Action Plan for an Aging Population

By Patrick O’Brien (AIMS on Campus Student Fellow) 

The Government of Nova Scotia is leading a new proposition to change how we think of the aging population, the benefits provided, the obstacles surrounding “aging” and the impact it has on our economy. By 2030 the Government of Nova Scotia estimates that one in four people will be over the age of 65, which shows a major change in demographic we will have going forward.

The “SHIFT” plan will make investments in transportation and affordable housing for those who want to retire in their own communities. It will seek to promote health and wellness, and promote participation in the labor market as the primary objectives. This is all capable with $13.6 million committed to the plan by the Premier Stephen McNeil with as many as 50 objectives to be completed by the end of 2020.

There are many positive aspects of the plan that could help the economy and community. Increasing the participation of older adults in the labor market lowers the unemployment rate for the province, which is 8.7% compared to 6.3% for the rest of Canada. It also brings experience and wisdom to these roles, not to mention that because there is such a large presence of older adults in many rural communities of Nova Scotia, it could increase competitiveness for the small businesses that adopt the hiring of older adults.

Another benefit of the plan is promoting healthy living, including exercising lessons. This also limits social isolation, which in a finding by the SHIFT program was found to increase the likelihood of smoking, drinking, and enabling the individual four to five times more prone to hospitalization. Implementing these strategies and educating the public on the matter will reduce the chances of an elder adult going to the hospital and therefore reducing healthcare costs.

Notwithstanding, there are many obstacles facing this initiative.

The main challenge for the SHIFT program will be the encouragement of older adult employment. First the employer may believe that the older adult is less productive than a younger hire, or may not want to pay the premium for workers compensation to the employee if he/she was to get hurt on the job. From the outlined reasons above, for example when the Government of Nova Scotia stated it “will work with employers” it could be assumed that some sort of training cost to mentor employers during the process will be a part of the program, or potentially a subsidy for said employment, however this is yet to be confirmed.

Should there be a subsidy for the employment of the elderly, this would increase the number of older adult hires, and would limit the hiring of younger employees and immigrant workers as well. Although this does improve the cost efficiency of hiring for the employer, one could argue it may not be as effective as hiring a younger, and more energetic and motivated individual. This would create an uncompetitive hiring process, limiting the number of new participants added to the labor force 15 years of age and older looking for work but are unable to acquire employment. This could factor into an increase in the unemployment rate.

The SHIFT program will be a positive step forward for the economy in Nova Scotia by better involving and demonstrating the importance older adults have in our economic development, in addition to the wisdom and experience they can share to improve our quality of living through labor participation, volunteering, and mentoring. However, and arguably most importantly, it will be of great interest to see how the government will maneuver around the many challenges this program will yield, in addition to implementing the necessary change.

$15 minimum wage would be bad for the Atlantic Provinces

By Henry Gray (AIMS on Campus Student Fellow) 

Growing up in New Brunswick, the local McDonald’s provided a perfect entry into the labour market and an excellent way to begin to earn income for myself to save up for university. My job at McDonald’s taught me general, transferable skills to prepare for a career: work ethic, time management, teamwork, and customer service. As eager as I was at 14, the majority of my spare time was occupied by personal endeavours such as listening to indie music, and most of my mental energy at work to thinking up ideas for songs to write. Many of my colleagues were well worth the wage, but my efforts were not worth much more than the $9 an hour the province mandated that my employer pay. Certainly not the $15 an hour rate that minimum wage workers in Alberta are slated to enjoy as of October 2018.

 

So what would have happened to me had New Brunswick set the minimum wage at $15 while working at my local McDonald’s? In the best-case scenario, I would have been paid $15 an hour for singing between serving customers at the cash register. In the worst-case and far more likely scenario, and indeed this has been the reality for many minimum wage workers, I would have been out of a job.

 

As Matthew Lau and Marco Navarro-Génie discovered in their paper “Revisiting the Minimum Wage in Atlantic Canada” (2017), minimum wages, which have only gone up over the past several years and are slated to continue to do so, hamper the ability of young people to gain employment and to acquire employable skills.

 

The Atlantic Provinces hold the dubious distinction of having the most people per capita at or near the minimum wage in Canada. This is indicative of a weak economy, and the result of raising the minimum wage will thus be felt most severely here. While labour unions and anti-poverty activists have been known to suggest that raising the minimum wage will help unskilled workers and the poor, this policy will, in fact, disenfranchise and marginalize them even further. Some members of this already vulnerable population may be subject to the loss of their jobs, as their employers may not be able to afford to keep them on at an artificially inflated wage, while others may be prevented from entering the labour force altogether if their labour is worth anything under $15 an hour. To be certain, those who keep their jobs will be making more money, but for those who do not make the cut, a minimum wage hike represents unemployment rather than a pay rise. Moreover, my former employer, McDonald’s, has produced out self-serve kiosks, part of a trend towards automation that will only grow more widespread as minimum wage hikes drag labour costs upward.

 

Rather than reducing income inequality and empowering marginalized people, the minimum wage actually hurts those it is intended to help. It increases unemployment among the lowest skilled members of society, leads to greater demand for government welfare spending, and causes economic growth to falter, leading to less economic opportunity for all.

 

As Lau and Navarro-Génie recommend, provincial governments would see far better results by reducing the barriers to employment, raising the basic tax exemption, and unleashing the private sector to allow it to create jobs and wealth.

 

Legislating further increases to the minimum wage would actually further increase youth unemployment and exclude many unskilled workers and those in a lower socio-economic class from the labour force. Young people in Atlantic Canada are far better off given economic opportunity to better themselves, to learn skills that can be further developed later, to learn how to manage money, and to contribute to the economy.

 

The Moral Hazard of Current Employment Insurance

By Ainslie Pierrynowski (AIMS on Campus Student Fellow)

Employment Insurance (EI) was created with the best of intentions in mind. Launched in 1941, the program provided temporary benefits to the poorest workers. Over the years, EI has evolved and expanded, becoming Canada’s main source of relief for displaced workers as of 2013. Yet, in Atlantic Canada, EI has coupled with seasonality to produce dire consequences for the region’s economy.

These effects can be traced back to the EI reforms which took place in the 1970’s. As AIMS author Justin Hatherly recounts in this policy paper, the 1971 Unemployment Insurance Act rendered EI eligibility criteria less stringent. Further, in 1977, Canada’s provinces and territories were divided into EI economic regions. The higher the unemployment rate in one’s EI region, the fewer insurable hours are needed to qualify for EI benefits and the longer these benefits can be received. Due to these changes, workers in Atlantic Canada today receive a substantial percentage of EI benefits relative to the percentage of covered workers in the region. Not coincidentally, according to Andrew Sharpe and Jeremy Smith of the Centre for the Study of Living Standard, Atlantic Canada had the highest employment seasonality rate in the country throughout the period 1976-2003. In fact, while Atlantic Canada only accounted for 11.1% Canada’s total unemployment during this time period, it encompassed 20.9% of Canada’s total seasonal unemployment. While Atlantic Canada may have a high concentration of seasonal industries relative to the rest of the country, EI in its current incarnation has played a major role in seasonal unemployment’s current prevalence—and persistence—in Atlantic Canada.

In particular, EI benefits may serve to incentivize workers to pursue part-time, seasonal work rather than full-time, but seemingly less lucrative, jobs. For instance, Sharpe and Smith note that the lack of full-time work in Atlantic Canada could partially stem from the practice of firms with full-year operations hiring seasonal employees that only work long enough to attain EI benefits. The resulting seasonal unemployment problem, in turn, has an adverse economic impact on the region. With a population that is both aging and in decline, but which relies increasingly on public services—thus fewer and fewer individuals are burdened with paying for these services—the dual issue of seasonal unemployment and EI hints at an approaching financial tipping point. Moreover, numerous small and medium-sized enterprises (SMEs) in Atlantic Canada have voiced concern over the labour shortage in Atlantic Canada—and its possible connection to EI. Indeed, 31% of SME owners in Atlantic Canada asserted that they felt as if they were “competing” with the EI system for employees (compared to 33% who stated the contrary and 36% who reported being unsure), while 27% contended that employees had requested to be laid off in order to collect EI benefits. Further, as Hatherly notes, whereas labour mobility in a healthy labour market can eventually cause regional differences in unemployment rates to dissipate, the regional nature of EI benefits may deter seasonal workers from migrating to more productive areas and thus entrench the unemployment disparity between Atlantic Canada and the remainder of the country.

Thus while it provides much-needed relief to unemployed workers, the EI program as it exists today underpins Atlantic Canada’s seasonal unemployment problem. When it comes to combatting the underlying causes of seasonal unemployment in Atlantic Canada, the path forward is fraught with difficulties. Attempts to dial back EI benefits may be met with resistance from Atlantic Canadians who rely on the program, as shown by the unpopularity of the Chrétien government’s Employment Insurance Act, which mandated stricter entry requirements for EI and reduced certain benefits, in many Atlantic Canadian ridings. Meanwhile, a Canadian Federation of Independent Business report found that of the Atlantic Canadian seasonal SMEs which attempted to extend their seasons, the vast majority were unsuccessful. Hence, Atlantic Canada has found itself in a Catch-22, in that the region needs labour mobility, a diverse economy, and profitable full-time jobs to combat seasonal unemployment and dependence on EI, yet the EI program serves to disincentivize attaining these very needs. As one Atlantic Canadian well-drilling entrepreneur attested, “We cannot get trained workers; I have been looking for trained, licensed, workers for our industry for four years without success.” In light of the evidence presented here, an EI program with benefits tied to pursuing human capital—the training, experience, education, and skills needed to create a diverse, productive economy—rather than the region where one lives would push Atlantic Canada further to meeting these needs, grant unemployed workers support and security, and avoid falling victim to the moral hazard of the current EI system.