribution.The and inthebottomhalfofmiddle—total the bottomthird oftheincomedistribution, erosion ofmarket incomeforhouseholdsin contribute tothisshrinkingmiddle.Oneisthe working-age populationin2015.Two factors accounted foronly21percentofthenon-senior themiddle40percentin1980 that supported is even more starkinOntario,where incomes income distribution.Thiserosion ofthemiddle more peopleinthebottomandtopthirds ofthe cent ofsuchhouseholdsin1980),withboth middle-income bandthataccountedfor40per have market incomesintheinflation-adjusted (only 28percentofnon-seniorhouseholdsnow pronounced amongnon-seniorhouseholds population in1976,to36percentby 2015. their ownover time, from 25percentofthe increase intheproportion ofpeoplelivingon related tothefactthatthere hasbeenasteady third oftheincomedistributionover timeis number ofhouseholdsfallingintothebottom (32 percentinsteadof40cent). smaller group inthemiddle2015than1980 (34 percentinsteadof30cent),leaving a households thathave moved tothebottomthird cent insteadof30percent),there are alsomore ladder compared toagenerationago(34per have moved uptothetopthird oftheincome for inflation).WhilemanyCanadianhouseholds with the“middle” incomesof1980(adjusted there wasasmallershare ofthepopulation before anytaxes orgovernment assistance),

19 | THE MOWAT CENTRE 20 | RACE TO THE TOP softer butthesame: » Intermsofafter-taxincomes,thetrends are ers willhave retired. unlikely to remain thecasein15years, by whichtimemostboom- benefits to momentis definedcontributions, thisgoldensenior’s based pensionbenefitssincethe 1990s, andtheshiftfrom defined 50 Given the reduction in theincidenceofprovision ofworkplace- »» Isn’t thatgoodnews? »» Across theentire population(i.e.,including »» Amongnon-seniorhouseholdsthere are adjusted forinflation. that thebottom10percentlived onin1980, cent are strugglingwiththesameincome per centnowenjoy “top” incomes;and15per trends are bigger: 22percentinstead of10 working-age households.InOntario,these are nowareality for13percentoftoday’s of working-agehouseholdshadtostruggle incomes withwhichthepoorest 10per cent cent oftheworking-agehouseholds;and age householdsnoware enjoyed by 21per flow totherichest10percentofworking- of thedistribution.Incomesthatusedto there are more householdsatbothextremes But whenseniorsare taken outofthemix, better public income supports forseniors. better publicincomesupports with more generous private pensions,and pensions in2015than1980,more seniors incidence ofseniorswithworkplace-based than they were inthe1980s,duetohigher because seniorsare doingfarbettertoday 30 percentoftheincomedistribution. of householdsare inwhatusedtobethetop population isinthemiddle;andalarger share is inthebottomthird; asmallershare ofthe seniors), asmallershare ofthepopulation or inOnt the topandbottom,whetherCanada-wide fewer householdsinthemiddle,butmore at ario. Yes, andthat’s 50

»» Theimpactoftransfers (incomesupports) »» However, atthe otherendoftheincome »» Thehollowingofthemiddlefornon-senior non-senior households. Amongseniors and the topandbottomof distributionamong after taxes andtransfers, andmore atboth the middleofincome distributionby 2015 reference point,wesee fewer householdsin “growing themiddleclass.” Using1980asthe attenuating polarizationisnotthesameas trend across Canadaand inOntario.But are having todomore worktosoftenthat incomes, andprograms ofredistribution and taxes reduces thepolarizationoffamily forthepoorestsupports families. the growth inearnedincomeand terms, meaninggrowth intaxes paidoffset smaller inafter-taxtermsthanmarket with children inthepoorest 30percentwas the declineinproportion ofhouseholds market in2015ascompared to1980.Infact, were spendingmore timeinthepaidlabour after-tax termsdespitethefactthatparents hadn’t much,ineithermarket declinedvery or which definedthebottom30percentin1980 children livingwithinincomesbelowthat spectrum, by 2015theshare offamilieswith course ofageneration. the incomesoffamilieswithchildren over the as-breadwinner” effect hasclearlyimproved parents are employed aswell.The“woman- hours compared to1980;andmore single have twoearnersworkingatornearfull-time because somanyofthesehouseholdsnow and thetop49percentinCanada.That’s account forthetop32percentinOntario describe thetop10percentin1980now this group, incomethresholds thatusedto age familieswithchildren under18.For the shiftupward ispropelled by working- households isallthemore strikingsince 2 Source: Statistics Canada, Custom Tabulation from CanadaIncomeSurvey. Top 2015(inflation-adjusted) oftheIncomeDistributionin 1980,by A ShrinkingMiddle:ChangesintheProportion FIGURE 5 2 »» Importantly, therecent pasthasreinforced major recession? are doingbetterinCanada,notwithstandinga recession. Doesthatmeanmostpeople down the income spectrum for years after the most householdincomestendedtoshift and exactlyunlike previous recessions, where would hopeeconomicgrowth canachieve, top, Canada-wide.Thisisexactlywhatone from bottomtomiddle,andfrom middleto 2007 and2015,more householdsmoved this trend atthenationallevel. Between in thepaidlabourmarket. primarily duetoparents spendingmore time and forfamilieswithchildren under18 because oflarger pensionsandtransfers, fewer inthebottom.For seniorsthiswas the middleaftertaxes andtransfers, butalso course of35years there were fewer peoplein families withchildren under 18,over the

of CanadianHouseholdsintheBottom,Middleand » Withoutaresource boom,significantincreases based on1980sstandards. growing “middleclass”willcomefrom, even one based wagegrowth, itishard toseewhere a in thehoursworked perhousehold,orbroad- »» Sadly, notreally. TheCanada-widegains between 2007and2015. share ofthesepoorest householdsgrew cent ofhouseholdsin1980.AndBC,the under thethreshold forthepoorest 30per proportion ofhouseholdslivingonincomes and Quebecsawlittleornoreduction inthe and atthebottomofdistribution,Ontario gains atthetopbetween2007and2015; provinces have seenfarlesssubstantial Labrador, Canada’s andAlberta. three largest in Saskatchewan,Newfoundlandand driven mostlyby therapidgrowth ofincomes mask strong regional differences, andare

21 | THE MOWAT CENTRE 22 | RACE TO THE TOP » Anotherway toassesshowthemiddle the focusremains onincomeredistribution. take tomeetthechallengesoffuture, if in 2015,itraisesthequestionofwhatwill the half-way markoftheincomedistribution are neededtostabilize household incomesat in Ontario.However, ifgovernment supports households Canada-wide,andmostlyoffsetit have largely offsetthistrend formedian per household.Government incomesupports 18, whoincreased theamountofpaidwork 2015, except forfamilieswithchildren under Ontario (by 8percent)between1980and fell across Canada(by 5percent) andin income spectrum.Medianmarket incomes driven by what’shappeningatthetopof over time,asaverages are increasingly decoupled from trends inmedianincomes Trends inaverage incomeshave become different household/familytypes) (Market IncomesvsAfter-Tax Incomes, for HOUSEHOLD INCOMES AVERAGE AND MEDIAN » Medianafter-taxhousehold incomesforall for inflation. For non-senior households, 2015, 11per cent more, afteraccounting rose from $50,700to$56,300 from 1976to Canadian households,including seniors, described. “average” household,ifthatentity couldbe no longerrepresents theincomeof course ofageneration.Theaverage income incomes hasconsequentlygrown over the The difference betweenmedianandaverage the years sincetherecession of2008/2009. in course ofageneration,andparticularly more slowlythanaverage incomesover the less incomeandhalfhasmore) have risen incomes atwhichhalfthepopulationhas median incomes.Medianincomes(the is faringtoreview trends inaverage and

class Source: Statistics Canada, Custom Tabulation from CanadaIncomeSurvey. time periods,CanadaandOntario Growth inAverage Incomes,Market andAfter-Tax |By differenthouseholdtypesandin Source: Statistics Canada, Custom Tabulation from CanadaIncomeSurvey. time periods,CanadaandOntario Growth inMedianIncomes,Market andAfter-Tax |Bydifferenthousehold FIGURE 6 2 » Average after-taxhouseholdincomeforall 2 2 double thepaceofgrowth ofmedian incomes 2015, adjustingforinflation,a22percentriseor It rose from $56,700to$69,400from 1976to growth inincomesatthetopofdistribution. accelerated muchmore quicklybecauseof Canadian households,includingseniors, to $85,300,a36percentincrease. the biggestgrowth inthisperiod,from $62,500 children under18,medianafter-taxincomesaw increase. Amongnon-seniorhouseholdswith to $60,000inthatsameperiod,an8percent median after-taxincomerose from $55,500

» Ontario’s medianandaverage after-tax has beenslowerthanattheCanada-widelevel the rateofgrowth ofincomeinallcategories athigherlevels,household incomesstart but median incomesforhouseholdswithchildren. which ismore inlinewiththeincrease in from $69,000to$95,200,a38percentincrease, children under18,average after-taxincomerose the median.Amongnon-seniorhouseholdswith increase of19percentinstead8for $60,600 to$72,200inthatsameperiod,an households, average after-taxincomerose from for allCanadianhouseholds.For non-senior types andindifferent 22 22 2 2 2 2

23 | THE MOWAT CENTRE 24 | RACE TO THE TOP » Canada-widegrowth hasoutstrippedOntario’s percent change in real hourly wages by wagepercentile,Canada2000-2016 percent changeinrealhourlywagesby wagegrowthsincethe2008 crisis|Cumulativeworst paidearnershave alsoseen important High-wage earnershave consistentlyseenthefastestwagegrowththrough FIGURE 7 Source: Statistics Canada, Custom Tabulation from Labour Force Survey. 2 2 employment andwagegrowth foratime. enjoyedcountry amore robust paceofboth because theoil-andresource-rich ofthe parts truesince therecession,This isparticularly incomes formostofthelast39years onrecord. growth inbothaverage andmedianhousehold in pay rates. and Saskatchewan)sawafasterpaceofgrowth jurisdictions (like NewfoundlandandLabrador pay andincomelevels incommodity-rich levels. That’sbecausejurisdictionswithlower around, or justalittleabove, theCanada-wide over the 39-year period, resulting inconvergence 2 » Thegrowth thatoccurred inaverage incomes » By2015,onlynon-seniorhouseholdswith » Sincethe2008/2009recession, theaverage broad-based growth. is becauseofgainsintheupperdeciles,not household incomesacross Canada. children saweven modestgrowth inmedian the nationallevel. essentially stalledoutinthelastfew years at outpaces thatofmedianincomes,whichhave everywhere growth inaverage incomes incomes hasslowedinallregions, but annual rateofgrowth inmedianandaverage 2 2000s, butthe 25 | RACE TO THE TOP » Arecent studyby theEconomic Policy construction andeducation/healthservices. better paidjobsinsectorslike finance,real estate, composition oftheeconomytowards relatively the period,aswellshiftingindustrial boomincommoditiesearlier of theexport between 2000and2015.Thisislargely because entire distributionwere abouttriplethatoftheUS Additionally, wageincreases throughout the base, resulting infar lessmoney intheirpockets. recent years, albeitfrom amuch,muchlower paid are seeingacomparablepaceofgainsin also seeingthefastestwagegrowth, thepoorest narrative: whileourbestpaidemployees are 2000 and2015.Canadahas,again,adifferent workforce hasbarely seenanyincrease between the biggestwagegains,whilerest ofthe In theUS,highest-paidemployees saw well asthedistributionofthatpurchasing power. their effects onaggregate purchasing poweras and governments allover theworld,becauseof rates are increasingly ofconcerntocentralbanks of workers putinfull-timehours,trends inwage which peopleare paid.Given thevast majority time spentinthelabourmarket andtherateat by paidwork.Earningsare afunctionofboth Trends inhouseholdincomesare primarilydriven all self-employed. examine trends forallemployees aged15andover, andexcludes cluding unincorporatedself-employed. The StatisticsCanadadata This studyexaminesdataontrends forallworkers aged18-64,ex people-make-up-some-lost-ground-on-wages/. american-wages-2016-lower-unemployment-finally-helps-working- nomic Policy Institute.http://www.epi.org/publication/the-state-of- 51 EliseGould(2017)“TheState of AmericanWages 2016.” Eco- (Canada vsUS) WAGES BY DECILE trends inCanada. highest wageearners,whichisincontrastto States hasbeenconcentratedamongthe Institute 51 showsthatwagegrowth intheUnited

- » Growth hasbeenfarmore inclusive inCanada » Whileboththe90thand95thpercentile we nowturnourattention. been slowinginCanada.Itistothisreality that and, generally, thepaceofwagegrowth has half-way pointofthedistribution)inCanada; growth inwagerateswasatthemedian(the after adjustingforinflation.Buttheweakest and lookingatcumulative growth since2000, than intheUS,usingmetricofwagerates, minimum wageincreases beyond inflation. most provincial jurisdictions,whichenforced in employment standards regulations in and educationsectors;and,finally, changes growth inthereal estate,financeandhealth sectors oftheeconomy(allheavily unionized); andconstruction gas, miningandquarrying US between2000and2016were intheoiland more rapidwagegrowth inCanadathanthe growth inrecent years. Themajorreasons for distribution) hasalsorivalled thatpaceof percentile (nearthebottomofincome growth since2000inCanadaaswell,the10th of earnersoutpacedmostworkers’ wage

25 | THE MOWAT CENTRE 26 | RACE TO THE TOP of evidence thatsuggestsfirmsaren’t usingthesecutstore-invest intheirworkers Policy prescriptions focusedoncorporatetaxreductions may need toberevisited inlight are thebenefitsofcorporationsaccumulatingagrowing share ofwealthvis-à-vislabour? annually between1980andthelate2000s. between 1990and2009,thisdrop forG-20nationsaveraged 0.3percentage points within theeconomy. inequality ofincomedistribution,asreturns tocapitaltendbemore highlyconcentrated economy; andhighershares ofnationalincomeincapitalare associatedwithgreater economic growth. Furthermore, inequalitycangrow withinasmallerlabourshare ofthe accounting for57.5percentofGDPinCanada),thisdevelopment alonecouldslow consumption andpurchasing driver ofmosteconomies(currently poweristheprimary measures, at49percent,65 cent and53perofUSlevels respectively. andequipmentICT.investments inmachinery CanadaiswellbelowUSfirmsonthese economic growth willnotnecessarilyleadtohouseholdincome growth. does thismatter?Ifthelabourshare ofnationalincomeisdeclining,there are risksthat than they didin1993. back intheirworkers. Canadianemployers invest roughly 1/3lessinstafftraining2015 Firms are accumulatingagrowing share ofnationalincome,andyet aren’t investing it of GDPstoodat23.2percentin2017,upfrom atrough of16.3 percentin1992. cent in share ismuchthesame, withlabour’s ofGDPstandingat50.6per In Canadathestory of economicgrowth. 1980s, overturning conventional orthodoxy thatastablelabourshare wasanacceptedfact The labourshare ofnationalincomeinG-20countrieshasbeenfallingsteadilysincethe The powerdynamicbetweenbusinessandlabourisshiftingto » insights-issues-future-of-productivity-2013.pdf. Canada series 58 BillCurrieandLawrence W. Scott(2013)“Thefuture of productivity: Awake-up callforCanadiancompanies.” InFuture of dian_Employers_Investments_in_Employee_Learning_and_Development_on_the_Rise.aspx?AspxAutoDetectCookieSupport=1. Development ontheRise.” 10December2015,http://www.conferenceboard.ca/press/newsrelease/15-12-10/Turning_a_Corner_Cana- 57 TheConference Board ofCanada(2015) “News-Turning a Corner:CanadianEmployers’ Investments inEmployee Learningand Harvard University Press. policy/The-Labour-Share-in-G20-Economies.pdf; ThomasPiketty (2013)“CapitalintheTwenty-First Century.” Éditions duSeuil, 56 ILO andOECD(2015)“TheLabourShare inG20Economies.” https://www.oecd.org/g20/topics/employment-and-social- policy/The-Labour-Share-in-G20-Economies.pdf; Atkinson, 2009. 55 ILO andOECD(2015)“TheLabourShare inG20Economies.” https://www.oecd.org/g20/topics/employment-and-social- Mowat Centre. https://mowatcentre.ca/wp-content/uploads/publications/132_working_without_a_net.pdf. 54 SunilJohalandJordann Thirgood (2016)“Working WithoutaNet:Rethinking Canada’s socialpolicyinthenewageofwork.” 53 Ibid. policy/The-Labour-Share-in-G20-Economies.pdf. 52 ILO andOECD(2015)“TheLabourShare inG20Economies.” https://www.oecd.org/g20/topics/employment-and-social-

COMPLICATING FACTORS 2017, downfrom 54.4percentin1977,whilecorporatecompensationasashare , DeloitteCanada.https://www2.deloitte.com/content/dam/Deloitte/ca/Documents/insights-and-issues/ca-en- 56 52 57 Labour’s share Labour’s ofincomedeclinedin2630advanced economies Norare they investing inR&Dorotherproductivity-enhancing 53 55 Sincehousehold 58 Whatthen 54 Why 2017 Issue,https://hbr.org/2017/09/managing-our-hub-economy. 63 Marco IansitiandKarimR.Lakhani(2017)“Managing OurHubEconomy.” Harvard Business Review, September-October ft.com/content/69ee1da6-a8ed-11e7-93c5-648314d2c72c. 62 RochelleToplensky (2017)“Amazon andApplehitby EUtaxcrackdown.” FinancialTimes 2017, https://www.recode.net/2017/7/24/16022210/alphabet-google-employment-employees-doubled-headcount. work/395294/; RaniMolla(2017) “Alphabet hasnearlydoubleditsheadcountsince 2013to more than75,000.” Recode, 24July Without Work.” TheAtlantic, July/August 2015Issue, https://www.theatlantic.com/magazine/archive/2015/07/world-without- 2017, https://www.cnbc.com/2017/05/04/heres-how-many-jobs-apple-has-created-so-far.html. ;Derek Thomson(2015) “A World 61 ElizabethGurdus (2017)“Apple’s investing $1billionto expand USjobs—here’s howmanyit’screated sofar.” CNBC http://www.zerohedge.com/news/2017-04-28/just-these-five-companies-account-28-sps-2017-returns. 60 Tyler Durden (2017)“JustTheseFive CompaniesAccountFor 28%OfTheS&P’s2017Returns.” ZeroHedge, 28April2017, nytimes.com/2018/02/25/opinion/investors-republican-tax-cut.html?smid=tw-nytopinion&smtyp=cur. 59 TheNewYork Times(2018)“Well-Heeled Investors Reapthe RepublicanTax CutBonanza.” 25February 2018,https://www. interests inthe digitalworld. questions abouthowtoensure acompetitive balancebetweencorporateandlabour 2 2 63 wasn’t yet apubliccompany)in2007. the thosesamecompanieswithoutFacebook (which the entire S&P500,compared toonly5percentfor market capitalizationaccountingfor13percentof Apple, Intel,Amazon, Microsoft andAlphabethave a Digital firmsare exacerbating thesetrends. Facebook, increasingly globalmarketplaces. or themselves tothe extent neededtocompetein jurisdictions willingtosheltertheircorporateprofits. and are dealswith adeptatnegotiatingsweetheart fewer workers togenerate personaltaxrevenue The mega-firmsintoday’s digitaleconomyhave networks ratherthanproducts alsoraisessignificant scale andtore-engineer newmarketplaces towards Their abilitytodrive highlylucrative returns to at USD$570billionwithonly75,000employees. workers intheUnitedStateswhileAlphabetisvalued $750billion,has80,000 By comparison,Apple,worth USD $267billion(adjusted)with758,611employees. America’s mostvaluable corporationin1964,worth Fortheir economicimportance. example,AT&Twas giants ofthepast.Andthatshiftsmeaning companies needfewer workers thancorporate by market capitalizationandrevenues, these Yet, asmeasured despitetheireconomicimportance from retail toappssearch enginesiswell-known. $3 trillion,andtheirdominanceover sectorsranging together have amarket capitalizationapproaching , 4October 2017,https://www. 59 60 Thesefirms ,4May 61

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27 | THE MOWAT CENTRE 28 | RACE TO THE TOP Canada, 1997-2017 Annual GrowthRateofInflation-AdjustedHourlyWages -Average and FIGURE 8 » Figure 8compares growth inaverage hourly consumption. the Canadianeconomyispropelled by household output andfuture potential,asover 57percentof While “slowth” isnotrecessionary, itisadragon off “slowth” -slowornogrowth intheeconomy. Without wagegrowth, itwillbedifficulttoshake declining foryounger Canadiansforsometime. purchasing powerofhourlypay rateshasbeen gains matchingorfallingbehindinflation.The purchasing powerforCanadians,withwage there noincrease isvirtually inmarket-driven resource-rich provinces like AB,NLandSK.Today, driven by theslowingpaceofeconomicgrowth in dramatically across Canadainrecent years, The paceofgrowth inpay rateshasslowed AVERAGE AND MEDIAN HOURLY WAGES OFEMPLOYEES Source: Statistics Canada, CANSIM Tables 282-0151 and 326-0021.

and belowwhichhalfthejobmarket works. earnings, whichrepresents rates ofpay above occupations, withgrowth inmedianhourly earnings, whichincludeshigher-earning 2 2 2 2 22 2 2 2 2 2 2 » Theseaggregate trends maskimportant » Over time,bothtrends showthatincreases in 2 significantly sincetherecession of2008-9. while increases inaverage pay have slowed hit thisagegroup intermsofwagerates), was whenthefullimpactofrecession much ground in2017asthey didin2011(which And medianwagesof25-54year oldslostas low ratesofpay.and 2017,butbasedonvery most gaininpurchasing powerbetween1997 crisis. Younger workers (15-24)have seen the declines inmanyyears sincethepost-2008 purchasing powerover thepast20years, with workers (55+)have seentheleastincrease in groups. Inflation-adjustedwageratesofolder distinctions betweenworkers from different age kept aheadofinflation,asmeasured by CPI. rates ofpay were slowingby 2017;they barely 2 2 22 2 Median, AllJobs, 2 2 2 2 Women’s Employment Rate,CanadaandUS,1976-2017 FIGURE 9 » InCanada,householdspendingdrove 57.5per » Whileinnovation andtechnologyplay an » Increases inthenational average have been Canada labour force is 15 years and over; in US 16 years and over. Source: Statistics Canada, CANSIM Table 282-0002; Bureau of Labour Statistics (http://www.bls.gov/cps/cpsaat02.htm). Note, in

% (per cent) shake off“slowth.” becomes difficulttoachieve, itwillbehard to to fallasashare ofGDP. Ifwage-ledgrowth 1961. Meanwhile,wagesandsalariescontinue based onconsistentmeasures ofGDPsince cent oftheeconomyin2017,anewrecord high domestic consumption. that mosteconomiesare primarilyfuelledby without growing purchasing power, given it isdifficulttoachieve economicgrowth roleimportant inadvancing economicpotential, sector over the past decade or so. a result of the rapid expansion of the oil and gas Newfoundland andLabrador, andSaskatchewan, spurred by strong wagegrowth from Alberta, 50 60 70 10 20 30 40 0 1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998 social, issue. an increasingly economic,aswell as important “surplus.” Thatmakes what happenstopay rates generation, asthere issimplynotenoughlabour 57 percentgrowth over thecourseofnext it ismathematicallyimpossibletofuelanother to 78.6percentbetween1976and2017.But saw employment ratesrisefrom 50percent ages (15andolder)thisgroup ofwomen worked considerablymore thanwomen ofall Women ofchild-bearingage(25-44)have always but thesituationhasreversed since2000. inthelabourmarket,women’s participation Canadian womentraditionallylaggedAmerican women’s risingrole inthepaidworkforce. growth andlessinequalityistheimpactof narrative thathasaccountedformore inclusive Another feature inthe“Canadianexceptionalism” (Canada vsUS) AND EMPLOYMENT RATES FORCEPARTICIPATIONLABOUR

2000

2002

2004

2006

2008

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2012

2014

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29 | THE MOWAT CENTRE 30 | RACE TO THE TOP and care facilities. regulated andlicensedearlychildhoodeducation tocreatesupports more affordable accessto by 2026; Canadian economycouldadd$150billiontoGDP noted thatachieving genderequityinthe as wellsocial,issue.The2018federal Budget is beginningtoemerge asacriticaleconomic, employment ratesclosing,thegenderwage gap decline, andthegapbetweenmalefemale With men’s employment ratescontinuingto » Thebiggestdriver ofthesetrends —andthe » Sometheoriesastowhythathappenedinclude: » Oneoftheways Canadianhouseholdshave womens-equality-in-Canada-Full-report.ashx. equality%20in%20Canada/MGI-The-power-of-parity-Advancing- ter/The%20power%20of%20parity%20Advancing%20womens%20 sey.com/~/media/McKinsey/Global%20Themes/Women%20mat- Equality inCanada.” McKinsey GlobalInstitute.https://www.mckin- Devillard etal.(2017)“ThePower ofParity: Advancing Women’s budget.gc.ca/2018/docs/plan/toc-tdm-en.html basedonSandrine 64 Government ofCanada(2018) “BudgetPlan.” https://www. employment. force ratesandtheirof participation haveage inparticular increased theirlabour the degree towhichwomenofchild-bearing families, aswellforpublicpolicy—is most challengingforbothwomenandtheir permits themtousethathumancapital. to affordable childcare thanintheUS,which human capitaldevelopment, andmore access education, whichpermitsgreater investments in access tomore affordable post-secondary and ithasstayed thatway since. eclipsed thatoftheirAmericancounterparts, 2000, Canadianwomen’s employment ratehas increasing role inthepaidlabourmarket. Since than theUS,forexample,isthrough women’s been abletoachieve more inclusive growth 64 butthiswillnotoccurwithoutgreater Employment Rate:MenandWomen, 45-65,Canada1976-2017 Employment Rate:MenandWomen, 25-44,Canada1976-2017 FIGURE 10 Source: Statistics Canada, CANSIM Table 282-0002. Source: Statistics Canada, CANSIM Table 282-0002. % (per cent) % (per cent) 2 2 2

2 2

2 2

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22 22

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2 2

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31 | THE MOWAT CENTRE 32 | RACE TO THE TOP » Thegenderwagegaphasshrunkthemost » Thegenderwagegapislargest inresource- covering 20years: and surprisingsub-themesinthisnarrative ages ofworkers, butthere are someimportant women andmenofalleducationallevels andall self-employed workers.) Thistrend includes wages to86.7percent.(Thisdoesnotinclude from 81.5percent of theaverage malehourly wage, Canada-wide,from 1997to2017–rising increased relative totheaverage malehourly The average female hourlywagehasgradually completion). (The exception isforthosewithonlyhighschool almost allcategoriesofeducationalattainment. forworkers2011, particularly aged25to44for have stalledoutorthegaphaswidenedsince Disturbingly, reductions inthegenderwagegap ofprime-ageworkers.fallen forthenewcohort hold; norhasthegenderwagegapconsistently fallen incircumstances where thesetraits old, thegenderwagegaphasnotconsistently robust economyandbeingneitheryoung nor better education,workinginaprovince witha variations. Whilethere are clearbenefitstohaving two decades.However, thetrends showlarge reduction inthegenderwagegapover thepast Across Canada,there hasbeenamodest (Canada andProvinces) GENDER WAGE GAP, BY EDUCATIONAL ATTAINMENT Saskatchewan. Columbia, Newfoundland andLabrador Manitoba andimproved theleastinBritish (in order) inNova Scotia,NewBrunswickand hourly wages are much lower for all residents. and NewBrunswick), jurisdictions where the provinces (PrinceEdward Island,Nova Scotia, and BritishColumbia)smallestineastern provinces NewfoundlandandLabrador, (Alberta, rich » Thegenderhourlywage gapissmallestamong » Thegenderwagegapislargest amongthe » Thegenderwagegaphaswidenedin »» Amongworkers withlessthanhigh school, »» Thegenderwagegapforworkers with »» Thegenderwagegapforworkers with »» Thegenderwagegapforworkers withless Ontario and Alberta atsome timebetween1997 Ontario andAlberta exceeded parityinevery province except degree),bachelor’s having touchedorslightly the besteducatedworkers (withmore thana improvement, Canada-wide. least-educated workers, butisshowingmodest that progress hasfaltered inrecent years. Canadian average over the20-year period,but wage gapnarrowed more rapidlythanthe in recent years (mostly since2011).Ontario’s Newfoundland andLabrador, QuebecandPEI female wages. more driven by trends inmalewagesthan declines inSaskatchewan.Thechangesare relative wagesinNewBrunswick,but Canada-wide, withincreases inwomen’s (25 to44)hasvaried alotsincetherecession than highschoolamongprime-ageworkers since therecession in2008/2009. for prime-ageworkers (25-44)inOntario than highschoolgrew inSaskatchewanand average forallagesofworkers. in 1997.Thisrepresents theCanada-wide cent ofmen’s in2016,upfrom 73.4percent women’s average hourlywageswere 76.9per However... those withabove-Bachelor’s degrees. any othereducationalsub-groups, including than highschoolclosedmore rapidlythan

less less » Asmallergenderwagegapcanoccur » Thoughprime-ageworkers (25to44)have less » Amongallofthecategorieseducational »» Thegreatest improvements inwomen’s faster thanmen’s, overall. closed wasbecausewomen’s wages improved the mainreason thegenderwagegaphas deterioration ofmen’s wages.Across Canada, of improvements inwomen’s wagesor further research.further to slowlyimprove amongallworkers, requires stalling among25-44year olds,butcontinuing (45 andolder).Whyprogress ingenderparityis young workers (under25)andolderworkers improvements inthegenderwagegapamong Canadian workers as awholeisresult of since 2011.Whatprogress there has been for in narrowing thewagegapforthisagegroup 15 andolder),there hasbeenlittleprogress gender disparity in wages than all workers (aged since 2011. progress innarrowing thegenderwagegap degree,a bachelor’s there hasbeen nofurther degreea bachelor’s since2011.For thosewith ordiplomaandthosewithmorecertificate than widening forboththosewithapost-secondary attainment, thegenderwagegaphasbeen wake oftherecession. among peoplewiththemosteducationin greatest increases inthegenderwagegap in 2016).QuebecandOntariohave seenthe from 95.1percentin2011to90.6 forworkersparticularly aged25to44(falling and 2016;butthesituationhasdeteriorated, (25 to 44). fastest wage growth forprime-agedworkers and Labrador wasthejurisdictionwith the Newfoundland andLabrador. Newfoundland gains were Saskatchewan, also in Alberta, and Nova Scotia.For men,thefastestwage Saskatchewan, Newfoundland andLabrador, wages occurred, inorder, inAlberta, because process ofintergenerational change. human capital,market forces ortheineluctable close simplybecauseofgreater investment in assumed thatthegenderwagegapwilleventually prime-age workers. Asaresult, itcannotbe economic growth oracross of anewcohort in jurisdictionswhere there hasbeenrapid improvement by educational attainment two decades,butthere hasbeennoconsistent in thegenderwagegapCanadaover thepast In summary, there hasbeenamodestreduction »» Withtheexception ofManitobaandNova »» Theslowestwagegrowth forwomenwas prime-age workforce (25to44). inthe educational attainment,particularly wage gainsthanwomenwiththesame and diplomassawsimilarorfaster certificates Scotia, menwithpost-secondary Bachelors). diplomas, university degrees, degrees above and education(certificates secondary ofcompletedpost- in every category (25 to44)outstrippedthoseoffemales wage gainsofmaleprime-ageworkers Columbia wastheonlyjurisdictioninwhich in BritishColumbiaandOntario.

33 | THE MOWAT CENTRE 34 | RACE TO THE TOP Summary both pre-distribution andredistribution. measures thatcouldimprove outcomesthrough following sectionsexamine abroad suiteof inclusive growth The intheearly21stcentury? markets? Whatkindsofpoliciescouldgenerate markets andhowgovernments perform shape kinds ofstrategicchoicescouldoptimize how more inclusive growth more consistently. What This raisesbigquestionsastohowproduce process ofintergenerational change. of ourindustrialbaseorsimplytheineluctable capital, more therealignment paidworkeffort, worked inthepast:greater investment inhuman inequality through themechanismsthathave reverse oreven offsetpressures towards greater we seethatitcannotbeassumedcan Looking atthesetrends across ageneration, » There isamathematicallimittoincreasing » Itisunclearhowmuchincreased investment » Domesticgrowth ishampered by wage growth » Thefuture growth ofexport-led isuncertain » Itdoesnotappearthatthecommodityboomis course duetoavariety offactors: driven thisphenomenonappeartohave runtheir recession of2008/2009,buttheforces thathave better thanthatofmanynationssincethe ofinclusiveCanada’s growth story hasbeen far off. women’s ratesofpaidemployment thatisnot broad-based thosebenefitswillbe. in educationwillyieldhigherincomesandhow that hasstalledout. given geopoliticalrealities. returning topropel the economyanytimesoon.

34 | THE MOWAT CENTRE putting the goal of putting the goalof efforts to improveefforts and technological and technological market outcomes change increase inclusive growth and government Slowing growth at the centre of the urgency of effectiveness.

35 | THE MOWAT CENTRE 36 | RACE TO THE TOP 4 organized underthecategoriesofpre-distribution andredistribution. creatively aboutspecificpoliciesandsuitesofpolicies,whichistheintentionfollowingscan, face ofglobaltrends inglobalizationandtechnology. Thechallengedoes,however, require ustothink system. Nordoesitmeanweshouldthrow ourhands upandsay thatthere’s nothingwecandointhe The challengeofgeneratinginclusive growth doesnotrequire ustocompletelyoverhaul oureconomic community orbusinesslevel. Canada. Manyoftheoptionsare withinthemandateofgovernments, whileotherslieattheindividual, ofasuitepoliciestomoveCanada, buteachonecanbeapart forward towards amore inclusive These optionsare presented asamenu–nosingleoptionwould onitsownleadtoamore inclusive aren’t optimally, performing governments canplay avitalredistributive role insociety. explores arangeofpolicyoptionsthatcanshapebothhowmarkets andhow, perform where markets widespread andthere islessneedforgovernment topropel intervention themomentum.Thissection The goalofinclusive growth cycle, where istofindavirtuous successbreeds success,successis DRIVE INCLUSIVE GROWTH POLICY OPTIONSTO » Asmore peopleattainprofessional and SKILLS ANDEDUCATION-LED GROWTH businesses, communitiesorgovernments. targeted toenhanceinclusive growth, withavariety ofchangeagentsleadingthecharge: individuals, growth; policyreform-led statutory/public growth; ortrade-ledgrowth. Anyoftheseprocesses canbe wage-led growth; profit-led growth; publicinfrastructure-led growth; private-sector investment-led well astheagentsofchange.Market canbeshapedby: performance skillsandeducation-ledgrowth; This sectionoffers atypologyforchangingpracticesinthemarket, lookingatthetypes ofchangeas Pre-distribution: Shapinghowmarkets perform from-online-programs. ticles/2016-01-22/what-employers-think-of-badges-nanodegrees- 2016, https://www.usnews.com/education/online-education/ar from OnlinePrograms.” 22January U.S.News&World Report, Friedman (2016)“WhatEmployers ThinkofBadges,Nanodegrees path-to-better-pay.html; andhowemployers seethem:Jordan infoworld.com/article/3081309/certifications/it-badges-a-new- “IT badges:Anewpathto betterpay?” InfoWorld. https://www. application isnotlimitedto thatsector), see:BillSnyder (2016) 65 ThedefinitionofbadgingoriginatesintheIT world(thoughits » Thecommunityprovides resources, the source ofthetraining. respect tothesubjectmatter, somebecauseof Some courseshave more recognition with coding.) Suchcourseworkcanbepaidorfree. or marketing workshop;anonlinetutorialinR Course ratherthanthewholeprogram; awriters’ course; elementsoftheCanadianSecurities How toinstalladoorratherthanfulltrades in specific,targeted areas. (Examplesinclude: looking individualsareacademic certifications, also self-organize toprovide learning from oneanother. Communitiesoften for entrepreneurs working inclustersand Communities are the sites for andsubstancetoinclusive growth.supports Individual Individual Government Business Community Government Business Community at “badging,” focusedskillsupgrading English (orFrench) incubator projects incubator - 65

library/abstract.aspx?did=9398. Conference Board of Canada.http://www.conferenceboard.ca/e- the Way: LearningandDevelopment Outlook—14thEdition.” The 67 SimonCotsmanandColinHall (2018)“LearningCultures Lead Queens University Press. ment: UnderstandingLabourMarket Insecurity inCanada.” McGill- 66 See,forexample:LeahF. Vosko (2006)“Precarious Employ- » Businesses often decry theskillsmismatch Businesses oftendecry without long-termcore funding. consequently, cannotbuildonsuccess often cannotbesustainedforlong—and, comes along.Suchcommunity-driven measures education programs settlement services as aSecondLanguage job training. what they need.Onereason isthefallinon-the- between whatthelabourmarket offers and and young graduates. should replace unpaidinternshipsforstudents development opportunities workers; andmore leave formore and mentoringofnewworkers; greater results by providing moreon-the-jobtraining Individual Government Business Community 67 Businessescanseeimproved long-term formalformation shorter-term professional shorter-term andcontinuing/adult longbefore publicfunding courses, . Paid internships immigrant 66 paid — of

37 | THE MOWAT CENTRE 38 | RACE TO THE TOP » » Some » WAGE-LED GROWTH 70 GlassdoorWebsite: https://www.glassdoor.ca/index.htm. British assetmanagerSchroders Plc. Virgin Money HoldingsPlc,whichoperatesmostlyintheUS,and t-your-company-just-fix-the-gender-wage-gap; Seeretail banker https://www.bloomberg.com/news/features/2017-06-21/why-can- the GenderWage Gap?”Bloomberg Businessweek 69 Claire Suddath(2017)“Why Can’t Your CompanyJustFix www.budget.gc.ca/2018/docs/plan/toc-tdm-en.html. 68 Government ofCanada(2018)“BudgetPlan.” pp.44.https:// Platform technologiesandthat The mostcommonway peopleusetoimprove terms fortheindividualor(more effectively) hours andratesorpay, andtonegotiatebetter for workers tocommunicate,compare work are usedtotracktelework andworkersof interviewees experiences. benefits focus onhowtonegotiatebetterwagesand wages istochangejobs,butthere isagrowing compensation information abouttopmanagement The website so asacorporatesocialresponsibility measure. to bemadepublic.Ahandfulofcorporationsdo compensation practicesoftheentire workforce pressure more informationonemployment and workforce). workers (about6percentoftheCanadian regulated sector, whichcovers 1.2million gender forcorporationsinthefederally- with regard tocompensationpracticesby announced newpay transparency requirements compensation. The2018federal budget within organizations atthetoplevels of lists inthepublicsectorpermitcomparisons of hiringpeoplewiththesameskills. permits more individualstocompare thecost Individual Government Business Community publicly tradedcorporations . Theriseof 68 Glass Door 69 andthere ismovement to open documentationtools 70 permitscomparisons offer achannel , 21June2017, publish Sunshine

» ways-talent-pipeline-maximizes-recruiting-budget/. Budget.” PandoLogic. https://www.pandologic.com/employers/3- (2018) “3Ways Your Talent PipelineMaximizes theRecruiting content/a89228e2-76d7-11e7-a3e8-60495fe6ca71 andJulie Briggs school.” FinancialTimes,26 September 2017,https://www.ft.com/ before 75 See:AmyBell(2017)“Biasinthe talentpipelinestarts good-launching-horizon-prizes-eur-5-million. ec.europa.eu/digital-single-market/en/news/blockchain-social- for socialgood|LaunchingHorizon prizes ofEUR 5million.” https:// ernance-2-0/ andEuropean Commission (2017)“Event -Blockchain themerkle.com/harnassing-blockchain-technology-create-diy-gov- Technology To Create DIY Governance 2.0.” TheMerkle.https:// 74 See,forexample:JPBuntinx(2015)“HarnessingBlockchain 73 See,forexample,Fair Crowd Work Website: http://faircrowd.work/. platform.coop. 72 See,forexample,PlatformCooperativismWebsite: https:// 71 See,forexample,Turker NationWebsite: http://turkernation.com/. » Platform technology Gender wageparity of talent people andmove themthrough thepipeline demands. Employers thatsystematicallytrain to showthey are proactively meetingthese but there isincreasing pressure foremployers and harder towantleave. easier forpeopletomaximize theirpotential... opportunities as agroup. platform cooperatives much someoneelsemakes. discussing howmuchyou make oraskinghow such conversations is intermediaries. blockchain of mutualaidcircles provision, forservice as could beusedtocreate version a21stcentury technology. by linkingthemtooneanotherthrough the some unionsare usingitto Individual Individual Government Business Community Government Business Community 75 andprovide career-laddering technologyremoves theneedfor 71 73 Thebiggestbarriertocross in Similarly, platformtechnology , from paidinternshipup,make it 74

remains anelusive target, isbeingusedtoformnew 72 breaking thetabooof andnetworks; organize workers and rules. for internationalcoordination ofregulations of large multinationals,asituationthatbegs and globalreality, dominated by ahandful nations inwhatisanincreasingly borderless how tomove forward ascities,provinces or disparately, tocomegripswith trying being testedinthedigitalera.We are all, during thecourseofthatprovision, is our abilitytotaxandregulate these entities provides and uswithgoodsand services, Our place-basedconceptionsofwho jurisdiction where they pay lowornotax? can seamlesslyshiftoperationstoa when globe-straddlingdigitalcorporations outside Canada.Whoserulesshouldapply at anadvantage ifthey are headquartered Google orAmazon) canconsequentlyplay “utilities” (digitaldietstaples,like Netflixor via theinternetthatare perceived tobe field. Firmsproviding “over thetop” services more, simplyinorder tolevel theplaying But customersbalked attheidea ofpaying taxes onrevenues collectedinCanada. to domesticcontentproviders by paying Netflix shouldplay onanequalfooting Telecommunications Commissioninsisted as theCanadianRadio-Television and was heard loudandclearby policymakers taxes Thismessage ontheseservices. abroad, they are likely toresist paying offirmsheadquartered the digitalservices While Canadianconsumersare happy touse »

COMPLICATING FACTORS » Governments atalllevels should europe-bargaining-fight-15-ghent. tics/2017/4/17/15290674/union-labor-movement- April 2017,https://www.vox.com/policy-and-poli have thesecret to saving America’s unions.” Vox the model:DylanMatthews(2017) “Europe could vulnerable workers intheUK;andforlimitationsof collective-bargaining forreduction inexploitationof exploitation-care-workers-demands-action-sectoral- tive bargaining.” http://www.ier.org.uk/news/study- care workers demandsactionon sectoral collec- of Employment Rights (2017)“Study:Exploitationof ca/?p=8574 forrelevance inOntario;TheInstitute Everyone isWhisperingAbout.” http://lawofwork. (2016) “TheModelofSectoral Collective Bargaining olabourlawsectoralbargaining/ andLawofWork Check. https://canadafactcheck.ca/bill148ontari implementing sectoral bargaining.” CanadaFact ness oflabourlawreform inOntario:Astrategyfor 76 See:EthanPhillips(2018)“Theunfinishedbusi » Insectorsthatare knownforpoor companies by subcontractingwork. reduce thepracticeofrisk-shiftingby provisions inlabourstandards to Introduce orenforce jointliability their workforce ispaida example toensure every memberof be modelemployers, leadingby and employment equitytargets time workers); enforcingpay equity replacing full-timeworkers withpart- advantage (or tohiringapart-timer and full-timeworkers sothere is no costs; pro-ratingbenefitsforpart- than usingitasaway toreduce work,rather the useoftemporary work forthepublicsector; including thosewhoare contractedto establish sectoralbargaining. wages andworkingconditions, Individual Government Business Community living wage minimizing 76

. , 17 - - - ,

39 | THE MOWAT CENTRE 40 | RACE TO THE TOP » Inthewake oftheglobalfinancialcrisis » PROFIT-LED INCOMEGROWTH petition-how-tame. dominance-google-facebook-and-amazon-bad-consumers-and-com https://www.economist.com/news/leaders/21735021- 2018, January 81 TheEconomist (2018)“NewTitansandhowto tamethem.” 18 mergers-acquisition/. erism. https://www.cleverism.com/historical-analysis-ma-waves- 80 Anastasia(2016)“AHistorical AnalysisofM&AWaves.” Clev - 20161213.ashx. Innovation%20Corridor%20white%20paper%20-%20fact%20base- Global%20Themes/Americas/Tech%20North/Toronto-Waterloo%20 novation Corridor.” https://www.mckinsey.com/~/media/McKinsey/ superclusters andafactbaseonCanada’s Toronto-Waterloo In 79 See:McKinsey &Company(2016)“Primerontechnology place-for-continuous-improvement. pulse/20140610090246-4806191-how-to-use-kaizen-in-the-work- ment intheWorkplace.” LinkedIn Pulse 78 NinaSunday (2014)“Howto UseKaizen forContinuousImprove- payments/employees-profit-sharing-plan.html. nesses/topics/payroll/payroll-deductions-contributions/special- https://www.canada.ca/en/revenue-agency/services/tax/busi- 77 Government ofCanada(2017)“Employees profit sharingplan.” Profit-sharing formal mergers unlocksnewpotential. clustering businesses are oftencompetitors,sometimes to newopportunities. as university-based research institutescanlead exchange withotherplayers andinstitutions such Mechanisms thatfostercommunicationand and regulation,market accessandprivacy rules. regards to monopolistic andoligopolisticcorporationswith Governments needto ever biggerglobe-straddlingcorporatetitans. consolidation 2008, there hasbeenawave ofcorporate innovation workplace practicesthat boost thebottomline.Othermechanismsinclude inaway performance thatwillalso company’s incentive toboostthedesire tobuildthe Individual Individual Government Business Community Government Business Community ofcorporatefunctionalitieswithout 78 anti-trust legislation,pricecontrols inbothprocess andoutput.Whereas 80 77 thatcontinuestoday, creating isperhapsthebestknown boost theiroversight create andencourage . https://www.linkedin.com/ 79

of - 81 - objectives. improvements insocialandenvironmental these expenditures for tofuelopportunities double oreven tripledutytotaxpayers by using but there are ways tomake thesedollarsdeliver communities andbusinessesacross thecountry, build theplatformforfuture growth forfamilies, decade. Theseinfrastructure improvements will in communitiesacross Canadaover thenext dollars onpublicinfrastructure investments Governments willspendmore than$700billion GROWTH PUBLIC INFRASTRUCTURE-LED » » A potentially important way» Apotentiallyimportant toachieve Tax reforms »» Gettinginvolved in on BoardsofDirectors »» Serving can beenjoyed fordecades,by: resources tobuildadditionalpublicassetsthat jobs andprocurement, aswellleveraging new canemergebecome. Opportunities fortraining, how engagedindividualsinthesecommunities The degree towhichthisoccursdependson the entire systemoftaxation. (1966), toconsidertheintegrityandpurposeof review, lastundertaken Commission by theCarter the federal taxcode,itistimetohave aformal Whereas there are sometentative stepstoreview Base Erosion andProfit Shifting(BEPS)initiative]. and more actionacross concerted nations[OECD more vigilantenforcement ofrulesfortaxevaders goals isthrough cyclists). or groups thatusepublicspace(forexample hospitals andlocally-ownedpublicutilities. Individual Government Business Community comeclosebehind,requiring both community benefitsagreements Residents’ Associations forschools, these

. » Individualshareholders canalsoshape GROWTH PRIVATE INVESTMENT-LED community benefitsagreements. more by negotiatingmore far-reaching across Canadainthecomingdecadeor public investment thatwilltake place to take greater advantage ofthewealth community centres, etc.)willbepositioned association, cycling clubs,immigrant (through organizations like residents’ and needsassessmentorare organized Communities thathave undertaken assets riacanada.ca/. sponsible Investment AssociationWebsite: https://www. Research &Education Website: https://share.ca/ andRe 83 See,forexample,Shareholder Association for July%202017.pdf. Community%20Benefits%20Agreements%20-%2017%20 web/default/files/Presentations/Reports/17011%20-%20 Investments.” University ofOttawa.http://www.ifsd.ca/ munities To Maximize ReturnsonPublicInfrastructure “Community BenefitsAgreements: EmpoweringCom 82 InstituteofFiscalStudiesandDemocracy(2017) business interests. Improvement Associations practices andinitiatives through CBAs canbeinformedby localbusiness emission-reducing outcomes,asaresult. well asbetterenvironmental andcarbon- economic, humanandsocialcapital,as communities couldseegreater growth in sustainable directions. or more environmentally orsocially corporation intomore ethicalbehaviours common purposetojoinforces topusha permits individualshareholders with trend towards shareholderactivism market Individual Individual Government Business Community Government Business Community performance. Thereperformance. isarising 83 Individual Community Government Business andotherlocal Business 82 These that - - infrastructure experts. the negotiatingtablewithexperienced insittingdownat typically notexperts to advance theirowninterestsare and takes time.Communitiesseeking infrastructure investments iscomplex that isassociatedwithlarge-scale and evaluating communitybenefits process ofnegotiating,implementing spurring inclusive growth.Butthe from greaterenergyefficiencyto number ofpolicyobjectives, ranging these fundscoulddrive progressina a century. Ifspentintherightway, the largestinvestment inabouthalf into Canadaover thenextdecade– investments ininfrastructurewillflow Roughly $700billioninpublic July%202017.pdf. nity%20Benefits%20Agreements%20-%2017%20 Presentations/Reports/17011%20-%20Commu Ottawa. http://www.ifsd.ca/web/default/files/ Public Infrastructure Investments.” University of powering CommunitiesTo Maximize Returnson (2017) “CommunityBenefitsAgreements: Em 84 InstituteofFiscalStudiesand Democracy over time. correct onthebasisofourlearnings be key tolearnaswedo,andcourse- ofexperiencewill and arepository communities, bettercontractlanguage commitment todeveloping capacityin won’t happenby accident.Apurposeful build communityinfrastructure,butthis possible tobuildcommunityaswe help achieve broaderprosperity. Itis entities spendinthecomingyears will billions ofdollarsthatpublicsector factor indetermininghowmuchofthe benefits agreementswillbeakey the development ofrobustcommunity to advocate for, negotiate,andmonitor Building andsustainingthecapacity Agreements Community Benefit 84 - -

41 | THE MOWAT CENTRE 42 | RACE TO THE TOP » Someinvestors are gettingmore choosy » 89 DivestInvest Website: https://www.divestinvest.org/. decent-work-fund/. decent work?”https://atkinsonfoundation.ca/community/atkinson- 88 Atkinson Foundation (2018)“How can wehelpyou create more 87 See,forexample,ShareAction Website: https://shareaction.org/. 86 BLabCanadaWebsite: https://www.bcorporation.net/canada. ies_in_Canada. https://en.wikipedia.org/wiki/List_of_twin_towns_and_sister_cit “List of Wikipediatwin towns (2018) 85 in Canada.”cities and sister “Twin City” movement The bestexampleistheglobal shaping where investments fundsare flowing. among pensionfundholders Corporations), and creation of“decentwork” supply chain,aswellhowthey promote the labour rightsare assured throughout their corporations todocumenthowhumanand through initiatives like environmental responsibility. Self-marketing of corporatepoliciesthatstress socialand about corporatepractices,leadingtotherise futures. gas extractionandtowards renewable energy even somestateenterprises,away from oiland sustainable inclusive growth. wide level, cycle of unleashingthevirtuous long-term behavioural changeatasociety- clusters orlivingwages,allofwhichtrigger as theadoptionofgreen policies,innovation race tothetoponaseriesofobjectives, such locally-rooted canalsotriggera partnerships deepening relations withanothercity. These spur innovation andtradeby learningfrom and countries isalong-standingmechanismto municipal level between,andeven within, Individual Individual Government Business Community Government Business Community 89 85 ofbigfoundations,universities and modelsofinterchange atthe shareholder activism B-Corps 88 athome.Thisis 87 are pushing 86 divestment (Benefit

- » Beingamodelemployer meanswalkingthetalk REFORM-LED GROWTH STATUTORY/PUBLIC POLICY pliant-employer-list-implemented. tion.govt.nz/about-us/media-centre/news-notifications/non-com employer listimplemented.” 27March 2017,https://www.immigra- Immigration NewZealand (2017)“NewsCentre -Non-compliant 94 NewZealand hastaken stepsto create this typeofmodel,see: tions/2014/05/Fair_Wage_FINAL.pdf. www.policyalternatives.ca/sites/default/files/uploads/publica in Ontario.” CanadianCentre forPolicy Alternatives, Ontario.https:// (2014)“TheCaseforaStronger Fair93 JoshMandryk Wage Policy final-report/chapter-7-changes-basic-standards. https://www.ontario.ca/document/changing-workplaces-review- standards.”. InTheChangingWorkplaces Review –FinalReport ofLabour(2017)“Chapter 7:Changesto92 OntarioMinistry basic fault/files/fafo_report.pdf. Wage: ANordic Outlook.” Fafo. http://www.world-psi.org/sites/de 91 LineEldringandKristinAlsos(2012)“European Minimum Good%20JobFINAL.pdf. Ontario%20Office/2013/11/Making%20Every%20Job%20a%20 policyalternatives.ca/sites/default/files/uploads/publications/ Canadian Centre forPolicy Alternatives, Ontario.https://www. 90 Trish Hennessyetal.(2013)“MakingEvery JobaGood Job.” » Additionally, require employers tooffer permit employment equityandpay equitytargets modernizeto hiringpart-timers; andenforce so there isnosystematically-produced benefit can easilyaccessinformation. to whichworkers cancontributeandwhere they per centoftheaverage wage self-employed); anchortheminimumwageto60 (currently viewedasindependentcontractors/ are inagrey zone withregard totheirstatus to includeplatform/digital/gigworkers who should: changethedefinitionofemployee you wantotherstopractice.Labourreforms rated create a European states. at thetop,effective practiceinanumberof growth doesn’t becometooskewed by changes ensuring inclusive growth by makingsure wage Individual Government Business Community benefits sectoral and/orcentralized bargaining; registry ofnon-compliantemployers registry 92 for part- andfull-timeworkers, forpart- 91 90 intheworkforce, pro- ; - 94 93 - -

» Thegrowth oftradeagreements asameans way» Themostimportant forCanadian » Trade isoftenpromoted astheway togrow the TRADE-LED GROWTH integrated at thefederallevel. skills development policies needtobebetter citizens’ needsforwork. programs willbeprofoundly challengedtomeet Domestic jobcreation andskillsdevelopment architects andlandscapedesigners,etc. for jobslike constructionsupervisor, engineers, spectrum, whichensures greater competition NOC (NationalOccupationalClassification) of free tradeagreements are moving downthe chapters their ownborders. entry Thetemporary Canadian workers tocompeteforworkwithin market assessmentswillmake itharder for economic “tests”suchasquotasorlabour labourmobilitywithout to facilitatetemporary workforce. how skillswillbedeveloped intheCanadian solutionwillbeaccomplishedand imported show howthetransitionfrom reliance onan businesses mustprovide abusinessplanto cannot befoundtodothejob,thenCanadian a skillorlabourshortage and migrantworkers asameansofaddressing foreignworkers limiting theuseoftemporary workers,to limit their use of temporary including companies topromote more inclusive growth is disrupt inclusive growth practices. labourpracticesthatcan trade inimporting based growth, oftenoverlooked istherole of can improve profitability butreduce broad- While outsourcing isoneaspectoftradethat economy, growth. withthefocusonexport-led Individual Individual Government Business Community Government Business Community Immigration, tradeand . IfCanadianworkers » Asthefederal government engagesinthe » Trade agreementsandotherpoliciesthat produces a multilateral mechanismstoensure thattrade social “dumping”;andintroduce enforceable Mechanism) toprotect communitiesfrom equivalents ofISDS Trans Pacific nations,itshoulddevelop worker “progressive” tradepactswithEurope andthe as wellimplementingorratifyingmore renegotiation and“modernization” ofNAFTA seek residence/citizenship inCanada. pathways topermanence workers] alsomustbe economicentrants and temporary foreignworkers encourage theuseoftemporary are protected infree tradedeals. only onesetofeconomicagents–investors – common denominatorpractices.Asitstands, rather thanaracetothebottomandlowest “race tothetop” inlabourstandards (theInvestor-State Dispute matched withmore forthosewhowishto [migrant ,

43 | THE MOWAT CENTRE 44 | RACE TO THE TOP for labourrightsandtheenvironment. corporate andinvestor interests over thepublicinterest, andinsufficientenforceable protections Progressive Agreement forTrans-Pacific (CPTPP). Partnership health andsafety. to labourstandards, environment, andgreater abilityforstatestolegislateintheinterests oftheir trade agreement ever negotiatedby CanadaandtheEuropean Union.’ Itincludesprovisions related Canada andtheEuropean Unioncameintoeffect. Canadahascalled thisthe‘mostprogressive been somesuccess.In2017,theComprehensive Economic andTrade Agreement (CETA) between Although there are barrierstofullyincorporatingprogressive elementsintotradedeals,there has as evidenced by postponement oftheTPPandhaltinCanada-Chinafree tradetalks. demonstrate thevalue ofaddingprogressive elementstotradeagreements toitstradingpartners, renewed NAFTA agreement. Recentevents indicatethattheCanadiangovernment hasstruggledto It remains tobeseenwhetherCanadawillableachieve theseambitiousgoalsthrough a an unassailablerightto regulate inthepublicinterest.” chapter; andfinallyby reforming theInvestor-State DisputeSettlementprocess, to ensure thatgovernments have in linewithourcommitmentto improving ourrelationship withIndigenouspeoples,by addinganIndigenous change; third by adding anewchapterongenderrights,inkeeping withourcommitment to genderequality;fourth, environmental protection to to attract efforts address investment, climate forexample,andthatfullysupports the agreement; secondby integrating enhancedenvironmental provisions to ensure noNAFTA weakens country “In particular, wecanmake NAFTA more progressive firstby bringingstrong laboursafeguards into thecore of progressive: Foreign Freeland AffairsMinisterChrystia describedelementsthatwouldmake thetradedeal elements, andputtingenvironmental, healthandhumanrightsobjectives onthebackburner. put thiscommitmentintopractice.Theagreement hasfrequently beencriticized foritsregressive The current NAFTA renegotiations fortheCanadiangovernment are opportunity to animportant economic growth.” promotion ofhumanrights,genderequality, transparent andaccountablegovernance andinclusive for 2017-2018,Canada’s progressive tradeagendawill“emphasize Canadianvalues, suchasthe that are ‘progressive’ inrecent years. According totheGlobalAffairsCanada’s plan departmental The Government ofCanadahasrepeatedly expressed itsdesire tonegotiatetradeagreements tions/reports/making-sense-ceta-2016. 98 ScottSinclairetal.(2016)“Making SenseofCETA.” CanadianCentre forPolicy Alternatives. https://www.policyalternatives.ca/publica mallandmedium-sizedenterp.html?wbdisable=true. quotas forEUcheese.” 1August 2017,https://www.canada.ca/en/global-affairs/news/2017/08/minister_of_internationaltradesupportss 97 GlobalAffairsCanada(2017)“News Release-MinisterofInternationalTrade smallandmedium-sized enterprises withnew supports ofthenorthame.html. (NAFTA).” 14August 2017,https://www.canada.ca/en/global-affairs/news/2017/08/address_by_foreignaffairsministeronthemodernization 96 GlobalAffairsCanada(2017)“Address by Foreign American Free AffairsMinisteronthemodernizationofNorth Trade Agreement aspx?lang=eng#a6_1. Plan2017-18.”95 GlobalAffairsCanada(2017)“Departmental http://international.gc.ca/gac-amc/publications/plans/dp-pm/dp-pm_1718. “Progressive” tradeagreementsinpractice 97 95 Despitetheseprovisions, theagreement hasstill beencriticized forprioritizing 98 Thesamehasjustoccurred withtheComprehensive and 96 - - - keeping pacewithgrowth inhousehold costs. tightened rulesforeligibilityandtransfers not for thedeclinesincludereductions inbenefits, decades, according totheOECD. Key reasons redistributive inrecent years compared topast Tax andtransfer policieshave beenless » Systemsoftaxation,whichserve tofundthe » Transfers thatdirectly provide citizens with » Publicexpenditures thateitherdirectly provide and accessthroughout society: deploy publicpoliciestoredistribute opportunity There are three key ways thatgovernments can Redistribution: Shapinggovernment policies sive%20Growth%20publication%20FULL%20for%20web.pdf. Growth.” https://www.innovationpolicyplatform.org/system/files/Inclu- 99 OECD(2017) “MakingInnovation BenefitAll: Policies forInclusive property inavariety ofways. and cantaxincome,consumption,wealth rates totaxinghigherincomesatrates) shifting from taxinglowerincomesathigher from regressive toprogressive innature (i.e., provision andcanrange ofgoodsandservices, programs). Employment Insuranceandpublicpension income (e.g.,theCanadaChildBenefit, affordable. moreby makingservices accessibleand/or toreducedo serve consumptioninequality not provide citizens withmore income,they water/sewage). Whiletheseinterventions do that aren’t provided privately (e.g.,electricity, access topurchase basicgoodsandservices affordable housing,childcare) orprovide (e.g., healthcare,public goodsandservices 99 inequality. an increase inafter-taxandtransfer income insurance andsocialassistanceresulted in which reduced benefitratesforemployment changes atboththeprovincial andfederal levels to 2011period. inequality by one-third, a peakforthe1976 past. In1994,redistribution offsetmarket income transfers hasproven tobequiteeffective inthe In Canada,redistribution through taxes and roleimportant insmoothingoutinequality. redistribution policiesare believed toplay an but netinequalityismuchlowerintheEU–its the UShave similarlevels ofmarket inequality, impacting inequality. For instance,theEUand roleRedistribution plays animportant in 102 Ibid. loads/2016/01/aots5-heisz-murphy.pdf. for Research onPublicPolicy. http://irpp.org/wp-content/up Taxes andTransfers inReducingIncomeInequality.” Institute 101 Andrew HeiszandBrianMurphy(2016)“TheRoleof org/wp-content/uploads/2016/10/BP-26-26_10_16-final-web.pdf. inclusive growth inEurope.” BruegelBlueprintSeries.http://bruegel. andGuntramB. Wolf100 ZsoltDarvas (2016)“Ananatomy of working-aged adults. the feasibility andimpactofabasicincomefor there are pilotsinseveral jurisdictionsexamining children andseniorshave beenenhanced;and 102 More recently for incomesupports 101 After1994,however, policy 100 -

45 | THE MOWAT CENTRE 46 | RACE TO THE TOP » Greater concentration ofwealthinthehands » Perceptions ofinequalityandfairness:AMarch » Ingeneral,thepublicconsiderstaxsystem barriers, suchas: tax codecanalsoencountersomeimportant inclusive growth, approaches thatfocusonthe While progressive taxationcanhelptopromote edu/viewdoc/download?doi=10.1.1.418.7819&rep=rep1&type=pdf. Experiment.” Institute fortheStudyof Labor. http://citeseerx.ist.psu. tribution andPreferences forRedistribution:Evidence from a Survey 105 GuillermoCrucesetal.(2011) “BiasedPerceptions ofIncome Dis- what-makes-taxes-seem-fair/full. Tax Policy Center. http://www.taxpolicycenter.org/publications/ 104 Vanessa Williamson(2017)“WhatMakes Taxes SeemFair?” skipping-out-on-paying-taxes/. globalnews.ca/news/2628574/canadians-believe-richest-1-are- skipping outonpaying taxes: poll.” GlobalNews 103 RebeccaJoseph(2016)“Canadiansbelieve richest1%are redistributive policies.Theconcentration of traditionalapproaches totaxandtransfer high earnerscouldmitigatetheeffectiveness simplification inthetaxsystem. preferences regarding redistribution levels and could increase forchangesand publicsupport various incomegroups pay intaxes. information onthetaxcodeanddatawhat levels inthesystemwhenpresented withmore their perceptions onfairnessanddistribution 2017 studyfound thatU.S.taxpayers changed Canadians. were influencedsignificantlyby therichest nearly halfindicatingthey believed politicians cent ofCanadianspaidenoughintaxes, with survey reported they didn’t thinkthetoponeper 81 percentofCanadianrespondents toarecent able tosuccessfullyavoid paying taxes. Indeed, to beunfair, withtheperception thattherichare with thatinformation. call forgreater redistribution whenprovided in comparisontootherswere more likely to that thosewhohadoverestimated theirwealth that affects viewsonredistribution. Itnoted perceptions ofincomedistributionsandhow another studylooked attheinaccuratepublic 103 105 Greater transparency , 9April2016,http:// 104 Similarly, &pattern=&stByVal=1&p1=1&p2=31&tabMode=dataTable&csid. statcan.gc.ca/cansim/a26?lang=eng&retrLang=eng&id=2040001& sus metropolitan areas nationalthresholds.” (CMA), http://www5. income trends oftaxfilersinCanada,provinces, territories andcen 109 CANSIMTable 204-0001;StatisticsCanada(2017)“High statistics.html. revenue-agency-cra/income-statistics-gst-hst-statistics/t1-final- www.canada.ca/en/revenue-agency/programs/about-canada- 108 CanadaRevenue Agency(2018)“T1FinalStatistics.” https:// uploads/2016/01/aots5-milligan-smart.pdf. Institute forResearch onPublicPolicy. http://irpp.org/wp-content/ of HighIncomes:TheEffects onProgressivity andTax Revenue.” 107 Kevin (2016)“Provincial MilliganandMichaelSmart Taxation org/wp-content/uploads/2016/01/aots5-heisz.pdf. and Elsewhere.” InstituteforResearch onPublicPolicy. http://irpp. 106 Andrew Heisz(2016)“Trends inIncomeInequalityCanada corporations mustbeconsidered. as welltheincreased mobilityofworkers and methods ofredistribution thatreflect thiscontext approaches increasingly challenging.New context, whichmakes theintroduction ofnew also leadtoamore polarized, fractiouspolitical for others.Thistypeofenvironment islikely to with every gainforsomeperceived asaloss pie increasingly resembles azero sumgame, or nogrowth (i.e.,“slowth”) astheeconomic challenging intheyears ahead,inaneraofslow Redistribution issettobecomeeven more access tohigh-pricedtaxaccountingadvice. as shiftingassetstoadifferent jurisdictionor yield expectedtaxrevenue forreasons such ataprovincialparticularly level, wouldlikely not that increasing taxes onthetop1percent, any pointsincethe1930s. and theUSwashigherin2000sthanat of wealthamongthetopearnersinCanada per centbetween2009and2015. more than$250,000from 19.9percentto25.7 provincial incometaxes paidby thoseearning Brunswick have ledtoanincreased share of in provinces includingOntario,QuebecandNew Yet, recent taxincreases affecting the1percent 2014 and2015. from 20.5percent to22.2percentbetween the toponepercent’sshare ofalltaxes paid, Statistics Canadadataindicatesanuptickin 109 106 Someargue 108 Similarly, 107

- 47 | RACE TO THE TOP » » TAXATIONGROWTH: TO SUPPORT INCLUSIVE REDISTRIBUTIVE OPTIONS article37422427/. commentary/is-canada-in-need-of-major-tax-reform/ www.theglobeandmail.com/report-on-business/rob- tem.” TheGlobeandMail,22December2017,https:// Here’s where Ottawa shouldlookto improve thesys and MichaelWolfson (2017)“Canadaneedstaxreform. needs-a-comprehensive-tax-review/article37529186/ com/report-on-business/rob-commentary/why-canada- 2018,https://www.theglobeandmail.Mail, 8January ada needsacomprehensive taxreview.” TheGlobeand 112 Seeforexample:Fred O’Riordan (2018)“WhyCan 111 Ibid. tor/redistribution-and-inequality. https://www.policyalternatives.ca/publications/moni gap inCanada.” CanadianCentre forPolicy Alternatives. How reforms to taxpolicycouldhelpclose thewealth 110 Claire Young (2017)“Redistributionandinequality: A review ofalltaxrates(i.e.,corporate, Taxing wealthatratesconsistent inequality. wealth transfers thatcontributeto leads tosignificantintergenerational from property dispositionfully, which does nottaxcapitalgainsstemming review ofCanada’s taxsystem commentators have calledforamajor major policyconcerns.Arangeof as incomeinequalityhave become evolved dramatically, andissuessuch of oureconomyandsocietyhas in 1966.Over thattimethenature Commission system sincetheCarter undertaken amajorreview ofthetax OECD average rates. that aimstobringCanadacloser on high-earningindividualsandfirms, personal, sales,property, etc.)focusing estate transfers). circumstancesapply incertain to (although thecapitalgainstaxcan OECD withoutanestateorgifttax one ofonlyseven countries inthe with peerjurisdictions. 111 110 Canadaalso Canadahasnot Canadais 112 and - - - governments inaddressingtaxavoidance. as well.BEPSsetsout15actionstoequip were involved indeveloping thepackage and G20countries,developing countries monitor implementation. have joinedtodevelop standardsand work together. Currently, over 110countries forallinterestedjurisdictionsto opportunity BEPS wasestablishedtoprovide equal 2016, theInclusive Framework (IF)on ‘modern internationaltaxframework.’ In international taxsystems,andcreatea the worldtogethertoaligndomesticand BEPS aimstobringgovernments across measures totacklethisissuein2015. a BEPSpackagewithcomprehensive countries andtheOECDjointlydeveloped different countries.To overcome this,G20 and take unfairadvantage oftaxsystemsin transnational corporationsthatexploitgaps due tobaseerosionandprofitshiftingby billion (USD)islostintaxrevenue eachyear It isestimatedthatabout$100to$240 july-2016-june-2017.pdf. tax/beps/inclusive-framework-on-BEPS-progress-report- ress July2016-June 2017.” report http://www.oecd.org/ 115 OECD(2017)“Inclusive Framework onBEPS:Prog- BEPS.” http://www.oecd.org/tax/beps/beps-about.htm. 114 OECD(2018)“AbouttheInclusive Framework on tax/flyer-inclusive-framework-on-beps.pdf. global answerto aglobalissue.” http://www.oecd.org/ 113 OECD(2018)“Inclusive Framework onBEPS:A line withthenewrules. have alreadybeenabolishedoramendedin regimes arecurrentlyunderreview and10 being seen–some125preferentialtax results fromtheBEPSinitiative arealready are frequenttargetsofsuchtactics.Early helpdevelopingparticularly countriesthat will leadtoareductionintaxavoidance, and It isexpectedthatthisglobalcollaboration profit shifting(BEPS) Base erosionand 115 113 AlongwithOECD 114

47 | THE MOWAT CENTRE 48 | RACE TO THE TOP » The-Labour-Share-in-G20-Economies.pdf. https://www.oecd.org/g20/topics/employment-and-social-policy/ 119 ILO andOECD(2015) “TheLabourShare inG20Economies.” weforum.org/docs/WEF_Forum_IncGrwth_2017.pdf. 2017.”Development Report World Economic Forum. http://www3. 118 Richard Samanset al.(2017)“TheInclusive Growth and http://www.broadbentinstitute.ca/the_brass_tax. Busting mythsaboutovertaxed Canadians.” Broadbent Institute. 117 Richard Shillington andRobin Shaban(2017)“TheBrassTax: content/uploads/2015/09/The-Liberal-fiscal-plan-and-costing.pdf. The LiberalFiscalPlanandCosting.” https://www.liberal.ca/wp- ofCanada(2015)“Growth116 LiberalParty fortheMiddle Class: A corporatewithholdingtax on more thantwice asmuch‘deadmoney,’ as countries. recent inclusive growth rankingsforadvanced top 6oftheWorld Economic Forum’s most four Nordic countrieswere allranked inthe invest more heavily insocialprograms –the the exemplar ofhowgovernments should the Nordic welfare modelisoftenheldupas Denmark andFinland.Notcoincidentally, top ofthe‘high-tax’rankingsincludedSweden, crisis. then sharplydeclinedaftertheglobalfinancial remained flatbetween2000and2007 demonstrates thatcorporateinvestment unused funds.Evidence from G-20countries investments) orbetaxed athigher rateson their ownprofitability andICT (e.g.,machinery firms toeitherinvest intheirworkers and period couldalsobeaway toincentivize accumulation ofcashreserves afterafinite percentage ofGDP. of 35OECDcountriesby totaltaxrevenue asa recent studyfoundthatCanadaranked 25th is keeping pacewithspendingpriorities.A be anassessmentofwhethertaxrevenue One key objective ofamajorreview should made public. Finance’s workonthefilehasnotyet been of high-income earners,buttheDepartment need toreview taxexpenditures thatbenefit the federal government campaignedonthe 119 Canadiancorporationswere sitting 118 116 117 Notably, countriesatthe whichtargets the » beps-actions.htm. 122 OECD(2018)“BEPSActions.” http://www.oecd.org/tax/beps/ companies-for-using-our-personal-data.html. https://www.nytimes.com/2017/11/14/business/dealbook/taxing- Using OurPersonal Data.” TheNewYork Times 121 SaadiaMadsbjerg (2017) “It’sTimeto Tax Companiesfor https://mowatcentre.ca/corporate-tax-reform/. rate Tax Reform:IssuesandProspects forCanada.” Mowat Centre. 120 RobinBoadway andJean-François Tremblay (2014)“Corpo - »

Exploring taxationmodelsbasedon Greater emphasisoninternationaltaxtreaties more heavily basedonrents isoneoption. their extraordinary profits shouldbetaxed ‘natural monopolies’are nothealthyand taxation modelswhichrecognize thatcertain new classofdigitaltitans.Exploring will besufficienttoreign inthepowerof clear ifexistingapproaches tomonopolies profitsanddatausage. extraordinary hoarding ratherthanprudentreserves. need tobedesignedcarefully totarget cash of GDP. Thistypeofapproach wouldobviously 2012 compared tothemid-1990s,asashare once describedcorporatecashholdings,in former BankofCanadagovernor MarkCarney performed andwhereperformed value iscreated.” economic activitiesgeneratingtheare share oftaxes andthat“profits are taxed where ways ofensuringcorporationspay theirfair with more than100countriescollaboratingon onthisfrontsignificant efforts inrecent years, profit shifting. and agreementstostembaseerosion programs andtransfers. means ofgarneringpublictaxrevenue tofund and monetize from individualscouldbeanother Alternatively, taxingthedatathesefirmsmine revenues, orbetweenUSD$100Band$240B 4 and10percentofcorporateincometax governments’ taxrevenue globallyatbetween Estimates puttheimpactsofBEPSon TheOECDandG-20have led 121 , 14November 2017. It’snot 122

120

49 | RACE TO THE TOP » introduces-worlds-first-robot-tax/. http://www.telegraph.co.uk/technology/2017/08/09/south-korea- ‘robot tax’.” InTechnology Intelligence,The Telegraph 126 CaraMcGoogan(2017)“South Korea introduces world’sfirst pay-taxes/. qz.com/911968/bill-gates-the-robot-that-takes-your-job-should- pay taxes, says BillGates.”, 17February 2017,https:// Quartz 125 Kevin J.Delaney (2017) “Therobot thattakes your jobshould 9789264241046-en.htm. tax-challenges-of-the-digital-economy-action-1-2015-final-report- and Profit ShiftingProject Economy, Action1-2015FinalReport.” InOECD/G20BaseErosion 124 OECD(2015)“Addressing theTax ChallengesoftheDigital framework-on-BEPS-progress-report-july-2016-june-2017.pdf. July 2016-June2017.” https://www.oecd.org/tax/beps/inclusive- 123 OECD(2017)“Inclusive Framework onBEPSProgress report

Consider adoptionofa‘Robottax.’ Some annually (2014figures). technological innovations. would thenbecomefarmore attractive to jurisdictions thatdon’t adoptsuchanapproach a taxwouldworkinglobalmarketplace where endeavour, andeven more practicallyhowsuch taxing technologicalprogress isaworthwhile However, there are real questions astowhether on thefuture ofwork. could helpaddress theimpactofautomation Gates, have suggested that ataxonrobots includingMicrosoftobservers, co-founderBill for investments inautomationtechnology. willlimittaxincentives2017. Thecountry what couldbeconsidered arobot taxinAugust South Korea tointroduce wasthefirstcountry efforts. and alsoprovide forskillsre-training support potentially negative impactsontheworkforce, toslowthespreadserve ofautomationandits governments intheyears ahead. pressing asapolicyandrevenue priorityfor evasion andavoidance challengeseven more of thedigitaleconomyislikely tomake tax . http://www.oecd.org/ctp/addressing-the- 125 Thisapproach might 123 Thecontinuedgrowth 124 , 9August 2017, 126

49 | THE MOWAT CENTRE 50 | RACE TO THE TOP governments. where citizens are subjecttorulesandframeworksdesignedby firmsratherthan shop anddare policymakers tocatchup.Thechallengeisavoid slippingintoafuture that offer cuttingedgetechnologiesoftenjumpintotheregulatory vacuum, setup neighbourhoods”exercise“smart betweenToronto andAlphabetshows, companies nature ofgovernment regulatory processes tohacktheirownrules.AstheSidewalkLabs We are tosee digitalplatformstake alsostarting advantage oftherelatively plodding more quicklythantheusualpaceofgovernments’ deliberative processes. autonomous vehicles, orriskgettingleftbehind.Difficultdecisionsoftenhave tobetaken governments were faced withthechoiceofbeingatest-destinationforUber’s government. Uberwasthetarget ofregulatory zeal in2016and2017.Bylate2017 possibilities emerging withlightningspeed,confoundstheplanninghorizons of The increasingly fast-moving societywelive in,rife withprofoundly newtechnological appropriate duediligenceisundertaken. of longlife-spans, measured indecadesnotyears, andtheirgenesisalsotakes timeas frameworks andinfrastructure development are typicallyundertaken withtheexpectation at theirdisposal,whetherregulation, taxes orlaws.Levers suchaslegislation,regulatory Policymakers in Canadaandmostoftheadvanced worldhave thesame broad set of tools Government 1.0?How canpublicsafeguardsbecomemoretimelyandrelevant? 4.0vs inaworldofIndustry to updateregulations.Arewedoomedlive The paceofchangeandtechnologicalpossibilityfaroutstripsthecapacity » http://digitalcommons.law.yale.edu/cgi/viewcontent.cgi?article=1491&context=yjreg. Van128 Rory Loo (2016)“TheCorporationasCourthouse.” Yale JournalonRegulation,Vol. 33,Issue 2,No.5,pp.547-602. https://lpeblog.org/2017/12/06/from-territorial-to-functional-sovereignty-the-case-of-amazon/#more-442. 127 Frank Pasquale (2017)“From Territorial to Functional Sovereignty: TheCase ofAmazon.” Law andPolitical Economy. of what’srightandwrong. adjudicated through opaqueprocesses wherein thecorporationincreasingly isthearbiter they remain relevant. whichdemandconstantcareunderfoot andmaintenanceofnewapproaches suchthat processes andsystems.Itwillalsorequire recognition oftherapidly shiftingconditions progress againstthatgoal.For policymakers, thiswillrequire are-alignment ofexisting became theguidepostforallpolicyoptions,then wecouldmore easilymeasure our daunting policyenvironment tonavigate, butnotimpossible.Iffosteringinclusive growth is characterized by significantuncertainty, andthepotentialforsuddenshifts.This isa The future ofworktouchesuponalllevels ofgovernment andmanypolicydomains.It firms have littleornocompetitiontoactasacheckonunfairpractices.

COMPLICATING FACTORS 127 Consumerprotection issues,as one example,are increasingly being 128 Markets are shaped,pricedandregulated differently when » TRANSFERS/PUBLIC EXPENDITURES REDISTRIBUTIVE OPTIONSTO SUPPORT INCLUSIVE GROWTH: tives%20guranteed%20annual%20income.pdf. - queensu.ca.qprwww/files/files/22%20international%20perspec 1, pp.49-61.http://www.queensu.ca/sps/qpr/sites/webpublish. teed AnnualIncomePrograms.” Queen’s Policy Review, Vol. 2No. (2011)“InternationalPerspectives onGuaran 129 MelissaMartin Guaranteed annualincome. that canmore easilybeadoptedthrough the tax over a GAI may beasimplerapproach Implementinganegativeintervention. income whether itwillbeviewedasafeasible policy ultimately bethedeterminingfactorin considerable costsofsuchaprogram will societal benefitsofaGAIagainstthe administrative efficienciesaswellthe Balancing direct fiscalsavings from pilots beingconducted. information toassessfrom thenewwave of labour force rateswillbekey participation how transfers ofincomecoulddampenfemale female rates. Newevidence participation about different today, withrespect particularly to 40 years ago,andlabourmarkets are radically However, these pilots were conductedsome with poverty. was alsolikely todecrease stigmaassociated population ratherthantoatargeted group. It likely beeffective if itwasavailable across the much aswaspredicted andthatitwouldmore would notnecessarilydisincentivize workas the UnitedStateshave suggestedthataGAI a GAI.Past experimentsinManitobaand which are implementingpilotprojects totest world, suchasFinlandandtheNetherlands, BC joinedahandfulofjurisdictionsaround the income (GAI).Since2017,Ontario,Quebecand interest intheconceptofaguaranteedannual inequality andautomation,there isgrowing 129

In lightofpersistent - basic-income. policyalternatives.ca/publications/monitor/redistribution-through- less ofit?”CanadianCentre forPolicy Alternatives. https://www. income: Are webetteroffwhenhave more income,orneed 131 ArmineYalnizyan (2017)“Redistributionthrough abasic https://mowatcentre.ca/basic-impact/. impact ofabasicincomeonsocial entrepreneurs.” Mowat Centre. and ChristineYip(2017)“BasicImpact: Examiningthepotential https://mowatcentre.ca/pilot-lessons/ andMichaelCrawford Urban to designabasicincome pilotproject forOntario.” MowatCentre. 130 Seealso:Evelyn L.Forget etal.(2016)“PilotLessons:How » Improvements toCanada’s existingsocial option. of programssorts than benefit would from a GAI directly benefitfrom expandedaccesstothese politically palatable,asmore peoplewould existing taxsystem, so. providing universal coverage withinadecadeor public transit,pharmacare anddental,gradually education,affordablesecondary housing, access tohighqualitychildcare spaces,post- as daunting.Halfofthat$30Bwouldexpand on topofexistingspending,thecostsare not a GAI,whichwouldcostanadditional$30B raising everyone tothepoverty linethrough wage. Yet, whencompared tothecostsof throughout societyandexpandthesocial expensive proposition toenhanceopportunities social programs isastraightforward, though effectively architecture. has asmanygoalspotentialdesigns. features ofanapproach toredistribution that costsandtimelinessremainopportunity key 131 Thistypeofapproach may alsobemore through universal orbroad-based Pooling andspreading riskmore 130 butissueslike expense,

51 | THE MOWAT CENTRE The Mowat Centre’s 2016 Ontario’s basic income pilot report, Working Without a Net: Rethinking Canada’s social In an age where employment is predicted to get more policy in the new age of work, precarious, governments in several countries are and its Renewing Canada’s testing the potential of a novel approach – universal Social Architecture series from basic income – as a means to redistribute wealth, 2015 with other partners, both reduce inequality and overcome poverty. Ontario explored a variety of potential recently launched a basic income pilot to study the potential of a basic income in ensuring economic updates to existing social wellbeing for all. This is the largest trial in North policies and programs, which America, which aims to include 4,000 participants won’t be covered extensively over a period of three years.132 Taking place in three again here.135 locations (Hamilton, Brantford, Brant County; Thunder Bay and the surrounding area; and Lindsay), the Whether expanding medicare to participants are randomly selected from a pool of include universal pharmacare eligible candidates. and mental health services,

Apart from being a resident of one of the three test increased investments in regions, the eligibility criteria include an age range of affordable housing and between 18 and 64, and annual income of less than childcare, reforming the $34,000 for singles and $48,000 for couples. Payments retirement income security for a single person will top out at $16,989, less 50 per system or modernizing our cent of any earned income, while couples can see a approaches to employment maximum payment of $24,027, less 50 per cent of any insurance and skills training, earned income. People with disabilities will receive up to $500 per month on top of these amounts.133 The pilot there are a multitude of ways in aims to test the outcomes of receiving a basic income which Canadian governments that provides more money than was available before can invest in the supports and on daily aspects of life such as food security, stress, services Canadians require. In mental wellbeing, health, housing stability, education a new world of work that could and training, and employment. Eligible candidates not see more people bouncing selected to receive the basic income will be the control between part-time gigs, with group, and the outcomes between the two groups will be compared to test the effect of the basic income. volatile income levels and little A basic income could prove to be instrumental in access to benefits through their supporting vulnerable workers, improving health and employer, there’s no question education outcomes, and ensuring economic equity that risks for many Canadians and wellbeing.134 are likely to increase.

132 Government of Ontario (2017) “News Release - Ontario Basic Income Pilot Helping Provide More Security and Opportunity.” 4 Octo- ber 2017, https://news.ontario.ca/mcss/en/2017/10/ontario-basic- 135 Sunil Johal and Jordann Thirgood income-pilot-helping-provide-more-security-and-opportunity.html. (2016) “Working Without a Net: Rethinking 133 Government of Ontario (2017) “Ontario Basic Income Pilot – Pay- Canada’s social policy in the new age of ment Amount.” https://www.ontario.ca/page/ontario-basic-income- work.” Mowat Centre. https://mowatcen- pilot#section-6. tre.ca/working-without-a-net/; Renewing 134 Government of Ontario (2017) “Ontario Basic Income Pilot.” Canada’s Social Architecture Website: 52 | RACE TO THE TOP TO 52 | RACE https://www.ontario.ca/page/ontario-basic-income-pilot. http://social-architecture.ca/. 53 | RACE TO THE TOP to essentialservices. costs, is to provide more affordable access to effectively poolriskandlowersystem increasingly stretched workers, aswell way toextendthepurchasing powerof what isthealternative? Theonlyfeasible and othernecessities,thenwemustask also jugglingrent payments, hydro bills dental care andupgradingtheirskillswhile income, forprescription drugs,childcare, constrained abilitytopay, withtheirearned income worker willhave anincreasingly If weagree thatamiddleorlow- of Canadians. options toputmoney directly inthehands EI ortheCanadaChildBenefitare also enhancements toprograms suchasCPP, Increasing transfers toindividuals, through for under-represented students. educationopportunities post-secondary programssupport toimprove accessto adults andalsoacademicpreparation and effective skills-trainingprograms for This meansexpansionofaccesstomore higher emphasisplacedonSTEMskills. thaneverand uncertain before, with which promises tobemore tumultuous is criticalasweenteraworldofwork A focusonskillstrainingandupgrading

53 | THE MOWAT CENTRE 54 | RACE TO THE TOP and thrive. periods of change how to navigate the beaconsfor stand out as communities In any era, some inclusive growth? when it comes to a future-maker a future-taker or Will Canada be WHAT NEXT? AN INCLUSIVE GROWTH 5 AGENDA FOR CANADA Canada’s path to more inclusive growth is not straightforward. Proven approaches from the past, such as increased women’s participation in the labour force and increased investments in education, will continue to be critical, but will have less additional impact going forward than they have had in the past 40 years. Moreover, our redistributive mechanisms as currently designed have done less to reduce inequality over the past two decades than was previously the case.

A protracted period of slowth, driven primarily by The jurisdictions that succeed in building strong, population aging, is both upon us and sure to stay vibrant communities in big and small cities alike with us for a few decades. This era will require are the jurisdictions that will attract investment deployment of different, and more creative, policy and talent,Ure and develop a mutuallydolo reinforcing measures to enhance and sustain inclusive positive feedback loop that continues to growth. We may need to place a greater emphasis strengthen communities, families and individuals. on pre-distribution, and getting markets right in officimpos the first place rather than looking to mop up after Those places that succeed in both nurturing yet another market failure. talent at home and attracting talent from abroad volorewill come out on top. viduci While Canada can’t offer Fortunately, Canada starts from a strong the climate of California, we offer the things foundation. As the 10th largest economy in the many people around the world are looking world, with a fraction of the population of other for: trustworthy institutions and regulatory large economies, we are in a good position to planblab frameworks, id a diverse quam and multicultural populace, for our preferred future, whatever it may be. And and a strong social infrastructure, beginning with while we can’t be sure we’ll get there, we can offer our medicare system. If we keep building on these a plan for what the whole world is lookingalitatus for: strengths Canada’serferunt cities will continue to have a a model of growth that focuses on an inclusive magnetic pull for people from around the world. society, with opportunity for all and supports for Drop the ball, however, and coast on what we’ve those in need. had, andfaceatem we’ll find out soon enough there are plenty of other places people will choose to live. People are on the move like never before, being pushed and pulled as they escape dire asInim. conditions or look for better opportunities. For better or worse, the world’s biggest cities are becoming ever-more-popular people magnets. 55 | THE MOWAT CENTRE 55 | THE MOWAT New Zealand – from neoliberal darling to progressive leader

Between the mid-1980s and early 1990s, grappling with a struggling economy and rapidly increasing public debt, New Zealand embarked on a series of market-based reforms that liberalized financial markets, reduced regulations and public investment, and privatized state assets.

These reforms included the removal of agricultural and industrial subsidies, privatization of all commercial state assets, reductions in welfare assistance and comprehensive tax cuts. All areas of public life – ranging from the economy to the environment and social life — were impacted, and income inequality and poverty accelerated rapidly.136 The Gini coefficient for New Zealand is among the highest of all OECD countries in recent decades while GDP per capita has continued to rank among the bottom of advanced economies.137

The failures of neoliberalism have seen a rising demand from citizens as well as some political parties for a renewed government role in designing an economy that promotes equity and works for all citizens. In 2017 a new coalition government led by Jacinda Ardern of the Labour Party was formed, and immediately dedicated itself to steering the country towards policies that promised more for marginalized New Zealanders on issues such as the housing crisis, homelessness, child poverty and climate change.138 The country now aims to bridge the gap between minimum wage and living wage, and plans to increase the minimum wage to $20 by 2021 from the current rate of $15.75.139 The government has also promised to build 100,000 affordable housing units in the country over a period of ten years for first time home buyers,140 restore all rivers and lakes to a swimmable state within a generation,141 and achieve net zero greenhouse gas emissions by 2050.142

Could New Zealand, once the world’s go-to example for how to undertake neoliberal reforms, pull an about-face and provide the new global standard for progressive initiatives? Why shouldn’t Canada — or Ontario — compete for that role, and lead the race to the top, in pursuit of inclusive growth?

136 Nick Carroll (2012) “Structural Change in the New Zealand Economy 1974-2012.” New Zealand Treasury. http://www.treasury.govt.nz/ government/longterm/externalpanel/pdfs/ltfep-s1-04.pdf. 137 Jonathan Boston and Chris Eichbaum (2014) “New Zealand’s Neoliberal Reforms: Half a Revolution.” Governance, Vol. 27 No. 3, pp. 373- 376. http://onlinelibrary.wiley.com/doi/10.1111/gove.12092/full. 138 Charlotte Graham-McLay (2017) “Jacinda Ardern, New Zealand’s Sudden Star, Gets Set to Govern.” The New York Times, 20 October 2017, https://www.nytimes.com/2017/10/20/world/asia/jacinda-ardern-new-zealand.html. 139 New Zealand Herald (2017) “Minimum wage to increase to $16.50 from April, 2018.” 22 December 2017, http://www.nzherald.co.nz/nz/ news/article.cfm?c_id=1&objectid=11964562. 140 New Zealand Labour Party (2018) “KiwiBuild.” http://www.labour.org.nz/kiwibuild. 141 New Zealand Labour Party (2018) “Clean rivers for future generations.” http://www.labour.org.nz/water.

56 | RACE TO THE TOP TO 56 | RACE 142 New Zealand Labour Party (2018) “Real Action on Climate Change.” http://www.labour.org.nz/climatechange. the bestperformance. planning, trainingandcourse-correcting toachieve could winthegoal,butwewon’t getthere without The raceison,andit’satothetop.Canada growth anachievable goaland aconcrete reality. also exploringnewapproaches tomake inclusive jurisdictions inCanadaandoutsideare investment inpublicinfrastructure. Other agreements ofamassive aspart wave of benefits toadoptingcommunity public pensionstoexpansionofbasichealth growth, inareas rangingfrom improvement of host ofpoliciesthatprovide avenues toinclusive Ontario hasalready provided leadershipona Ontario? for thebenefitofall.WhynotCanada? promises alongsidethedisruptionitthreatens, how tomanagetheabundancethattechnology stand outandinspire theworldwithexamplesof Some places—cities,statesandnationswill how tonavigate periodsofchangeandthrive. some communitiesstandoutasthebeaconsfor when itcomestoinclusive growth? Inanyera, Will Canadabeafuture-taker orafuture-maker before thefuture shapesthem. and societiessearch forways toshapethefuture with somemixoftheseoptions,asindividuals We believe manycountrieswill beexperimenting measures are goingtobeinthecomingyears. and triedtoshowhowmuchmore such important individuals inthepreceding sectionsofthisreport, by governments, businesses,communitiesand distributive thatcanbeundertaken interventions a numberofpotentialredistributive andpre- set-backs willcomeoutontop.We’ve outlined help peoplemaximize theirpotentialandminimize andtakeuncertainty strong, concrete actionto Communities andnationsthatacknowledgethis » Asawork-back,eachprovince/territory and » » » Thefederal andprovincial/territorial the front oftheglobalraceinclude: inclusive growth agendathatpropels Canadato governments couldadopttodrive forward an Some specificnextstepsthatCanadian and measuringprogress Preparing forsuccess scorecard Benchmark Canada’s onthescorecard performance Set atargettoincreaseCanada’s performance been traditionally excluded from prosperity. way, with respect particularly togroups thathave inclusive growth andwhich are standing inits measures toassesswhich are generating assess existingprograms, policiesand tax those targets. Policymakers should alsoclosely are beinginitiatedor amended todrive towards their budgetsonwhichprojects andprograms inclusive growthtargets plans thatdetailplannedinitiatives toreach the federal government shoulddevelop public globally within10years). frame (e.g.,tobeamongthetop3or5countries on thescorecard to those reviewed in this report. which employs a broad range of indicators similar World Economic Forum’s inclusive growth ranking, pack among advanced economies according to the economies. to peerjurisdictionsacross G-7and other advanced Nations, inhabitantsofremote communities). Canada (e.g.,women,racialized minorities,First on specificsub-populationsandgroups within These metricsshouldalsobedesignedtoreport gender wagegap,labourshare ofincome). and wealthGinis,poverty rate,savings rate, instrument, medianhouseholdincome,income (e.g., GDPpercapita,theearlydevelopment includes abroad-based seriesofmetrics shared scorecardforinclusive growth governments workingtogetherto Canada is currently in the middle of the Canada is currently in the middleof the withinareasonable time , andreport annuallyin develop a that

57 | THE MOWAT CENTRE NATIBUSDAE NUMET ET 2AroundMAGNIS QUIS the world, governments are course-correcting their path to prosperity. The compass-setting depends on a new key modifier for growth: ‘inclusive’. 58 | RACE TO THE TOP TO 58 | RACE 6 CONCLUSION The focus on inclusive growth today arose from a questioning as to whether growth, without any adjectives, has been producing benefits that are shared sufficiently broadly. The focus on economic growth for growth’s sake simply did not create enough opportunity for enough people. Given the evident failure of this strategy, all around the world, governments are course-correcting their path to prosperity. The new compass-setting depends on a key modifier for the pursuit of growth: ‘inclusive.’

There are no guarantees Canada will be a leader down this road, given the facts and the pressures. But some place, some community, some group of people will fire imaginations by showing how inclusive growth is not only attainable; it’s self-reinforcing. Canada has the opportunity to lead by example, and lead the race to the top, propelled on the journey by the fuel of inclusive growth. 59 | THE MOWAT CENTRE 59 | THE MOWAT