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Introduction: The Unemployment Figure and Relatives

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In this essay I report the unemployment figures and allied statistics for the Greater Toronto Area (GTA) over the 1990s. The headline rates are not nearly representative for various reasons and the underlying figures reported here are large. As well there are several related anomalies reported and the social context in which these anomalies developed are discussed. This essay is long but all of the figures are straight out of the Statistics Canada Library here in Toronto. The essay is about Toronto but the issues are general and apply to any immigration city. I naturally have sensible solutions to the problems discussed. This treatise was originally written in the spring of 2002.


Contents
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Introduction Page 1

Part 1:     Four Major Anomalies Of The Toronto Economy
   Page 3

Part 2:     A Very Peculiar Fact About Unemployment Figures
   Page 11

Part 3:     The Immigration Program's Labour Market "Mantra"
   Page 14

Part 4:     Solutions: Traditionally it's the Industrial Revolution
   Page 19

Part 5:   Raising Low Wages Page 25

Conclusion Page 29





Appendix 1: Toronto etc. etc. Page 31

Appendix 2: Immigration Studies Page 41

Appendix 3: Calculation details Page 42

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Part 1: Some Major Hits on the Toronto Economy

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There are four serious anomalies in the Toronto economy gone over in the following.

The Hit On Incomes of Torontonians ( of Part 1 of 5.)

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The first anomaly is a serious reduction of family income in the 1990s in the Metro Toronto (416 telephone exchange) area due to immigration.

The 416 is the central half of the Greater Toronto Area (GTA). The other half is the "bedroon suburbs" which all have the 905 telephone exchange. I use these three terms (GTA, 416 half and 905 half) in the following a lot. There's a dichotomy in the performance of the two half's economy in the 1990s.

There's a bit of a statistical explanation below but follow it through -- in the end it makes good sense and the numbers are not only large but even amazing.

The Canadian economy went into recession in 1990 and then started to recover some time in 1992 and is still going 13 years later as of 2003. However in the Greater Toronto Area the downturn was particularly sever and the recovery was slow such that it took six-and-a-half years to recover to the previous jobs peak. That'd be to Nov. 1996. In those six-and-a-half years the Canadian immigration program was maintained at a near record level. In those six-and-a-half years the Immigration Department moved some 558,000 new immigrants into the Greater Toronto Area. That’s half-a-million people, without a single new net job being created. It's an 11% increase in the entire GTA population. As it happens immigration is the only demographic change in the GTA over this time period. The 1991 and the 1996 Census show a net population change of pretty much just the immigration totals to the GTA. The labour force surveys for the other years are ditto. So the net change is immigration. This is large enough to affect family income, depress it.

Now supporting 558,000 people at Canadian standards is not cheap. There's food, clothing and shelter and in Canada there's public health, education and welfare. However the Immigration Department's cost accounting for all of these is zero. Nothing. Any immigration program will have a mismatch between the arrival of the newcomers and the development of a labour shortage that absorbs them but there are costs to this premature arrival and they are never mentioned or even acknowledged in the immigration literature. There is simply a blind eye to this cost -- possibly factoring it in as a unavoidable cost of doing business. All anybody ever mentions is the cost of language training and sundry settlement programs. So the time comes the immigration program gets out of control and you have 558,000 extra people in one city and no one notices anything.

I did notice this problem myself and the growing size of it and I eventually realized that a main part of the cost would show up as a drop in family income as reported by Statistics Canada. The 558,000 would work their way into the economy, into bad jobs and good, through the churn in employment, which is very large. The churn in employment is as much as 29% of the job totals per year nationally. Someone else sits out for a while. This is the Canadian way of job sharing. The 558,000 certainly wouldn't hang out on welfare for years and years. There would be more reliance on Employment Insurance (EI) and welfare but this would be spread around. Family income would decline reflecting a family member not working or not working as much.

I went down to the Statistics Canada Library here in Toronto and found that for a few hundred dollars they would run the tapes and give me exact family income figures for the Metro Toronto (416) over the last decade. That was good as the hit was going to be billions of dollars and I wanted to know what the figure was. The recovery point in the GTA economy was at the six-and-a-half year point -- Nov. 1996. As all other GTA demographics conveniently net to zero at that date the decline in income beyond that point is simply the arithmetic of supporting the new people. I use the next year, 1997, to do a calculation. Note I am using the terms family income and per capita income interchangeably but per capita is the proper statistic.

I calculated the costs for the 416 area but there's a proviso. At the 1997 point the whole GTA economy had indeed recovered its jobs total. However the 905 did all the recovering and the 416 center was in bad shape. This is convenient for me as it yields large numbers for the 416 that stand out from the statistical aggregates. My proviso is the Grand Assumption that reverse commute from the 416 is as easy as the standard commute in-town so everyone should be back to work. This is reasonable as even poor people like to have a jalopy. In reality the city was hollowing out and the housing costs and patterns would have been different without the 558,000 extra people to the Greater Area. New immigrants tend to go to the central city and without them the 416 would have had a reduced population. However there is this qualification to my statistics. My calculations have a conservative aspect though because they cover only part of the GTA -- the 416 half.

Calculating for just the Metro (416) half of the GTA the drop from 1989 average to the 1997 average was -15.4% of per capita income. That's the arithmetic for the drop in family income. For 2.4 million residents this sums to a loss of $9.8 billion ($1997C) per year. That's corrected for inflation and also for real wage increases. The real wage increases over my seven-and-a-half year study period obscure the effect of increased unemployment. The $9.8 billion a year is a hidden surtax for arriving immigrants prematurely. That's for one year, 1997, for the Metro (416) half of the city only. See Appendix 3 for the above calculation details.

I do these calculations on my day off and that's all of that particular time series that I've got done to date. It's original data. The Metro Toronto (416) jobs total only recovered from the 1990 / 91 recession in 2001 and the local economy is under duress as of July 2003. The rest of this treatise covers several other large statistical abnormalities. These other numbers are not any smaller in significance than the above.

The family income loss was near 1 to 1 with the unemployment change. It was actually slightly lower but would edge up if you costed out the high welfare and unemployment transfers. Thus you can do a quick cost estimate for any city by using the unemployment figure. There's an important skilled immigrant "wash" I describe latter. I detail this quick calculation in Appendix 3.

I have a bit of a flowery speech to tail on to the above $9.8 billion figure. Nationally federal taxes were 17.8% of the GDP in 1997, that's their total haul, such that the 15.4% local (416) hidden surtax for the Immigration Department is 87% of all other federal taxes for the city on an average basis. Working taxes off book the Immigration Minister was able to slip that in without a single colleague or citizen in the country (besides myself) noticing. It's the quintessential scam -- no one is aware that they've been the target of one huge sting.

One other flowery figure is that the $9.8B cost compares to the Metro Toronto (416) city budget of about $5B at that time. That'd be the much squeezed and presently very topical city budget.

If you have a mass of extra people in the city you also have extra costs to the government in health, education and welfare. These would be hard to look up but if you make the conservative guess that the variable costs of government is, oh, 20% of all costs - that the overhead is 80% - then the $9.8 billion in lost income also corresponds with a $860 million in extra government costs in the Metro Toronto area (416) per year. That's 20% of all the government spending in the city. I include this guestimate as the figure is substantial. And over the long term you have the bricks and mortar fixed costs of the other 80%. I return the infrastructure problem in Appendix 1.

In the end the premature immigration is all pretty much for the convenience of the Immigration Minister. In the long term the performance of the economy sets the immigration quota and not visa versa. The idea that the Minister can just pick an annual quota out of thin air is not too smart. In the mean time this target quota saves the Immigration Minister from examining the employment figures once a year. That's all he had to do.

The Immigration Minister is also dominant over Fiscal Policy and Monetary Policy I've noticed. The Statistics Canada numbers for fiscal policy are awesome, the deficits. The Finance Department and the Bank of Canada have to respond to the Immigration program pumping up the population and unemployment. See Appendix 1 for these undiscussed quirks.

The 416 tax payers took the $9.8 billion hit calmly. This is in contrast to the gnashing of teeth that goes on if citizens are asked would they accept a tax increase. This idea around that Canadians are taxed to the limit and would riot if taxed further is incorrect.

A Depression in Metro Toronto ( of Part 1 of 5)

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Here's a second great anomaly.

In the Metro Toronto (416) half of the GTA area the 1990-92 recession was much more sever than elsewhere including just across Steeles Street in the bedroom suburbs. In fact employment continued to drop in Metro Toronto (416) until March 1997 when it was reported by Statistics Canada to be off 17.2% from the peak in 1989. The 17.2% figure is drastic but that isn't the unemployment statistic. To get that you have to consider the base rate of unemployment at the starting point plus the gradual population increase in the intervening years. The actual figure is 23% unemployed. That's a depression. It's not a Great Depression -- that'd be 30% or more. It's not reported. It's not even detected. And it's past the six-and-a-half year recovery point to the former jobs peak in the larger area -- as growth in the "bedroom suburbs" has actually compensated. Making the Grand Assumption that the reverse commute from the city to the suburbs is easy by 1997 the entire area would have been back to it's previous full employment status except for the addition of half-a-million immigrants. The depression at that point is in fact an artificial creation of the Immigration Dept..

Oddly in the 905 suburbs after 1992 growth was very robust all the while the city center stagnated. This growth compensated for both itself and for the city center part. A very large difference between the unemployment rate in the city and the suburbs develops. Now even most of the poor in Toronto have some sort of a jalopy so the difference may be the role of information. It's odd. The reverse commute solution would have been augmented by the facts that if there were less immigrants there would be shifting demographics including in housing. When unemployment hit the 23% figure the recent immigrants were 16% of the population in the 416 central half of the area.

The Statistics Canada figure for March 1997 that gives the 23% unemployment figure puts employed in Metro (416) at 1,105,300 . The data is from a custom cut of Statistics Canada labour force survey that the City of Toronto pays for but makes available on request. See Appendix 1 for a further peak unemployment statisitc.

Hidden Unemployment ( of Part 1 of 5)

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Here's a third anomaly in the Toronto economy.

The depression level of unemployment I mention is no where near the official Statistics Canada figure and you may have been wondering what these figures of mine are all about. This is because citizens simply exit the official unemployment statistic in droves in a bad economy. The unemployment statistic is from a monthly telephone survey that asks "are you looking for work" and if you aren’t you drop out of the unemployment statistics. In the modern economy many people have options. They have the money or support to do other things and start answering "no they aren't looking for work". In a bad economy they look after the kids, go to school or simply retire. They are termed "discouraged workers" or "hidden unemployed" and staticians always distinguish them in what's called "participation" and "nonparticipation". That's adults not participating in the official labour force. At the March 1997 recovery point 13% of the previous labour force in Metro Toronto (416) had swung into hidden unemployment. At that point this swing to nonparticipation was 2.5 to 1 the swing in to the official unemployment statistic. The unemployment statistic, the official labour force figure, is that inaccurate. In the 1950's and 1960's when women were at home it may have been more reflective but today it's obsolete. The participation figure is the better figure, the more active indicator, in the advanced economy of our times. The official unemployment rate is still reported very solemnly and economists study it. At this point this is almost ritualistic as far as I can make out. I always use the "corrected" unemployment statistic that includes the people that were previously working or would want to start working. I call it the expectation or the pent-up demand for jobs. In a city as expensive as Toronto not to anticipate the re-entry of these people into the work force is not realistic. I use the participation figure of 72.0% which was the peak level in the Toronto suburbs before the recession. You have to correct for people over 64 as well. There been no instance in a Canadian city where participation didn't go up to this level as the economy improved but also these people maybe be "not looking for a job" but the blame, the blame mind, tends to manifest itself in unpleasantries -- as you may have noticed.

I discuss the calculations I make in Appendix 3. They are arithmetic but they are all prorated so you have to be careful about the wording and strict definition of terms.

The Low Wage Sector In Toronto ( of Part 1 of 5)

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Here is a fourth "anomaly" in the Toronto economy. It's no smaller than the others.

In Toronto the economy used to be in good shape and both white collar and blue collar jobs were easy to come by. This was up until 1973 when the OPEC oil embargo vandalized the world economy and unemployment went up everywhere including here in Toronto. Until then a blue collar worker in this city could go out and get a unionized job, a job for life, in a matter of weeks -- I'm told in a matter of hours sometimes. This was the Toronto that was a "model to the world". The OPEC embargo was a problem but after that the Toronto economy, which always had robust growth, oddly never really recovered in 29 years. In the vernacular we're still in the 1973-2003 recession.

The McLabour thing began to happen. A McJob is a distant second to a good unionized post and to get people to take such work there has to be unemployment pressure. That's the law. The low wage is just supply and demand. It’s simple economics. What goes on is small and medium business expansion absorbs the unemployed into low paying jobs. Larger firms, it's interesting, pay better and economists observe that they don't respond to labour market supply and demand closely. And the same goes for skilled people who are valuable and are coddled. Economists term this non-responsiveness of labour markets as being "stickie". Wages understandably behave like long term contracts. In general the corporate sector is not low wage dependant, yet. In fact if general wages declined that would be a deflationary disaster. In the last three decades the average wage continued to increase with productivity and so people had some idea that the economy was working. The behavior of the simultaneous growth in the McLabour market is an anomaly and it got insufficient attention. Again in the vernacular a McLabor job isn't considered employment.

The absorption of the unemployed into small and medium businesses at low wages has gone on here in Toronto. The mechanism of the growth of and growth in numbers of these employers is slightly less straight forward from a simple decline in wages. That decline would have been going on as well. This would have manifest as low wage increases rather than an actual cut to wages.

Also the low wage problem infects the next step up in the labour market. It drags down the wages of supervisors, minor skills and rough jobs.

In the meanwhile decades Toronto also got the world's most aggressive immigration. The city did and does have a robust economy and it did need some immigrants. However all the Immigration Department has to do is to get the immigrants arriving at a high unemployment level, prematurely, and off goes the price of small business general labour. There's a certain amount of resistance in the economy to lower wages. The hidden unemployed may be slow to return to the labour force and even lots of smaller firms have the "stickie" wage syndrome. However the immigration program was allowed to become more and more cavalier in regard to the unemployment figure over the decades. The aggravation of the unemployment situation became quite bad and permanently so. Small and medium businesses, entrepreneurs, and franchisers either expanded or sprouted up. In fact they were all the rage. Entrepreneurs! Make your own job! Be Bold! Save the economy? There's eventually a shift in the consumer basket of goods towards cheap and cheerful stuff on offer by small businesses. Unfortunately by 2002 the GTA has 5.1 million people and the low wage component of its hundred square miles of industrial and commercial zones is probably quite high. It's probably too high to fix even with decades of peace and prosperity. That's my guestimate and the sad conclusion of this essay. Later in this essay I do go over the reverse process of tightening the labour market which is what you'll have to do to raise low wages.

The $8 - $10 on offer from small firms to general labour is away off the jobs of the 1960s and early 1970s. Since the early 1970s Canadian productivity has grown 50% and the blue collar worker should actually be doing quite well by now. The Industrial Revolution produced higher standards of living continuously for 200 years but about 30 years ago overpopulation rerouted the economy to grow downward in an isolated segment - the small and medium business general labour force. Supply and demand is actually an overarching factor at the bottom of the economy to productivity growth.

The educated and skilled labour aspect of the immigration program would not affect the general labour market as I described above. However the immigrant community in the GTA is 41% - 43% of the total population and to say that it's simply a strategic program to fuel skilled growth is patently ridiculous. The immigration to Toronto wasn't just premature but the world's most aggressive and it overwhelmed even the robust economy of the GTA for 30 years.

Toronto had a good economy until the early 1970s and I've described how Toronto had inappropriate immigration since this time and the economy did actually find an outlet in the growth of the low wage segment of the labour force. However maintaining high wages might be tricky at the best of times. The increase in the labour force from the baby boom, internal migration or the vagaries in the business cycle could all break the discipline of fair wages. In countries that actually need immigrants adjusting the influx to something absorbable at good wages is an inherent problem. It's not quite all that simple.

The good labour market of days of yore in Toronto is what I call a system of fair wages. A system of fair wages is the other half to the nanny programs in a "kinder and gentler" state. Obviously this is very important and I refer to it as a foundation of "social order". In Toronto this is gone -- it has basically been spent. It was spent on an immigration program in the face of long term unemployment.

In a nanny state such as Canada the low wage sector is ultimately subsidized by the social programs and this sector is a "dependent" class the same as elderly people are. There's lots of discussion of how the elderly are a dependent class but nary a mention of the problem of low wages of fiscally irresponsible employers. We may not survive. The nanny programs are very expensive, every school age kid is five to seven thousand dollars a year for example, and to actually expand the low wage dependent class unnecessarily is wild folly. In fact low wage earners are dependent in another sense as well -- within the nuclear family. To expand a dependant class is not in anybody's self-interest -- which technically encompasses one's entire life.

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Part 2: A Very Peculiar Fact About he Unemployment Figures

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The Manifest Pattern ( of Part 2 of 5)

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Now that's several "anomalies" and you may have noticed a pattern. I don't mean my personal obsession with the idea of "a good job" for every one including all immigrants but rather the parent pattern. The parent pattern is that the unemployment figure and relatives have gone AWOL and have been for decades. In fact I find the unemployment figure has gone missing from the lexicon of economists of all things. This is a specific and distinct problem as these people are opinion leaders. Following are two extreme examples.


Decades ago in the Trudeau era the economy got worse and worse and a Royal Commission on the Economy was eventually convened to study the matter. The Commissioner was former Finance Minister Donald McDonald and he reports back with respect to immigration that there's "a consensus among economists that immigrants inject money into the economy". End of that discussion. Economists do say that immigrants spend money and that this stimulates the economy. Now when there is unemployment the universal problem is how to get the money deposited into your bank account in the first place. The economist "argument” is pretty much just that phrase and there is no explanation anywhere that there's some wondrous process going on unseen to explain the deposit side -- not that there could be. It's a shibboleth. People accept it. You see it in the newspaper and you hear it around. The Royal Commissioner on the direction of the Economy forgot about the deposit by an employer. (Excepting his own deposit which for some reason after over 20 years I can still remember was $800 a day. He defended it saying he was "worth every penny".) There's a consensus amongst economists about this stupid half-thought of immigrants spending freely? And, continuing, it would be another silver bullet, a panacea, that would basically solve all any have country's economic problems. You may recall the results of some other economic panaceas from the Economics Dept. that they tried out.


Here's another general case. There's a University of Toronto Economics Dept. professor that re-edited his text on Canadian labour market theory in 1998. There's an entire chapter on how immigration affects labour markets and that'd be the standard "study after study" show's it has "no effect". The artificial depression situation inducted by the immigration program outside the Universities office windows had not been noticed by said U of T. Labour Market professor. As he and the University Economics Dept. would be conversant with the Canadian economic literature and have a word-of-mouth network amongst Canadian economists as well you can surmise that also goes for pretty much the entire class of professionals -- Canadian economists. Further the other two main immigrant cities in Canada, Montreal and Vancouver, have had pretty much terrible unemployment and nonparticipation to go with their wild immigration for going on three decades now. The Canadian data on unemployment and immigration of three decades has, as I say, gone AWOL.

The "studies" done by economists on immigration (and in fact most all of their studies) are cheap and cheerful and rather rigid in format. I comment on them to my hearts content in Appendix 2.


In Canada "politics is all economics"? In point of fact the working paradigm around is "there is no economics". Economists themselves subscribe to this one - possibly because as Economics is a Social Science and cannot be very empirical they're in an opinion free-for-all. Also all the allied professional intellectual classes subscribe. The Political Science Dept., the Social Science Dept., the Canadian Studies Dept., the History Dept., the entire collection of Think Tank Institutes in the country, media pundits and even, say, your stock broker, are all pretty much onboard. You've probably heard the term "chattering classes", they do subscribe as well. It's pretty much the all-party all-governments ideology at this time. Even the OECD is in there pitching empirical studies that show everything is taken care of.

At any working class bar you can hear the explanation that it's hard to get a good job as there are too many people around and that the government is just importing poverty. That's supply and demand. That's economics. The professional intellectual stuffed shirts are all "there's no economics" – no market . That's the parent pattern. You can't tell a college boy anything.

In the United States you had the accounting fiascos being revealed about the time I was composing this treatise on Canada's economic history. Enron was one of several giant accounting frauds. It was always explained to me the American accounting was rigorous and transparent so that people with money and people with companies could get together and this was the very basis of Capitalism. Then the accounting fiascoes hit and I saw a businessman explain it all in about five minutes. He was amused the whole time. He explained that from the executives to auditors to the stock brokers there's a list interdependencies. A good one is the stock broker gets his best information personally from the Chief Financial Officer and doesn't dare to offend that source by low mouthing the stock. The analogy with my treatise is that eventually the professional classes of accountants, auditors, consultants, lawyers, executives, regulators and academics all forgot that they have to check peer data. Then eventually there's angst or even a panic amongst the people as to what these professionals are doing. In the USA immigration is the same as here, a national status symbol basically, and so we can double up on their list of Eastern professional elite classes who the folk rightly distrust.

In Canada we had high immigration for three decades. The list of rationalizations of immigration that began to circulate is very long. It's odd but people rationalized this wayward government policy rather than criticize it. That was the public and the professional reaction for all those years.

Here's the Canadian problem in perspective in a paragraph. The G7 countries have all been struggling with never ending unemployment for about 29 years now - since the 1973 OPEC oil embargo. The only two exceptions to this are Japan up until 1990 and the recent boom in USA. However, in the last 29 years a whopping 45% of Canadian net job creation was filled by the immigration program. As everyone knows the Canadian Immigration program is "points" based and selects out higher qualified applicants. Much is made of the fact that the immigrants selected have higher economic profiles than the indigenous population. This is generally celebrated as meeting the needs of our growing economy. The other G7, except for the USA, don't even have large immigration programs. The UK, Germany and France had primary immigration programs but they gave them up long ago. Japan and Italy never had them. While all the G7 struggled with unemployment for 29 years in Canada the economy was sold as being so strong that immigrants including many with skills and education were imported to fill 45% of the new jobs. The notorious "trickle down" of jobs in the other G7 countries is in contrast to a supposed "torrent down" of good jobs in Canada. The Canadian economy is head, shoulders and torso above the other great countries by this reckoning. Except no one in Canada or anywhere in the rest of the world noticed this miraculous Canadian Economic Model. Something like that would be of interest to the rest of the world.

The immigration program took up half (45%) of the economic growth over three decades. It engendered a cycle of immigration, unemployment then small business growth. It's a connection between politics and the economy that Canadians know exists intuitively.

I don't have much free time but I did manage to look up the Statistics Canada CD's for 27 major urban centers in Canada. I calculated out the immigration versus the nonparticipation rates city by city and I can report that, yup, were an immigration country. Just barely. At the year 2000 point and counting back only to 1990 there were 2.418 million new immigrants of which a whopping 18% were absorbed into actual tight labour markets. That'd be using the word "tight" loosely and maintaining the usual blind eye on the quality of employment. Using the notion immigrants work their way into the economy the arithmetic is the extra idleness around is 6.4% of the entire population. The cost figure would be increased by unabsorbed immigrants prior to 1990 and also in the rural regions but decreased by the consideration recent immigrants earn less and experience more unemployment than others. However the candidate figure for the hidden cost of excess immigration expressed as a percent of the GDP is in the 3% region, the division by two coming from the fact wages are 50% of the GDP..

At this point the current hapless Immigration Minister has been fed the line by the department mandarins that immigrants are making up 70% of Canada's labour force growth --that they are the locomotive of the Canadian economy. The 70% is simply reflective of the hidden aspect of much of the unemployment. My wild guess at the net system costs are:

(a) the depression of family income through unemployment,
(b) the interest charges on the federal and provincial debts -- which were aided and abetted by the politics of unemployment to be sure and hence,
(c) the principles of the federal and provincial debts,
(d) the wasting away of the system of fair wages,
(e) the suppression of internal migration,
(f) the additional unfunded load on the strained nanny programs
(g) the cost and opportunity cost of excess of graduates

are all vast costs.


Blaming immigrants? People will say that. Actually if you've been following the topic here is as Captain Kirk philosophized "how can I help". How can we help the immigrants that are here and not doing so well and the indigenous poor. People don't like to hear immigrants blamed, they're sort of vulnerable, however in Canada no one is ever going to send them back so that's over done. It's the lovely elected officials that are being discussed anyway, not immigrants. Gettit?

I must admit I do have a problem with some people though. I have a problem with adults that when the headline rate of child poverty right in Toronto is 37% as it was in 1997 they treat it casually.

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Part 3: The Immigration Program's Labour Market "Mantra"

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The Immigration Department sells itself as catering to the Canadian labour market needs. It says it provides the needed skilled and educated workers required for long term economic growth. Any immigrant that was filling a skilled labour shortage wouldn't add to unemployment in any way of course. However the department's list of occupations with known labour shortages that they award points for has been null and void for 29 years -- since shortly after the economy turned sour in 1973. There’s been very little on it. I saw a quote a long time ago, I still recall, where Liberal Cabinet Minister Llyod Axworthy stated that there was unemployment everywhere and there really were no skills shortages. There's been a few scattered occupations since then listed as having shortages on the General Occupation List (GOL) and that's about it. The government continued to use the point system all along, which selects higher profile applicants with the understanding, including by the applicants themselves, that underneath somewhere professions and skills were actually in short supply. It's been 29 years straight of troubling unemployment which is not a great argument that somewhere underneath there is general skills shortage. The Immigration program has had this internal inconsistency for going on three decades and no one besides Llyod Axworthy has ever dealt with it.


In fact should a systemic shortage of a particular skill occur it's the Provincial Minister of Education's job to arrange that the relevant College or University department get extra funds. That's his job. If funds are short he can switch moneys from, say, the Arts programs which are very large at this time. And it behooves him to fix this problem as every mother wants her child to go to College or University and have a nice life. It's a mother's milk issue. Period. It's that simple. And it's the same with immigrants. Immigrants often say they come here specifically for their children. This training issue has never been mentioned in this country in 30 years. Not even by University professors who sit in front of such clients decade after decade. And by the way anything in sort supply widely enough to make to the Immigration Department's General Occupation List would be a systemic shortage. A shortage across Canada for the length of time it takes immigrants to get into the country is a systemic shortage caused by lack of training.



In Canada a whopping 44% of adults already go on to College or University. There's not going to be many fields which aren't already well looked after in the training infrastructure. How they are currently squeezing all these Canadians and all the trained immigrants into little old Toronto's economy at this time is something probably best not to ask about too much. There, that's the skilled immigration wash I mentioned. It's pretty simple.

Any immigrant that was filling a shortage would not be contributing to unemployment however conversely any immigrant that was not filling a shortage would directly or indirectly be adding to the general labour supply problem.

All immigration departments would cater to admitting world class experts, fixing bottlenecks and filling sever service industry shortages but that is hardly what the Canadian program is about. In fact my understanding is that if an employer makes an offer of employment to someone overseas the immigration application is processed as usual which at this time means a delay of 25 months on average. Very few employers have a job that can wait to be filled 25 months down the line. Also the offer of employment is only worth a few points and the admission of the candidate is still uncertain. These problems are rarely mentioned and possibly because the entire shortage fixing mechanism is inactive.

The skilled immigration myth has further problems. The accreditation problem has been well known for decades. The Immigration Department itself advertises that there are some 400 associations with accreditation requirements to deal with. The small and underfunded professional accreditation bureaus are supposed cope with people from anywhere in the world physically located anywhere in Canada. There's the problem that third world resumes are going to be even less reliable than indigenous resumes. It so happens that the third world is not where you find world class skills in general. There's the problem of the overseas interview. There's the idea around that specific local skill shortages can be fixed by immigration but the notion that an immigration clerk can land the right person at the right place at the right time like a high paid head hunter is dubious. The points system is basically a form with a few boxes that can actually be verified by the Embassy and at this time they charge a third world person $500 to do that. The Immigration Dept., I guesstimate, has a two year long informal system of selecting people with degrees, especially science degrees, that meet a certain age profile and are headed for the main traditional immigration cities.


An immigration program can respond to local known shortages. A provincial government may determine there's a need for medical specialists, construction workers or software workers. I think that'd be great but I notice at this time they all want this to happen at price free. If you need oncologists in the regions, experienced, English speaking, accreditable oncologist to come with his / her family right away, you'd better be the Minister and expressing yourself with the cheque book open rather than your mouth open as to "the benefits of immigration". And by the way the newspapers report the signing bonus for a medical doctor for the Canadian military at this time is $225,000.


The immigration mantra also includes that jobs are created.


The Immigration Dept. has investor class, entrepreneur class and self-employed class all of which are small business, low wage job oriented categories of interest to no one. The investor class itself at this time is actually $400,000 low interest rate loan for anyone who likes to do their banking with a subsidy by an immigrant. So far it's scandal free.


The half-an-idea that immigrants create jobs is popular. It is said all immigrants self select and are thus the more ambitious people. They say the job creation by immigrants statistics are very impressive. But how many of immigrant businesses offer unique services or are trade item businesses that pay a good wage and how many of them are just small businesses in service industries of which there's too many already? Economic growth in the major cities creates jobs. Also see my mention of Fiscal Policy in Appendix 1.

There's also actually "rich" immigrants to Canada from Asia. When a rich person changes his address of residences he doesn't move any of his business interests although the newspapers say there's "international competition" to attract these individuals. Unfortunately I've seen stock brokers quoted in the newspaper saying that rich immigrants stimulate the city's economy. How, by relocating a factory from Asia? See the conspicuous house for that quirk.


Of course life is not all jam and rumors of unemployment and of immigrants themselves not fairing well have reached the Prime Minister's office. The lingua franca amongst the mandarins is that change is constant, people will have several careers in a life time, and the competitive world means we have to move to knowledge based industries. The Immigration Dept. has responded by doubling the number of immigrants and recently making persons with a postgraduate degree the preferred primary immigrant. They have dropped the nonfunctioning General Occupation List in favour of even higher qualified immigrants. The logic is the torrent down of really good jobs is about to double. In fact they reason this will be the result of higher qualified immigrants. There's another panacea in there.

The lingua franca of the immigration industry is that third world immigrants inject money into the economy, create jobs and the high level of education of immigrants will attract quality investment. That's a little three-pack of economical miracles from the immigration industry.


In Canada immigration is quite popular. There's this strong attachment to the idea Canada is an immigration country. And the sky's the limit in regard to skilled immigrants. This would be natioalism. Maybe half of Canadians would be offended if you were to say to them that "Of course Canada is an immigration country but perhaps we are not that big of an immigration country". Internally these people have two thoughts that co-exist. The one thought is the economy is not so good and the other thought is Canada is an immigration country. The thoughts just co-exist. The polls as much as expert "opinion" have lead to ever higher numbers in the immigration program.

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Part 4: Solutions: Traditionally it's The Industrial Revolution

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Is this Economics? Upward rather than downward growth ( of Part 4 of 5)

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The following is what you can do in Toronto and the other rich cities in the have provinces to reverse the 30 years of economic backsliding in the country.

The economies in our cities in the have provinces all have economic growth. All of them have immigration communities of 20% to 44% of the entire population. If these cities were allowed to run their normal course without piling in immigrants inappropriately their economies' would advance on several fronts. Unemployment would clear up first, then hidden unemployment and then wages would firm. With luck wages at the bottom would firm relatively to other wages as they are more sensitive to supply and demand. Any shortages in skilled and professional jobs would open those fields and training would be more directed to these open fields. However there's another critical mechanisms at work as well and it's outlined next.

I described how bad growth, the growth of marginal small businesses, has infected the Toronto area because of never ending unemployment. A labour shortage would have the reverse effect and this is the solution. In fact it's pretty much all you can do. Well given that social program taxation is already hard to fund it's all that you can do.

In Japan and then later in the four Asian tigers they've shed marginal businesses for a long time. The workers in the worst businesses shifted industries to ones that had higher productivity or simply had stronger market power. These countries matured to advanced economies in this way. That's the mechanism, upward growth in the quality of businesses. It’s well known and widely discussed but never in the Western context. Hong Kong and Singapore achieved Canadian levels of income some years ago. That's Tiger growth. That's the model. Economists mostly fixate on productivity growth but the quality of the businesses around is a second mechanism. Upward growth is in fact normal and is a "benefit of the market place". Theoretically there's no upper limit. You could just have a rich, expensive city. World class cities are expensive. In Toronto you have as much as 7% growth annually, near tiger growth, and you have this same potential of moving up the ladder of the quality of businesses as in Asia. It's ironic that the Communist Party of China continues to run Hong Kong in an upward fashion while the central planners in Canada, the government in Ottawa, continue to run all the have cities downwards and are basically in the dark about the "benefits of the market".

There are articles about how the South Korean business men are going to move their labour intensive industries to North Korea as labour becomes too expensive in the South and this win-win cycle is the way the peninsula will be healed and then reunited. There's never any mention that the reverse process of moving masses of people into places like Toronto, Vancouver, Los Angeles and other cities in the West and building the economy downwards is dysfunctional.


The main problem is the economy has to have low unskilled unemployment while everything else is in surplus such that the low wage employers are put out of business but there is no recession. It did work in the Tiger economies. However what you can do that is more effective is to legislate a local minimum wage just for a tiger city and raise it gradually year by year. I call this a city-by-city legislated minimum wage regime. This way the zillons of adjustments to the economy that the "invisible hand" makes when price changes occur take place gradually and not just at the peak of the business cycle. Thus they don't inflate or disrupt too many businesses all at once. Eventually the economy grows and comes to full employment as per usual at which point the higher legislated wage would be the same as the labour market wage. You could abandon the legislated wage. The entire economic landscape is contoured to higher quality of businesses over several years. It's a simple plan and it has the advantage you don't need to get both the Cabinet and the Bank of Canada involved. Another advantage is that the noise in the media caused by labour shortages - "small businessmen can't find staff and are going bankrupt" - would be muffled. Low wages are popular. The need for cheap labour is part of human nature. Support for such is murky as support for feckless deficits. The popularity of low wages I refer to as the Jeffersonian inclination after that American President's problem with his half black offspring.

There are adult economists around that say there will be skilled worker shortages if the population goes down. Actually there'll be cheap labour shortages. That is as people will train, to get a better job. Another variation of this theme is that when the OECD's population declines they say there will be world wide competition for skilled immigrants and a shortage of these. There's an implied world wide shortage of people wanting a good paying job. There'll be shortages of skills if business managers think that their competition does the on the job training and their only job is to poach. In Canada there are businessmen who have been able to poach all their business life and they will have to figure this one out.

In part progress is having workers hired by a better quality company or move up to a better job because they got some training. These two processes have domino effects down to the most marginal companies. When some one is promoted they are replace from below which continues all the way to the bottom. The worst companies should atrophy. The workers sort this out very precisely by moving around. This domino effect of workers moving up to better jobs is the alternative explanation of the job market to the shibboleth immigrants take jobs  that the indigenous don’t want.

In other countries there have been violent anti-immigrant riots by the poor. In Canada it's been basically accepted so far presumably because the nanny programs are sufficient to keep body and soul together. Ergo the inappropriate immigration, which is just another form of spending somebody else's money, may continue until the nanny programs give out. In Canada EI and Medicare have already been cut due to the various deficits.

People talk about economic growth never mentioning the fact that low wage growth is a problem - it's bad growth. Economic growth anywhere would be reduced if the wages were higher. That's the relation -- see the anemic growth both in the EU and in high paying large corporations. You can actually slow growth to zero or even to a negative number - in the case of declining population -- but still have wages going up with productivity improvements. A city would become expensive with increasing wages and there would be shifts in the consumer basket. The 7% growth in the Toronto area is like a brand. Businesses like locating in the city. In the city they are close to their suppliers, customers and a pool of trained labour. This brand is actually a common good, just as the fish in the sea are, and how the officials divvy it up has to be policed just like any other common good. Maintaining economic progress in the face of any liberal immigration program is unlikely in today's competitive world. My legislated wage regime would be like a union for the worst paid.

Interprovincial Migration ( of part 4 of 5)

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An important and under mentioned solution to Canada's regional economic disparity is inter-provincial migration. This is important so I'm going to go over it. This simple solution actually juts out in the Canadian Almanac. The Almanac shows net inter-provincial migration switching from one province to another as the economy in a particular province shows some promise. All that's required to get people to move is to have somewhere to go -- some hope. The Immigration Department has kept all the have provinces deep in unemployment and low wages, they call this "gradualism", and so there's never been anywhere to go for decades. Statistics Canada data from away back has higher inter-provincial migration. More recently it has dropped off entirely, except to the oil patch. The potential here is substantial. The only thing you ever read about internal migration is that everyone should be able to live and work in their hometown. Who dat? I want to go back to and live and work in "The Gulch"? People like the freedom to move around. Traditionally Canadians have had a hankering to move to the West, Lotus Land. Lotus Land probably doesn’t really need foreigners. Finally, a thought of mine, if you only speak French where could you to move to at this time to get a job?

In fact people will move out of cities with too much immigration. As of 2003 BC, which has lost its have province status, actually has a net negative inter-provincial migration although it remains a major foreign immigration destination. Ditto Quebec for the last 30 years.

Intra-provincial migration, migration within a province, is the same as inter-provincial migration only the numbers are even higher.

Disabled ( of Part 4 of 5)

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Of course there's all sorts of people with disabilities or special situations that could use a good job or some training. There's a whole list.  A tighter labour market would make it easier for marginal people to get a job, would make employers more interested and tolerant of them.

Family Formation ( of Part 4 of 5)

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The prolonged high unemployment and low wage problem in Canada has very probably been a contributing factor to the decline in national fertility rate. It's probably not all by choice. Teenage pregnancies peaked in the 1950's. In the 1950's when good jobs were available to high school graduates teenagers formed families. This may be too young for most people to do that but today young Canadians are the demographic with the highest poverty level and having a family early is out of the question. One of the Immigration Minister's and the immigration expert's stock power speaches is that the national birth rate is declining. Treating the birth rate as an isolated statistic rather shows that these experts have not done much observing.

An Appropriate Immigration Program ( of Part 4 of 5)

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An appropriate immigration program might be as follows: There'd just be a background of immigration of special classes. These would be corporate, family, and humanitarian classes. However when a city reached full employment you could have an annual quota just for that city, a special movement. I call this a city-by-city immigration regime. It would be of skilled and professional primary applicants, actually an additional corporate class movement. Visas would be offered to corporations that wanted some foreign talent to fix shortages. It would be in limited numbers so it’d be manageable from an administration point of view.

A precise annual city-by-city immigration lottery would be feasible as Statistics Canada already collects detailed labour force data on individual cities on a monthly basis. Hence you know the unemployment and growth rate of the main cities with some detail and can easily extrapolate for 12 months. At a very low unemployment rate a city-by-city immigration quota would have energy to it and be popular. One idea is to have some sort of Auditor manage the program. This would be someone knowledgeable in the problems with the labour force, such as corporations asking for immigrants as a means of getting cheap labour.

Summary (--of Part 4 of 5)

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In summary a city-by-city regime of immigration and legislated wages would have several major advantages. Productivity, taxes, government costs, private income and regional disparity would all head the right direction at once. It would inflate some but in the end this would just reflect the natural price of labour and it would actually be dampened by the advantages. It would slow growth but this would simply mean you adjust the immigration quota. Call it Just-In-Time-Immigration.

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Part 5: The Raising of Low Wages.

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A main concern of this treatise is raising low wages to a basic living wage. This is more of the modern problem than national productivity as the "others" already have a fairly nice life. In the end you do have to raise productivity at the bottom some. However the economy at the bottom is always soft and pudgy and the "invisible hand" of the market would react to price changes at the bottom in at least five positive and dynamic ways. The five are:

(1) defragmentation of small businesses,
(2) an outright reduction in the sales of marginally useful items,
(3) exporting trade-item businesses out of the city entirely,
(4) plain old mechanization and
(5) reducing employee qualification inflation

The following is an elaboration.

(1) The small business service industries are very fragmented -- far, far too many businesses in the same field -- and they would experience bankruptcy and consolidation as prices rose. Technically this is acquisitions and mergers. The survivors would be more productive. Busier places are more productive of labour and of capital. Not only could the owners pay higher wages but they would make higher profits. In Toronto this fragmentation problem is not only huge but in most areas it's an awful eyesore – the streets are lined with small, inefficient small establishments.

(2) When there's inflation in the cheap-and-cheerfull sector sales of marginally useful items will decline. The free market will target these. This would happen on the business side as well as the consumer side. Such infamous practices as telemarketing would be targeted. The money formerly spent on marginal items would be spent elsewhere.

(3) Trade item industries can relocate to cheaper have-not areas. Not only manufacturing industries can relocate but services can too. Telemarketing again would be a good example. This would help the regions in the country. Kicking them out of expensive cities is a bonnie idea. Businesses that relocate offshore are a process of bringing jobs to the third world, to peoples home, rather than bringing immigrants to bad jobs. An alternative to being an immigration country is being a job exporting country.

(4) Mechanization. Any time wages go up substituting machinery for labour becomes more viable. This is the basic method of increasing productivity of course and high wages are actually a discipline to force this. Bottom tier businesses are not highly mechanized or motivated to do so.

(5) Qualification inflation is part of our times but is probably less prevalent at small businesses. It includes (a) qualified persons doing tasks that can be done by a junior person, (b) University graduates working as clerks or what ever and (c) salespersons in the over invested retail sector that have idle time. Managers would have to sharpen their pencil in these regards.


Raising wages would produce inflation, bankruptcies and workers laid off from the right-sizing of various sectors. This is the creative / destructive process of capitalism everyone already lives with. In particular workers at the very bottom live with this. The advantage of a minimum wage regime that I suggested is that the increases are foreseeable and the changes occur gradually every year. The inflation would be subtle, spread over several years. Also it targets low wage businesses. If it's left to the business cycle wages at the bottom might never improve. For one even in an ideal economy firming wages at the bottom only occurs at the top of the business cycle. Secondly recessions occur for different reasons such as international slow downs. So that's not often and not much for the business cycle alone.


There is one outstanding problem with eliminating low wages. Essential services that pay low wages would become costly. I'm told that the grocery stores chains have a significant low wage reliance and food prices would inflate. Grocery stores stock thousands of items so you can imagine the consumer making some adjustments. I suppose welfare recipients would require an increase.


When wages where raised business men with a better plan would survive. Wal Mart is an example. Innovation by buyers, managers, and IT staff would become more important than services on the low-wage-plan.

I have couched the discussion of raising low wages on a city by city basis in terms of my local legislated minimum wage idea. This may not be necessary. There is a reluctance of discouraged workers to re-enter the labour force when what's available is an inconvenient $8 an hour job. This hidden unemployment drag forces up wages at the bottom in fact. All that may be required is to have a city expand at low unemployment for several years.

If you could figure out the fair wage nut you could move a legislated wage towards that. As to what a fair basic wage is my suggestion is 50% of the average wage within a growth city, expensive city or no. A legislated wage would drag up all other low wages. Hence the small premium for staying with a company and all other small premiums would make the defacto minimum wage 60% of average. Raising minimum wage to 60% of the average in a city the size of Toronto would be a huge experiment or more specifically yet another huge economic experiment. In the next 20 years you have the prospect of improvements in the national productivity to lift wages at the bottom to a basic living wage as well.

I have done this little analysis and figured out that you can improve a whole country one city at a time. It's an industrial policy for the western nations. This city-by-city improvement should have been brought to the surface by the Royal Commission on the Economy in the 1980's.

Some Other Considerations ( of Part 5 of 5)

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The fact that low wage businesses have some better paid staff is important. If you're shifting society to upscale industries you do have to move all the employees and not just the low paid staff. The higher paid staff will have skills and experience and they just get another job. The broader point is this creative / destructive process is quite large scale if you’re talking about an improvement in the economy.

When a non-trade business closes the money that it took in from customers goes to some other business which then grows and adds employees. You do not actually have to have near Tiger growth to do a lot of creative / destructive adjustment. Any city with good growth can work on its economy -- firming wages and productivity at the bottom.


Actual Tiger growth cities have the clouding factor that housing costs are higher. In Toronto you have quasi Tiger growth but a lot of it is low and middling wage dependent AND the city is expensive. This point needs more attention from society.


It was mentioned to me that in the job poor regions you could just pay a higher minimum wage and what would happen is the money would do the spent elsewhere thing and the net job loss would be slight. In the regions you have part time students working in the food industry for a few peanuts a week and it's a problem. The government policy of grubbing for every possible job is simply unappetizing. In this case you are frankly saying "discouraged workers" are an option because they'll self select to someone who has something else important to do.  


Small businesses in Toronto have an obvious fragmentation problem. However fragmentation is every where. Mergers and acquisitions are a route mid and large firms deal with fragmentation. Mergers are said to rarely correlate with stock price increases but they may serve a more basic purpose -- survival of the firm.



Productivity is the basis of our modern life of course. There's no reason to go anywhere else or do anything else. McLabour discourages productivity. As obvious as this is it's missing from the Canadian national dialog in regard to the economy. See the professional intellectual class.

The Advantages of Low Wages ( of Part 5 of 5)

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Low wages have a bad reputation but they have advantages. I go over the advantages here for completeness. If you're the bread winner low wages are the end of the earth or something. However in a family if it's a second income that goes on top of the household budget and you can afford a few things. A low wage employer also has better paid employees, supervisors for instance, and this boosts better employment in the economy. Low wage jobs can get people off social programs. Low wage earners pay various taxes. Low wages have all these advantages. The current economic recovery in Canada is puffing along on these advantages and not doing so bad either.

I have a bit on the advantages of a low wages. In the city we now have a myriad of niche businesses that provide services to other businesses or simply add interesting services to the city. There are stores that sell just potted orchids for example. Some of these useful or interesting niches would disappear in a better economy.

Wrap Up ( of part 5 of 5)

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A tightened immigration program would facilitate training, upward growth and higher participation rates. There's an inflation cost to it but this would be mitigated by several effects.

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Conclusion

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In Canada in the 1990’s we had the "one party state" situation as everyone knows and in January 2002 I went around joking that we don't so much have a "one party state" as a "one man political system" since most everything the government has done was the work of one guy - (former) Finance Minsiter Paul Martin. I didn't get a single laugh. People I told this to actually pursed their lips or bent their head down slightly. I was a bit surprised myself at the sharpness of the reaction. The MPs aren't too respected. Their dropping out of the unemployment facts of their constituency and their program spending orientation is highly suspect.

I characterize the Canadian people as like a Collective rather than a community and all the political instability around in the 1990s is a manifestation of this. The various block voting patterns since 1983 are the one consciousness thing. Note that the one party political situation dates from the 1983 election not the infamous 1993 election as everyone thinks

Resistance is futile. You will be assimilated.




Sincerely yours,



Bruce J. Wellington.