Politicians and their advisers in the industrial countries are properly concerned about high unemployment. Hence their jobs summit in Detroit this week. But the danger is that the G-7, including Canada, will push ahead with short-term policies that add further complexities to the tax and regulatory system and may do little to reduce unemployment.
For example, Finance Minister Paul Martin suggested tax incentives as a way of encouraging business to hire and train workers.
It's an idea worth study. But no further study is needed to determine that it's the existing levels of payroll taxes and onerous government regulations that are the biggest disincentives to hiring. And as U.S. economist Edmund Phelps of Columbia University says in his new book Structural Slumps, there's a double whammy on jobs when the heavy payroll levies help fund payments to the jobless that make working less appealing to them.
Before further cluttering up the tax system, and before launching costly new ''infrastructure'' spending programs, the G-7 leaders should consider that the rate of employment in the industrialized world has actually risen in the past decade or so. In 1992, 66% of those between the ages 16 and 64 in the member countries of the Organization for Economic Co-operation and Development had jobs, up from 64% in 1982. That means 40 million more people working.
Furthermore, the aging population in the industrial economies means that the number of people of employment age will be declining, or at least increasing more slowly. That should result in lower numbers of unemployed.
The policymakers also need to be skeptical about the view that the new technologies are creating permanent unemployment, rather than creating new job opportunities as ''automation'' did in previous days. Many jobs in many industries are indeed lost forever. But it is far too early to conclude that technological advances have doomed us to a shrinking workforce. The increased productivity resulting from the new technologies will encourage new investment and growth, just as productivity improvement has done in the past.
Admittedly, many jobs will demand higher skill levels. That's where training comes in and that's why the emphasis being placed on training in Canada, and in other G-7 countries, is important.
The gloomsters say, why train when there are no jobs? But that implies a standstill economy where there is no demand for new products or services. The boom in information technology, the expanding demand for financial advice and for travel services, new services required in health care - these and many other areas offer the potential for new employment.
With lower payroll taxes and less regulation, business will be better able to exploit this potential.
|This information is provided by the Financial Post.|
Please send comments to:
Revised: June 3, 1995
All contents copyright ©, Financial Post. All rights reserved.