Jack Mintz, president’s fellow at the School of Public Policy at the University of Calgary, told the House of Commons Financial Committee that he recommends Canada suspend all measures to increase taxes until the COVID-19 pandemic has died down, citing widespread unemployment and other long-standing economic problems.
“Structural unemployment reflects the pandemic’s supply shock, as people were told to stay home. Supply shock has let to a loss of jobs and hours in certain sectors, especially in hospitality, travel, retail, and commercial real estate,” said Mintz. “After the pandemic is no longer with us, probably in 2022, many workers will not be able to go back to their original employers in certain sectors, in part reflecting long-term changes in consumer and business behavior.”
Structural unemployment is different from the more common cyclical unemployment. Cyclical unemployment refers to jobs that disappear during a recession but quickly return when stimulated by demand. Structural unemployment typically results from technological changes, rather than fluctuations in supply or demand, making the job skills of some workers obsolete.
“As of October, 636,000 net job losses remain. Moreover, roughly 433,000 additional Canadians worked less than half their regular hours in October relative to February, 90 per cent of whom worked zero hours during the survey reference week, despite being technically employed. Employment among lower-income individuals has fallen more severely compared to middle- to higher-income individuals,” the report states.
Mintz said labour productivity is another major economic issue that should be addressed in the budget for the upcoming year, adding that it was already a major concern prior to the pandemic. Labour productivity measures the GDP that a country’s labour produces hourly.
“It is well accepted that countries with higher level of labour productivity tend to also have higher personal incomes per capita. Labour productivity is particularly important since the output generated per hour of work provides income available to pay wages, taxes, and other income to Canadians. Our social programs are not affordable, if our productivity performance lags,” he said.
One leading factor affecting productivity is investment, which enables businesses to reflect on innovative ideas to be adopted in businesses practices.
According to Mintz, investments in non-residential, public, and private sectors in Canada have declined by 12 percent from 2014 to 2019. While the biggest decline, by 53 percent, was seen in mining, oil, and gas, investment per worker in other industries have also dropped by 10 percent.
Mintz recommended that the government suspend tax increases, including delaying an increase in the Canadian Pension Program and the Goods and Services Tax to be placed on digital services.
“We really have to worry about making sure we’re getting people back to jobs, and we have some growth in this economy,” he said.
