Job Creation: Canada vs. the U.S.

[jshore]

Here (http://www.americanprogress.org/atf/cf/%7BE9245FE4-9A2B-43C7-A521-5D6FF2E06E03%7D/CANADA.PDF) is an interesting report from The Center for American Progress comparing job creation in Canada vs. the U.S. The basic conclusion is summarized by the graph on the first page: During the 1990s, the U.S. outpaced Canada in job creation as measured by percentage job growth (although it looks like what happened is the U.S. outpaced Canada just in the first half of the 90s and then the two were pretty much in lock-step). Then, starting in early 2001, the U.S. job numbers leveled off and even fell a little while Canada's continued to grow In fact, between 2000 and 2003, Canada experienced 5.6% growth in jobs whereas the U.S. experienced a 1.4% decrease. As a result, Canada is now ahead of the U.S. in percentage job growth between 1991 and 2003 (22.7% vs. 19.9%).

The rest of the report discusses possible reasons for this and other economic measures, such as balance of trade, etc. They note that both countries instituted tax cuts but the ones in the U.S. were more directed at the rich while the ones in Canada were smaller and targetted more to the middle class. As a result, the government revenues as a percent of GDP declined only a little in Canada between 2000 and 2003 (1.15%) but much more in the U.S. (4.2%).

So, what say the wise folks on the SDMB about these numbers? Do you think this is a good test of how effective Bush's economic policies are or are there other explanations. (As you can read, the report considers several other explanations but tends to argue that they would be unlikely to account for this.)

Of course, we can never run true experiments in economics so we are always left with these somewhat unsatisfactory methods of trying to glean the effect of policies. Still, I find these results most interesting.

[Plan B]

A quick trip to the American Progress web site shows that they are not a disinterested objective party; they clearly have a leftist point of view. Surprised that there was no mention of this in the OP. Lost my motivation to peruse the numbers.

[John Mace]

For capitalist countries, I think that trying to prove a causal relationship between any one particular economic policy of a given president and actual perfomance in the economy of that country is next to impossible.

In a command and control economy like the old USSR, it might have been easier. There are just too many variables in our economy.

[jshore]

Plan B: Yes, The Center for American Progress is a left-of-center think-tank. I was going to put something about that in the OP but I didn't know exactly how to characterize them since there are a number by similar names that I get confused. (For example, there is the Progressive Policy Institute, which despite its name is affiliated with the Democratic Leadership Conference and is thus probably is left of center but not by much.) From the list of columnists I just found on the CAP's website, I'd say they are more solidly left wing...but not far left. E.g., one of their columnists Eric Alterman writes for The Nation although he is definitely one of that magazine's more centrist columnists. Another, Gene Sperling, is a Clinton White House person.

[jshore]

John Mace, I would tend to agree that it is hard. However, you would have to admit (I think) that this sort of comparison is a step up from the sort of logic we have been hearing from the Administration, e.g., that the good job growth numbers for March show how wonderful the President's policies are doing or this (http://www.ustreas.gov/press/releases/js1317.htm) more detailed press brief from the Bush-Cheney Re-election Campaign...excuse me...the U.S. Treasury Department.

[jshore]

Since Plan B has raised the issue of who The Center for American Progress is, I dug up this (http://www.washingtonpost.com/ac2/wp-dyn?pagename=article&contentId=A2623-2003Oct22&notFound=true) Washington Post article on them.

[Sam Stone]

If you're looking to nail George Bush's policies this way, it's not going to work. As John Mace said, our economies are far too complex, and there are far too many differences between our populations, for you to draw any conclusions like that.

For example, what if I said that maybe the difference was that Canada never had a tech bubble as big as the U.S.'s? That would account for the U.S. beating us in the mid-1990's and then lagging behind us when the bubble burst.

I could also claim that because we are starting from a much higher unemployment situation in the first place (7.5% vs 5.6%), we have a larger pool of unemployed people and can therefore meet job demands faster.

And you might want to be careful with the comparisons anyway, because last month the U.S. created over 300,000 new jobs, and Canada LOST 20,000. Given that we're 1/10 the size, that's a pretty big difference.

[Raygun99]

For example, what if I said that maybe the difference was that Canada never had a tech bubble as big as the U.S.'s? That would account for the U.S. beating us in the mid-1990's and then lagging behind us when the bubble burst.

I'm not sure that's true. Through the late 90s and into the early part of this decade, Nortel strode Collossus-like across Canadian stock markets. The stock price is to this day a national obsession.

[jshore]

For example, what if I said that maybe the difference was that Canada never had a tech bubble as big as the U.S.'s? That would account for the U.S. beating us in the mid-1990's and then lagging behind us when the bubble burst.


I suppose it is possible...and yet the difference in % GDP growth between the two countries from 2000 to 2003 was not that great (12.9% for Canada and 11.9% for the U.S.) yet the difference in job creation was +5.6% vs. -1.4%.


And you might want to be careful with the comparisons anyway, because last month the U.S. created over 300,000 new jobs, and Canada LOST 20,000. Given that we're 1/10 the size, that's a pretty big difference.

That's also one month's data. Don't you think that looking over a longer period of time is necessary to discern trends?

Mind you, I am not convinced how meaningful this data is myself but it sure seems hard to fathom how the Bush tax cuts, which we know have exacted a very heavy price in terms of fiscal policy (particularly long-term), could really be doing that much to help our economy create jobs...unless you want to believe that the divergence between the U.S. and Canada in job creation would have been a lot greater without them and that seems far-fetched to me.

[Sam Stone]

I've been thinking about this some more, and I think you have to control for some very big factors.

First, oil prices. Canada, and Alberta in particular, is an oil producing country. The oil industry in Alberta is booming.

Second, population increase. This might account for the whole difference right there. All else being equal, the country with the fastest growing population will create the most jobs. The fact that Canada's unemployment rate is 7.4% indicates that job creation has been from immigration.

Also, you're assuming that Bush cut taxes and Canada didn't. In fact, Canada has been cutting taxes for some time. Our Federal taxes were lowered by 58 billion dollars over the 5 years between 2001 and 2006. That's almost as large a tax cut as Bush's. And it's been a 'supply-side cut', too. capital gains and the rich surtax was eliminated. In fact, the left in Canada was complaining to our centrist liberal government that they were 'cutting taxes for the rich'. Sound familiar?

Finally, job growth in Canada has been driven primarily by two provinces: Alberta and Ontario. Both of those provinces cut provincial taxes more than anywhere else in Canada. Hmm... Maybe tax cuts work.

[Sam Stone]

In fact, thinking about it more... I think Canada is a fairly good laboratory for social policy. Our country has a fairly homogenous population (other than Quebec), and yet the provinces have drastically different social and tax policies. Without an exception I can think of, the provinces with the healthiest economies have the most 'conservative' economic policy - lower taxes and regulations. Look at British Columbia - it's a poster child for the things the left in the U.S. wants - progressive taxes, higher funding for social programs, strong environmental regulations, and lots of government programs.

British Columbia is a mess. It has both the highest rate of immigration and the lowest job creation rate in Canada. It lags in almost every economic category.

[Gorsnak]

Come, now, Sam. I will not debate your general argument regarding a correlation between fiscal health and conservative policies aside from noting that there are a great many differences between provinces you're not drawing attention to. Just as examples, I'm pretty sure the cod fishery didn't collapse because of socialism or high taxes, nor are the NDP to be blamed for the drought, grasshoppers, and BSE that have put Saskatchewan farmers deep in the red for the past while. To provide services at a given level requires a given amount of money, and in places where money can't be pumped out of the ground, that amount is likely to consitute a higher percentage of the total available than it does in places where it can be. If Saskatchewan set its taxes at the same level as Alberta does, we'd be so deep in debt that not even the Money Mart would extend us credit. There's this whole physical infrastructure/population density ratio working against us.

Okay, so maybe I will debate the general argument a bit. :)

But anyways, the point I want to make is that to blame the situation in BC on leftists is going astray. BC is in a mess because they consistently elect idiots, be those left-wing idiots or right-wing idiots. I mean really, who was the last BC premier to not leave politics because of an RCMP investigation? The current one is liberal in name only, and I haven't heard things are improving.

As to the OP, I won't pretend to have any conclusive evidence, but I think that our federal govt, scandal-wracked though it might be, has had a much steadier hand on the budget in recent years than the US govt has. This, I don't think, can be the whole answer, but it may be a part of it. The tech bubble probably does have something to do with it, as Sam suggests, Nortel notwithstanding. Possibly Canada has gained more from NAFTA (and before that, the US/Canada FTA) than the US, though that wouldn't explain the big relative gain in the last couple years.

[Sam Stone]

I was just trying to point out that the argument could cut both ways if you want to start trying to give credit or blame to any one policy for the workings of a complex economy. But in the same message I agreed with you - there are other factors going on that we aren't controlling for, so the exercise is meaningless.

Now, if someone wanted to do a proper economic study, and try and control for the myriad dependent variables, then we might learn something interesting.

[John Mace]

John Mace, I would tend to agree that it is hard. However, you would have to admit (I think) that this sort of comparison is a step up from the sort of logic we have been hearing from the Administration, e.g., that the good job growth numbers for March show how wonderful the President's policies are doing or this (http://www.ustreas.gov/press/releases/js1317.htm) more detailed press brief from the Bush-Cheney Re-election Campaign...excuse me...the U.S. Treasury Department.

I don't know if it's a step up or not. It might sound more reasoned, but I'm still highly skeptical that it is actually more meaningful. I will also say, as I've said before, that Bush is talking pure BS when he claims his tax policy is responsible for job creation in any given month (or series of months). I'm not taking any sides here. It's just too politically charged an issue for anyone to be objective.

[matt_mcl]

Our country has a fairly homogenous population (other than Quebec)

Really? This (http://en.wikipedia.org/wiki/Canada) says, "Fully one-sixth of Canadians are foreign-born, a percentage second only to Australia."

[Sam Stone]

I meant homogenous in that we're fairly similar across the provinces, not that the populations within the province were all of the same lineage.

With a few exceptions, if you met a Canadian you'd have a hard time telling if he or she is from Toronto, Edmonton, or Vancouver. I certainly can't. But in the states, a Texan is very different from a New Yorker, who is very different from a New Englander or a resident of Louisiana.

[matt_mcl]

That's an unusual definition of "homogeneous."

[Sam Stone]

Homogenous: all of the same or similar kind or nature. It's just as valid to to say, "The provinces are homogenous" meaning that the populations between them are similar as it is to say, "The population is homogenous", which breaks the unit down to individual people. For that matter if I said, "The G8 countries are relativey homogenous", would you take that to mean that there are no ethnic or cultural differences between subgroups in each country, or that the eight countries themselves are similar?

[jshore]

Also, you're assuming that Bush cut taxes and Canada didn't. In fact, Canada has been cutting taxes for some time. Our Federal taxes were lowered by 58 billion dollars over the 5 years between 2001 and 2006. That's almost as large a tax cut as Bush's. And it's been a 'supply-side cut', too. capital gains and the rich surtax was eliminated. In fact, the left in Canada was complaining to our centrist liberal government that they were 'cutting taxes for the rich'. Sound familiar?


No, the Center for American Progress report specifically noted that Canada cut taxes, as I explained in the OP. It is just that the tax cuts were smaller (in terms of the reduction in revenue they caused as a percent of GDP) so they didn't cause a fiscal disaster and they were directed more at the middle class, according to CAP. Since you seem to claim that the cuts were directed more at the rich (or that some people claimed they were), do you have a cite showing how the cuts were distributed like Citizens for Tax Justice shows (http://www.ctj.org/pdf/gwbdata.pdf) they were distributed here in the U.S.?

[Kimstu]

Sam Stone: I meant homogenous in that we're fairly similar across the provinces, not that the populations within the province were all of the same lineage.

Fairly similar across the provinces? That's interesting; do you have a cite for that that gives population diversity statistics by province? Just based on naive experience, I'd have guessed that you're fairly different across provinces: i.e., a higher proportion of Francophone descendants in the eastern provinces (not just Quebec) than in the Western, more people of East Asian descent in British Columbia than in Saskatchewan, more people of South Asian descent in Ontario than in British Columbia, and so forth. What do the numbers actually look like? In other words, how similar is "fairly similar"?

[Sam Stone]

Kimtsu: I'll have to see if I can dig up some numbers. I'll admit that I was just going on my experience as a Canadian, and not on any official demographic data. There are differences between the provinces, but they don't strike me as being anywhere near as great as the difference between many states in the U.S. But in thinking about it, maybe I'm wrong. Alberta certainly seems to have a pretty different mindset from, say, Prince Edward Island. BC votes NDP, and the NDP couldn't get elected dogcatcher in Alberta (not that we elect our dogcatchers...).

I was really thinking about the rather drastic differences I see from state-to-state in the U.S., and how you don't really see such differences in most of Canada. Ontario pretty much looks and feels like Alberta or Saskatchewan. Downtown Vancouver feels pretty much like downtown Edmonton, just bigger.

But New York feels very different than, say, Austin Texas. New Orleans is very different than Minneapolis or Seattle.

But I'll admit I could be wrong. I'm just going on anecdotal evidence and personal experience. I'll see if I can dig up some numbers.