Too many people working for the government, that's the problem

Canada's falling productivity traces directly back to a bloated government

In the past week I have had discussions with two Alberta entrepreneurs that cause me to question some of the policies espoused by the UCP government.

But before discussing this, the current economic background needs to be assessed.

(The data for these charts comes from this internet database.)

According to the latest Yougov poll, the issues which motivate most American voters are economic in nature — inflation, wages, debt etc. Based on consumer confidence surveys, US consumers are increasingly pessimistic as shown on this chart.

The US consumer confidence, which decreased dramatically following the COVID-19 shutdown in 2020, has not recovered to pre-COVID values. Surprisingly, Canadian consumer confidence has not fallen as significantly. Does this mean that the Canadian economy is better than the US economy? Or alternatively, are Canadians not attuned to the problems in our economy?

Perhaps it is the latter. This chart shows the gross domestic product per capita of Canada and the United States. Even with declining consumer confidence, the US economy has grown 15.4 percent in the past ten years. In contrast, the Canadian economy has remained unchanged which means that we are falling behind if inflation is taken into account.

The gross domestic product is a measure of the market value of all goods and services produced within a country in a given time period. Inflation and population growth should cause an increase in the market value of production. When it doesn’t increase, it means that both the country and the people in that country are getting less wealthy. It means that workers are producing less value for every hour of labour worked. And this is identified by the labour productivity chart shown here.

In 2015, Canadian workers were more efficient than American workers. They produced more value for every hour worked. This relationship switched in 2016 and the gap between US and Canadian labour productivity has grown every year since.

I wonder why. Canadians are falling behind, but we are apparently happy with this situation according to consumer confidence surveys. Perhaps it is time for Canadians to wake up.

Labour productivity goes down when the non-productive civil service grows too large. It goes down when corporations don’t invest in new equipment and production expansion.

The good news to this bad news story is that everything can be reversed by changing government policies. New policies only come with new governments, but those governments must propose policies based on reality. And this brings me back to the conversations earlier referenced.

We are told that housing shortages demand urban densification and changes in development rules to facilitate new construction. Housing shortages, if true, should be driving up housing and rental prices across the country which, outside of a few pockets of increasing prices, is not happening. I was told by someone who manages sixty Calgary rental properties for eastern owners that it is getting more difficult to find tenants for the mostly new rental stock.

When I asked if there is a housing crunch in Calgary he said, “Definitely not.”

We are told that the increasing retirement of tradespeople will leave Alberta without necessary labour resources. This should be driving labour rates up in the face of falling inflation. A journeyman electrician told me that his salary, when he became a journeyman twenty years ago, was $38 per hour. Today the average rate for a journeyman electrician is still about $40 per hour. The entire $2 per hour increase has been more than consumed by inflation and electricians are going backwards economically. Journeyman electricians used to be able to buy houses in Calgary and now, like many others, they must live in outlying communities and drive much further to their places of work.

Two conversations do not necessarily represent the whole truth. Economies are complex and there are a lot of reasons for bad economic results.

What can’t be disputed however is that the Canadian economy is in a world of hurt and it is getting worse. The household economies of Canadians are also in a world of hurt. Mr. Poilievre and Ms. Smith are offering solutions and support to make life easier for Canadian households.

My concern is that, like the Canadians who answer consumer confidence polls, they may not understand at least some of the important variables which define our economy.

If there is no housing shortage, then pushing development policies to build more houses is going to destroy rental markets resulting in substandard housing. If labour rates have been stagnant and going backwards for twenty years, then giving a $5,000 bonus to skilled labourers who emigrate to Alberta is not helping anyone, except those who want to hire cheap labour.

I am not a conspiracy theorist who thinks labour rates are being artificially held down or that housing is being used to enrich certain industries.

But I also worry that proposed policies at both the provincial and federal levels are not well considered. With all due respect, might I suggest that, rather than micromanaging labour and housing markets, our politicians should focus on dramatically reducing the public sector and reducing the unnecessary administrative burden on the commercial sector.
https://www.westernstandard.news/opinion/lytle-too-many-people-working-for-the-government-thats-the-problem/58574