The high cost of child care may be holding our economy back

A confluence of headlines outlining dangers to the Canadian economy have a common thread. We read about high levels of household debt, families under stress due to unemployment, stresses on schools dealing with children living with stress at home, and declining birth rates leading to worries about who is going to power the economic engine when seniors retire.

The common thread is that more than ever, it takes two full-time incomes just to keep the roof over our collective heads. Signing trade deals, building pipelines or pushing debt-funded infrastructure projects will not be able to fix this.

Not when taxes eat up half of a two-income family's pay, and certainly not when paying for child care eats up another 22 per cent, as a recent OECD study has shown.

Why does the government need to tighten regulations on mortgages? Because young families can get in over their heads on their mortgages, should interest rates rise someday — which, eventually, they will.

I've lived through this. During a period of rapid, inflationary growth, a generational surge occurred in the 1970s, with thousands of new families being formed and having kids.

We were giving birth to Generation X, and we wanted to raise our kids in a house. A starter home cost a bit more than double the median salary of a single worker, and was rising quickly. Today, that cost can reach — or in some cities, surpass —10 times the Canadian median income.

In the late 70's, mortgage rates spiked to 20 per cent and more, and even though most mortgages totalled less than $75,000, young families found themselves in over their heads.

The numbers have changed, but that same potential appears likely today.

When our family started having children, we made it possible to survive on one income. That was because after paying taxes on a second income, plus child care costs, the second bread winner got very little bread for her labour. (Then as now, most stay-at-home parents were females.)

Today, I can't see how everyday working families could possibly keep home and family on one regular income. The cost of a (new, more restricted) mortgage isn't the only reason for this. It's the cost of child care.

According to the Organization for Economic Co-operation and Development, Canadian families pay more for child care than just about anyone in the developed world — up to 22 per cent of family income. The Trudeau government's much-vaunted family support program barely touches those costs.

If a second working spouse essentially works for no take-home pay, what's the incentive to work? If the desperate need for cash flow forces the need for a second income anyway, what value is that labour to the economy?

Not only is there a disincentive to work (and pay taxes), there is also a disincentive for educated families to have children. If populations cannot be sustained by natural growth, and if we cannot pass our culture on to a sufficiently large next generation, what changes can we expect in our national makeup?

Almost all other nations in the OECD solve this dilemma with generously subsidized child care — costing 10 per cent or less of family income in many countries.

If two incomes are required for a Canadian family today, and if a nation wants to collect the benefits of educating women into well-trained career paths, it makes sense to subsidize quality child care for them.

Would we rather tell women not to bother getting a good education because their labour will only be eaten up by student debt, taxes and child care costs? Would we rather see families default on mortgages in large numbers, or see the costs of our own homes plummet as fewer and fewer young families can afford to buy a home? Would we rather signal to young people that having children is too much of a burden? Would we rather rely on immigration alone for a stable population?

It seems the cheapest alternative is the one chosen by almost all other developed economies: nationally-subsidized child care.

We're always told that our people are our greatest resource. But in Canada, half of our family-producing population seems only to be a resource for governments, banks and day care operators.

In my retirement, I've become a grandparent day home operator. It's a lot of work for the money (yes, I'm being paid). But the pay is substantially less than what regular daycare for three children would cost.

Not every young working family has that alternative available. And I can't see how our federal government believes its new national support plan for young families fills any gap at all.

That unfilled gap — as much as the lack of a new pipeline, or a trade deal with Europe or infrastructure projects that never seem to materialize (though we pay for the debt with our taxes) — is what is holding back growth in our economy.

We're not making best use of our best resource: our young people.

On minimum wage, every dollar is spent

I can remember a time not too long ago in Alberta, when workers with minimal training and not much experience would refuse to crawl out of bed for a job that paid less than $80,000 a year — not counting substantial overtime.

I recall the stories from young members of my family living in the northern part of the province of friends working the fast food business, who would simply walk out their employer’s door to the restaurant down the street, and sign up for better pay — no interview required.

Good times, right? During the boom, even small Alberta businesses managed to make money paying their workers substantially more than the new minimum wage of $12.20 an hour.

I don't recall the price of a burger and fries or a double-double dropping that much since oil dropped below $50 a barrel. But it seems now that it has, minimum wage seems too much to pay for many Alberta small business owners.

The Federation of Independent Business has pulled out the same notes they used five years ago, to warn of rampant business closures, or of drastic cuts in jobs or hours, if the legal minimum wage should ever be raised.

News outlets like the Globe and Mail gave them plenty of space to argue that now is not the time to make a law such that people working full-time could actually live on their salary. Not that $12.20 an hour is a living wage in most Alberta cities, but that point has been lost in the rhetoric.

Besides, we were told while reading from the old notes, Alberta has very few workers earning minimum wage, and anyway, they are mostly teenagers living free in their parents' homes.

Well, back in 2010, Alberta did only have 22,200 workers on minimum wage, according to Stats Canada. But by 2015, that number had blown up to 51,600.

And according to Alberta Labour Department figures, more than 296,000 Alberta workers earn less than the nominal living wage of $15 an hour — the minimum wage mandated for Oct. 1, 2018. Right now a living wage is calculated to be $17.29 an hour in Calgary,

Almost 80 per cent of minimum wage earners work permanently on minimum wage in Alberta, while 54 per cent of them work full-time, and 38 per cent of them have children to support. Not surprisingly, 62 per cent of them are female.

But this is not just a small business problem. Government figures say 58.5 per cent of people on minimum wage work for employers with more than 100 workers.

The point which could have been stressed five years ago when the the small-business case was last being made, is this: if the success of your business model includes paying wages that require a full-time employee to rely on the Food Bank month to month, maybe it's your business model that's wrong.

The grocery store managers and thrift store workers in Alberta all know exactly when government support cheques come out every month. They can track the date by their sales figures.

A basic text on economics will tell you that every dollar in an economy will eventually be spent. It's a rule. For people on the bottom end of the wage scale, every dollar that is earned is spent locally. That's a rule, too.

Differently stated: if a poor person gets another dollar, it doesn't take long for a rich person to obtain it.

So the business case that has been made over and over again, against expecting employers to support a fair minimum wage, has not been convincing.

All the money workers earn gets spent (and for many, spent and then some). All the places where that money is spent is owned by business owners. The money goes round and round. Watching that occur is called economics.

In a time when disparity of income between the rich and the poor has become the root of some rather dismal politics in North America, I fail to see how the moral importance of workers being able to live on their pay levels is somehow wrong.

Especially when it's absolutely known that when there's more money at the bottom, it just flows upward all the faster.

Follow Greg Neiman's blog at ReadersAdvocate.blogspot.ca

I like the carbon tax because it makes me money

When it comes to discussions about taxes and public policy, everyone gets to grind their own axe. So why not me?

Well-funded business lobbies — and there are plenty of them — push their agendas for lowered taxes. The Canadian Taxpayers Federation claims to represent my interests as an ordinary citizen, but they've never asked me what my interests might be.

For my part, I support a carbon tax both in my home province of Alberta, and federally. Not just for environmental reasons, or to improve Alberta's and Canada's image regarding climate change. No, I want a carbon tax, because under the rules explained to me so far, I'll make out like a bandit.

In fact, I can hardly wait for January to arrive so our household can collect its first $300 rebate cheque.

We've already invested in energy-saving technology in our little home, so the increase in utility and gasoline costs that we will see as a result of carbon levies ought to be much less than those of other less efficient households. Carbon taxes are linked to energy consumption but rebates are linked to income, so families like ours will be ahead of the game.

What's not to like?

In the past, I had calculated the economic benefit of my riding a bike to work to be worth about $1,000 a year as a tax-free increase in my disposable income. With the added cost of a carbon tax, if you decide to bike to work for the nine or 10 months of the year when it's easily feasible in 2017, that benefit would rise.

Who doesn't want an extra $1,000 of spending money a year, plus another $200 or $300 cash rebate from the government for the privilege of not burning so much fuel? Well, in Alberta — and Saskatchewan — a lot of people don't.

There are yard signs in Red Deer saying Kill the Carbon Tax. Apparently, these people don't like their money.

Saskatchewan premier Brad Wall declared the proposed federal carbon tax will siphon $2.5 billion out of his province, once it is fully implemented by 2022. That statement has been rated as Mostly Baloney by CBC's fact-checking site, Baloney Meter.

That's because there are two sides to the taxation coin, something most business lobbies and even the Canadian Taxpayers Federation don't cite as often as they should. There's the taking with one hand and the spending with the other. There's also the social benefit of the purposes behind taxes, which viewed globally are worth money.

The federal government has vowed that the money taken in carbon taxes from the provinces will be returned to the provinces. Brad Wall, like all premiers, can allot that money as he sees fit.

He could lower business taxes if he thinks that's a good idea. The Alberta government will lower its own small business tax from three per cent to two, once our carbon tax comes into effect. Who doesn't like a two-per-cent tax rate?

In fact, over the weekend, a Globe and Mail article put forward numbers suggesting that each dollar increase in business taxes produce between three and five dollars in losses to business. If that's so, then the $865 million the Alberta government intends to allocate toward our small business rate cut should produce a rather hefty return.

Raising the $9.6 billion Alberta says it will collect over the next five years is one thing, deciding how that money is spent is another.

Right now, what we've got is pretty vague: $6.2 billion to diversify the energy industry and create new jobs, plus $3.4 billion in rebates to businesses and communities (I hope that means municipalities). And to households, which means me.

And that's the part that should be getting the scrutiny.

Years ago, Alberta put a levy on car and truck tires. It's a tax. The spending of that levy to find innovative ways to recycle those tires has been widely hailed as a money-saving, job-producing success. The costly effort of a previous Alberta government to capture and store carbon dioxide has not been hailed as a money-saving, job-producing success. Let's just leave it at that.

Not every government initiative succeeds. So we need vigilance to see that we get not just a revenue-neutral carbon tax, but a profitable one. Rather than griping about a tax — which is easy — we need to be able to judge the financial return.

I get a good financial return from leaving my car in the garage as much as possible, and walking or cycling on my daily commutes. With the carbon tax, I fully expect that return to increase. Multiplied throughout the province, such a small change has been studied and shown to potentially save families and municipalities many millions of dollars every year.

If business can lobby for its narrow interests in the making of tax policy, why can't I? Bring on the carbon tax, I say. I have plans for the money.

Follow Greg Neiman's blog at ReadersAdvocate.blogspot.ca