Author: Michal Rozworski

Categories
Austerity Canada Tax

Transfers, taxes and who pays for austerity

The question of who pays for austerity and how is an enormous one. Promoters of austerity often claim that cuts to universal services are fine if they’re offset by transfers to those who can’t pay for newly-marketized services. The same goes for expanding services – why give everyone childcare if you could just give those at the bottom the money to pay for it the same as those who can afford it?

There are many arguments for why services should be public and universal that do not simply rely on whether everyone is able to pay for them privately. However, even on their own terms, the argument for ramping up transfers to the bottom of the income distribution hasn’t held up in recent times.

I was intrigued by a post from Matt Bruenig that compares the US and Finnish tax and transfer systems, arguing that while the Finnish system looks less progressive by some measures, this is due precisely to higher and universal transfers. I’ve been looking at lots of data on the latest phase of austerity in Canada that began at the federal level with the election of the Chretien Liberals in 1993. Here, I’ll steal some of what Matt does and apply it to the Canadian tax and transfer system since then.

For starters, here are average gross government transfers by quintiles in Canada. This is how much money people receive in the form of cash benefits and credits from all levels of government. This is thus only a rough picture of what’s happened at the federal level, but most transfer income is federal. The first chart is for 1993 and the second is for 2011 (the last year of publicly-available data); everything is adjusted for inflation to constant 2011 dollars.

150402 Govt transfer 1993

150402 Govt transfer 2011

What’s striking is how similar the two charts are. While the economy has grown – 35% growth in real GDP per capita between 1993 and 2011 – government transfers have essentially stagnated for everyone. The bottom 40% have actually lost in transfer income and only the fourth quintile saw any kind of sizeable increase gaining just above 10%.

Next, let’s add income taxes into the mix. Here are the same two charts, but this time showing net government transfers. This is the difference between the transfers above and income tax paid to all levels of government.

150402 Net transfer 1993

150402 Net transfer 2011

Again, we have little change over almost two decades except for a lower net transfer to the richest 20%, though this is likely a reflection of the growing inequality in market incomes, especially higher top incomes (and hence higher income taxes). Remember too, that this shows a more progressive structure than if we took all taxes including those on consumption as well as user fees (again, paying more with stagnant transfers) into account. This total tax structure is far less progressive – somewhat regressive even in some provinces.

Here is another way to look at the changes in same net transfer data, showing the trends in time over the entire 1993-2011 period.

150402 Net transfer series new

We can divide what’s happening into a few distinct periods at the federal level (provinces do more direct spending). Clearly visible are

  1. a main phase of Liberal austerity from 1993 and 2000,
  2. a short upturn after the 2000-era tax cuts (since net transfer = gross transfer minus taxes, a reduction in tax means the net transfer goes up)
  3. a general stabilization since then, only punctuated by
  4. the fall in incomes and short-term fiscal expansion after the 2008 crisis (with a clear trend back to the stabilization or lower in the last years of data).

Finally, here is a last chart that takes net transfers and divides them by market income. That is, it shows what percentage of market incomes is received on average by each quintile as net government transfers.

150402 Net transfer percentage series

This last chart is combines the picture of growing inequality with transfer stagnation. Economic growth is not translating into shared resources, whether in the form of existing or much-needed new public programs or even simply being pooled for redistribution. This certainly points to austerity falling disproportionately on the backs of the poorest.

Note: all data comes from Statistics Canada, CANSIM Tables 202-0703 and 202-0704.

Categories
Inequality

Branko Milanovic on inequality and the new global plutocracy

Last week I interviewed Branko Milanovic, one of the world’s foremost authorities on inequality. Our conversation moved freely from global trends in inequality over the past quarter-century to the rise of a new plutocracy and the threat it poses to democratic governance. I thought it worthwhile to transcribe our chat in full.

A bit more about Branko: he is currently a professor at the CUNY Graduate Centre, where he also heads the Luxembourg Income Study Centre. His most recent book is The Haves and the Have-nots: A Brief and Idiosyncratic History of Global Inequality and he has a great blog worth reading. Here is our conversation, edited lightly for clarity and length:

Michal Rozworski: How has global income inequality evolved recently?

Branko Milanovic: Global income inequality is really defined as inequality between individuals. So, in principle, it’s the same as inequality within a country if you were to assume that the world is one country. Surely we have to allow for differences in price levels – that’s really the important difference between inequality and global inequality because price differences between countries in Africa and, say, Norway are enormous and, obviously, we have to allow for the fact that things are much cheaper in Africa.

Having done all of that, the basic story is that, first, the level of global inequality is extremely high. It’s higher than within any one country, which is not surprising. But what is also interesting is that this level, to any extent we can really determine, has been slightly going down over the past ten years approximately. In other words, all the evidence we have points to a downward trend, except that we are unsure if the trend is larger or smaller. The reason for this is that the relatively poor and populous countries, such as China, India, Indonesia, Vietnam and so on, have now had 15 or 20 years of very high growth rates – higher than the rich countries – and they are the ones pushing inequality down.

The final point is that all this happens while inequality in all the countries I mentioned, as well as in the US and Europe, is going up.

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Categories
Canada Inequality Political Eh-conomy Radio

Inequality, global and Canadian, with Branko Milanovic and Armine Yalnizyan

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I have two guests to talking about inequality today. First up is Branko Milanovic, who speaks with me about global inequality as well as the rise of a global plutocracy. One of the world’s foremost experts on inequality, Branko is professor at the CUNY Graduate Centre, where he also heads the local affiliate of the Luxembourg Income Study Centre, former chief economist at the World Bank’s research unit and author of the The Haves and the Have-nots: A Brief and Idiosyncratic History of Global Inequality. He blogs regularly; it’s always interesting.

I’m also happy to have Armine Yalnizyan back on the show as my second guest. Armine is a senior economist at the Centre for Policy Alternatives in Ottawa. The Centre has done extensive research into inequality in Canada and that’s the topic of our conversation. To wit, Armine will be introducing the inaugural Sefton-Williams Memorial Lecture on March 19 in Toronto, which will be given by Miles Corak and also focus on Canadian inequality.

Cartoon by Chris Slane.
Cartoon by Chris Slane.
Categories
British Columbia Minimum wage Workers

Minimum wage workers not the only ones getting screwed

I have a populist piece in The Tyee this morning on how last week’s paltry $0.20 minimum wage increase in British Columbia actually reflects stagnant wages across the economy and why the Fight for 15 is everyone’s fight. Here it is in full.

Last week, the B.C. government reacted to the increasing push for a higher minimum wage… by giving minimum wage workers a 20 cent raise. Even Business in Vancouver magazine quoted UBC labour economist David Green calling the new higher wage “laughably low.” What perhaps hasn’t received enough attention is that the two-dime bump in the minimum wage — the first in three years — is not that far out of line with stagnant wages across the economy. For instance, the average wage in British Columbia grew by 14 cents in 2014! While 20 cents over three years doesn’t even allow minimum wage earners to account for inflation, the fact is most of us have been barely keeping up with price increases. Real wages, those adjusted for inflation, have been mostly stagnant.

While Canada-wide statistics paint a picture of modest wage growth since the end of the last recession in June 2009, much of this growth is due to the three oil boom provinces, Alberta, Saskatchewan and Newfoundland and Labrador. In fact, for the more than 80 per cent of workers outside the oil boom provinces, average real wages have grown just two per cent since that period. Median wages, which are not dragged upwards by the disproportionately large increases in wages for the wealthy, have seen just 0.4 per cent growth outside the oil provinces. This is stagnation loud and clear (see this earlier post for a closer look at the numbers).

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Categories
Canada Precarity Unions Workers

Some notes on precarious work

Here’s a few more notes on a point that seems to be made with increasing frequency: working for a wage has always been precarious. The current focus on precarity as a defining feature of our age is not unwelcome; indeed, its popularity shows that it clearly harmonizes with the everyday experience of many. The question is whether that everyday experience is so new; can a focus on precarity as novelty be crowding out important features of the transformations we’re seeing and what we can do about them?

Perhaps most generally, precarity is what it means to have nothing to sell but your labour power, to use Marx’s turn of phrase. Taken in this sense, precarity is wide-spread: today, the bottom 40% of Canadians today own a measly 2% of national wealth and the bottom 60% own just over 10%. The fact of owning relative peanuts gives precarity an important part of its meaning – it’s certainly nicer to live in a rich country, but the “outside option” remains the wage with all its attendant risks.

The fight against precarity is also the foundation of the welfare state. The welfare state provides a social wage in addition to the working wage and thus undermines precarity. Its genesis was an experiment in social compromise. On the one hand, it gave workers greater security – a springboard to potentially fight for more. On the other, it gave elites a tool to manage labour unrest, especially the wave coming out of the late 19th and early 20th centuries, and the means to incorporate workers into new cycles of accumulation. For now, however, this experiment is sputtering. The last several decades have seen the breakdown of the compromise and, perhaps unsurprisingly, have brought precarity back to the fore, if for now in a more limited sense.

screen_shot_2012-09-13_at_12.01.55_pm

An argument along these lines is crystallized and developed in greater detail in a recent article by Kim Moody. It’s a rare piece because it takes seriously the empirical data that shows modest rises in what most people consider to be precarious work, while at the same time building a broader perspective on precarity that links the present with the past. His comments, while based on the UK experience, apply more generally across Northern economies and are worth quoting at length:

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Categories
Canada First Nations Political Eh-conomy Radio

First Nations and the political economy of land

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This episode looks at the political economy of land in Canada and the Canadian state’s relationship with First Nations as mediated by land. I’m happy to bring together two guests who deal extensively with these issues and pose challenges to rethink the way land is governed.

My first guest is Hayden King, Anishinaabe from Beausoleil First Nation in Ontario and director of the Centre for Indigenous Governance at Toronto’s Ryerson University. He joined me to discuss his recent piece in the Globe and Mail on land and the institutions that govern it.

My second guest is Lynn Gehl, an Algonquin Anishinaabe researcher, writer and activist with a PhD in Indigenous Studies. We discuss her recent article in Ricochet, written with Heather Majuary, on how the current Algonquin land claims process may be undermining those First Nations. It is based on her book The Truth that Wampum Tells: My Debwewin on the Algonquin Land Claims Process.

640px-Ottawa_Valley

Categories
Canada Workers

Stagnant wages for over 80% of Canadian workers

Are wages in Canada stagnant or growing? The short answer is another question: do you live in an oil boom province? There’s a fairly common meme that while Canada, like the US, saw wages stagnate, this is no longer true. Indeed, overall wage growth has picked up since the last crisis.

The baggage that comes with this meme is that we here in reasonable, responsible Canada shouldn’t care about all those things that the US and European lefts are alarming about: no need to worry about inequality, austerity doesn’t concern us and so on. But while it’s a truism that we shouldn’t wholesale import analysis of another economy into the Canadian context, we are not immune to global trends. Yes, the US is a large economy with huge internal markets and this is a big difference; however, as a small, open economy, we cannot escape larger trends, especially with ever greater economic integration through free trade, freer movement of capital and international financialization.

One example of a phenomenon we haven’t really escaped is precisely wage stagnation. Here is a pair of charts showing wage growth since the end of the last recession in June 2009. They separate the three oil boom provinces (Alberta, Saskatchewan and Newfoundland and Labrador) from the rest of Canada. The first chart is from the survey of employers and shows the change in average real weekly wages . (It and all others are smoothed out to show the underlying trend, adjusted by provincial CPI and weighted by the size of the workforce in each province.)

120225 seph short

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Categories
Europe Greece

Syriza buys four months of breathing room

Belatedly, here is an article I wrote on Greece’s agreement with the Eurozone for Ricochet. It focuses on the next four months with their opportunities and pitfalls. Given that the list of reforms authored by Yanis Varoufakis looks to get the approval of the Eurogroup member states, the article remains relevant, the breathing room actually in place.

Assuming its plan of reforms is accepted by the Eurogroup on Monday, Greece’s Syriza government has gained four months of breathing room — albeit in the same stuffy space, already full of the nauseating fumes of austerity, the window barely cracked.

No one was humiliated in Friday’s compromise between Greece and the Eurogroup. Nevertheless, Syriza had to concede much, most painfully the continued involvement of external observers from the Troika. In return, Germany’s no-compromise hard line was finally broken. Friday concluded but the first skirmish in a long battle.

If anything, the resulting agreement demonstrates the weakness of Syriza’s position. Syriza has inherited an economy and financial system in tatters — years of economic depression compounded by sadistic austerity. Yet its leaders, for now, calculate that change outside the bounds of European institutions, including the euro, would open the gates to something far worse. Whatever the precise distribution of gains and losses, which will only come to light as the agreement is implemented, the fact remains that Syriza has four months to act.

Four months to stop the bleeding

First, of course, there is the pressing need to start enacting change in state policy. Existing austerity measures will be hard to dislodge for the time being. But breathing room means that Syriza will be able to spend more, even run a smaller primary surplus this year than stipulated in the old program, perhaps by up to 3 per cent of GDP. It can also start breaking the old oligarchy’s grip on the Greek economy and go after the unpaid taxes of the rich.

Beyond this, there is space for creativity. One Greek journalist tweeted that he’d already overheard Greece’s delegation at the Eurogroup talking about creative ways to raise the minimum wage. Though a far cry from simply raising the minimum wage, such creativity would be a testament to Europe’s intransigence.

Altogether this amounts to a program that can stop the bleeding and subtly fortify the patient before the next round of negotiations.

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Categories
Austerity Greece Political Eh-conomy Radio

Leo Panitch on Syriza and Greece

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Update: the transcript of this interview has now been published in Jacobin.

This week I’ve devoted the entire show to discussing the most recent developments in Greece. While there is a great deal of day-to-day drama at the level of the ongoing negotiations between Greece and European institutions, I wanted to take a broader strategic and political look at what the election of Syriza both for Greece and more broadly for the left around the world, including in Canada. To that end, I’m happy to present an extended conversation with Leo Panitch. Leo is professor of political science at York University, author most recently of The Making of Global Capitalism: The Politcal Economy of American Empire, written with Sam Gindin, and knows Greece well.

640px-20110630_Indignados_Syntagma_general_mass_Athens_Greece

Categories
Crisis Europe Greece

Creditors enabling rapprochement within Syriza?

I’m starting to cautiously think that the Varoufakis and Lapavitsas “approaches” to the crisis might end up not too far away from each other even though the strategic direction they have advocated is very different. The situation, especially after today’s hardening of the creditors’ stance at the Eurogroup, may simply force it. The other option is that this is the intense posturing phase just before a bridging agreement, in which case the following would be less applicable for the time being. Like Paul Krugman, however, I’m inclined to think that the EU is serious in possibly forcing a crisis — with creditors and “Northerners” having the upper hand in the camp facing Greece.

In fact, reading Lapavitsas and Flassbeck’s very recent e-book on the European crisis (recommended), I’m struck with how much of the structural analysis of the causes of the crisis the authors share with Varoufakis. Both use Keynes to similar effect; both have Marx in the background. Both ascribe the debt crisis to current account imbalances across the EU driven largely by wage repression in Germany. Of course, this is not to collapse the two approaches. Crucially, they draw very different conclusions in terms of what the analysis of the causes of the crisis mean for political possibilities.

wpid-wp-1424137430154.jpegBut look at how things are playing out. I think Varoufakis is honest when he says he doesn’t have a complex, game-theory-based bargaining strategy. It was a smart strategic choice on the part of Syriza to place him at the helm of the negotiations simply in order to have the EU force the issue in the face of this “naive” goodwill — one that, let us hope, will nevertheless not accept further austerity. The one thing Varoufakis isn’t saying is that behind “I don’t have a Plan B” lies the fact that the creditors may simply force a Plan B.

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