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Federal government should tackle Canada’s productivity crisis in upcoming budget

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From the Fraser Institute

By Jock Finlayson

In late-2014, per-person gross domestic product (GDP), a common indicator of living standards, stood at $58,162 (adjusted for inflation). By the end of 2023 it was actually slightly lower. This means Canadian living standards haven’t increased in a decade.

In a recent speech, the Bank of Canada’s senior deputy governor highlighted the risk posed by chronically sluggish productivity growth to the country’s living standards. She also noted that stalled productivity makes it harder to reduce inflation and keep it at (or close to) the Bank’s 2 per cent target.

Productivity is conventionally defined as the value of economic output per hour of work. Over time, it’s the most important determinant of overall economic growth. In a mainly market-based economy such as Canada’s, particular attention should be paid to the productivity performance of the business sector.

Unfortunately, here the news isn’t good.

Business sector productivity has flatlined in Canada, with the level of output per hour worked essentially unchanged from seven years ago. This pattern of productivity stagnation, in turn, is the principal reason why the value of economic output per person has stalled in Canada. In late-2014, per-person gross domestic product (GDP), a common indicator of living standards, stood at $58,162 (adjusted for inflation). By the end of 2023 it was actually slightly lower. This means Canadian living standards haven’t increased in a decade. That’s not a picture any Canadian citizen or policymaker should be happy about.

For many people, GDP is an abstract concept that doesn’t easily map to their lived experience. But the level and rate of growth of GDP clearly matter to the wellbeing of citizens. Academic studies confirm that worker wages are based in part on the productivity level of their employers. Put simply, the most productive businesses generally pay higher wages, salaries and benefits.

Moreover, over time individual and household incomes can only grow if the economy itself generates more output per hour of work and per person. When per-person GDP increases by 2 per cent a year (after inflation), average income doubles within 35 years. With 1 per cent annual growth in per-person GDP, it takes 70 years. At 0.5 per cent growth in per-person GDP, 139 years must pass before the average income will double. In Canada, per-person GDP has been declining outright, an alarming and unusual trend.

Addressing Canada’s productivity crisis should be job one for the federal government’s 2024 budget, which the Trudeau government will table on April 16. In the early 1980s, Canada was roughly 88 per cent as productive as the United States, measured by the value of output per hour of work across the economy. By 2022, that figure had dropped to 71 per cent, and it’s continued to decline since then.

What can be done? So far, the Trudeau government has relied on population growth fuelled by high levels of immigration to drive economic growth. That strategy has manifestly failed, as the government itself recently (if sheepishly) acknowledged by dialing back the numbers of non-permanent immigrants who will be admitted to the country.

A smarter approach is to boost investment in the things that make businesses and workers more productive—machinery, equipment, digital tools and technologies, intellectual property, up-to-date transportation and communications infrastructure, and research and development focused on bringing innovative products and ideas to market, rather than keeping them in the lab or in academic institutions. Canada’s record is poor in most of these areas, as evidenced by the fact we trail far behind the U.S. and many European countries in the level of business investment per employee.

That will need to change if we hope to up our game on productivity and lay the foundations for a more prosperous Canada.

Business

‘Context Of Chemsex’: Biden-Harris Admin Dumps Millions Into Developing Drug-Fueled Gay Sex App

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From the Daily Caller News Foundation 

By Owen Klinsky

The Biden-Harris administration is spending millions funding a project to advise homosexual men on how to more safely engage in drug-fueled intercourse.

The University of Connecticut (UCONN) in July announced a five-year, $3.4 million grant from the U.S. National Institute of Health (NIH) for Assistant Professor Roman Shrestha to develop his app JomCare — “a smartphone-based just-in-time adaptive intervention aimed at improving access to HIV- and substance use-related harm reduction services for Malaysian GBMSM [gay, bisexual, and other men who have sex with men] engaged in chemsex,” university news website UCONN Today reported. “Chemsex,” according to Northern Irish LGBTQ+ nonprofit the Rainbow Project, is the involvement of drug use in one’s sex life, and typically involves Methamphetamine (crystal meth), Mephedrone (meth), and GHB and GBL (G).

Examples of the app’s use-cases include providing a user who has reported injecting drugs with prompts about ordering an at-home HIV test kit and employing safe drug injection practices, UCONN Today reported. The app is also slated to provide same-day delivery of HIV prevention drug PrEP, HIV self-testing kits and even a mood tracker.

“In Malaysia, our research has indicated that harm reduction needs of GBMSM [gay, bisexual, and other men who have sex with men] engaged in chemsex are not being adequately met,” Shrestha told UCONN Today. “Utilizing smartphone apps and other mHealth tools presents a promising and cost-effective approach to expand access to these services.”

Homosexuality is illegal in Malaysia and is punishable by imprisonment, according to digital LGBTQ+ rights publication Equaldex. Drug use, including of cannabis, is illegal in Malaysia, and drug trafficking can be a capital offense.

The NIH disbursed $773,845 to Shrestha in July to conduct a 90-day trial testing the efficacy of JomCare among 482 chemsex-involved Malaysian gays. It also provided Shrestha with $191,417 in 2022 to “facilitate access to gender-affirming health care” for transgender women in the country.

“Gender-affirming care” is a euphemism used to describe a wide range of procedures, including sometimes irreversible hormone treatments that can lead to infertility as well as irreversible surgeries like mastectomies, phalloplasties and vaginoplasties.

Shrestha has a track record of researching mobile health (mHealth) initiatives for foreign homosexuals, co-authoring a 2024 study entitled, “Preferences for mHealth Intervention to Address Mental Health Challenges Among Men Who Have Sex With Men in Nepal.”

The proliferation of LGBT rights has been a “foreign policy priority” under the Biden-Harris administration, a State Department spokesperson previously told the Daily Caller News Foundation, with President Joe Biden instructing federal government department heads to “to advance the human rights of LGBTQI+ persons.”

“Around the globe, including here at home, brave lesbian, gay, bisexual, transgender, queer, and intersex (LGBTQI+) activists are fighting for equal protection under the law, freedom from violence, and recognition of their fundamental human rights,” a 2021 White House memorandum states. “The United States belongs at the forefront of this struggle — speaking out and standing strong for our most dearly held values.”

President-elect Donald Trump announced on Nov. 12 that Elon Musk and Vivek Ramaswamy would collaborate to establish a new Department of Government Efficiency (DOGE), with Musk claiming the agency would feature a leaderboard for the “most insanely dumb spending of your tax dollars.” Some DOGE cuts could come from LGBTQ+ programs, such as a grant from the United States Agency for International Development to perform sex changes in Guatemala and State Department funding for the showing of a play in North Macedonia entitled, “Angels in America: A Gay Fantasia on National Themes.”

“The woke mind virus consists of creating very, very divisive identity politics…[that] amplifies racism; amplifies, frankly, sexism; and all of the -isms while claiming to do the opposite,” Musk said at an event in Italy in December 2023, according to The Wall Street Journal. “It actually divides people and makes them hate each other and hate themselves.”

Shrestha and the NIH did not respond to requests for comment. When reached for comment, a UCONN spokeswoman told the Daily Caller News Foundation that, “specific questions about the grant and the decision to award it to our faculty member should be directed to the NIH, since that’s the funding agency.”

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Broken ‘equalization’ program bad for all provinces

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From the Fraser Institute

By Alex Whalen  and Tegan Hill

Back in the summer at a meeting in Halifax, several provincial premiers discussed a lawsuit meant to force the federal government to make changes to Canada’s equalization program. The suit—filed by Newfoundland and Labrador and backed by British Columbia, Saskatchewan and Alberta—effectively argues that the current formula isn’t fair. But while the question of “fairness” can be subjective, its clear the equalization program is broken.

In theory, the program equalizes the ability of provinces to deliver reasonably comparable services at a reasonably comparable level of taxation. Any province’s ability to pay is based on its “fiscal capacity”—that is, its ability to raise revenue.

This year, equalization payments will total a projected $25.3 billion with all provinces except B.C., Alberta and Saskatchewan to receive some money. Whether due to higher incomes, higher employment or other factors, these three provinces have a greater ability to collect government revenue so they will not receive equalization.

However, contrary to the intent of the program, as recently as 2021, equalization program costs increased despite a decline in the fiscal capacity of oil-producing provinces such as Alberta, Saskatchewan, and Newfoundland and Labrador. In other words, the fiscal capacity gap among provinces was shrinking, yet recipient provinces still received a larger equalization payment.

Why? Because a “fixed-growth rule,” introduced by the Harper government in 2009, ensures that payments grow roughly in line with the economy—even if the gap between richer and poorer provinces shrinks. The result? Total equalization payments (before adjusting for inflation) increased by 19 per cent between 2015/16 and 2020/21 despite the gap in fiscal capacities between provinces shrinking during this time.

Moreover, the structure of the equalization program is also causing problems, even for recipient provinces, because it generates strong disincentives to natural resource development and the resulting economic growth because the program “claws back” equalization dollars when provinces raise revenue from natural resource development. Despite some changes to reduce this problem, one study estimated that a recipient province wishing to increase its natural resource revenues by a modest 10 per cent could face up to a 97 per cent claw back in equalization payments.

Put simply, provinces that generally do not receive equalization such as Alberta, B.C. and Saskatchewan have been punished for developing their resources, whereas recipient provinces such as Quebec and in the Maritimes have been rewarded for not developing theirs.

Finally, the current program design also encourages recipient provinces to maintain high personal and business income tax rates. While higher tax rates can reduce the incentive to work, invest and be productive, they also raise the national standard average tax rate, which is used in the equalization allocation formula. Therefore, provinces are incentivized to maintain high and economically damaging tax rates to maximize equalization payments.

Unless premiers push for reforms that will improve economic incentives and contain program costs, all provinces—recipient and non-recipient—will suffer the consequences.

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