Making Canada Relevant Again- The Economic Super-Thread

[I_am_John_Galt]

I don't see any conflict between the two acts, since the provinces have presumably entered into agreements with the federal goverment wrt to administration and enforcement of tax collection, so they've handed over the right to do so to the federal goverment. I suppose in theory a province could withdraw from the agreement and establish its own provincial revenue agency.

The point that I am trying to confirm is that (supposedly) they *can't* hand that right over to the feds: it is an issue of (de)centralization of power.

 

[Britney Spears]

The point that I am trying to confirm is that (supposedly) they *can't* hand that right over to the feds: it is an issue of (de)centralization of power.

Well they haven't *handed it over*. The province still collects taxes on the other stuff (liquor, etc), and they can choose to collect their own income taxes if they want, like Quebec. I don't see anything in the constitution saying that the provinces *can't* delegate it to the federal goverment. What difference would it make?

 

[Britney Spears]

The above In detail:

92. In each Province the Legislature may exclusively make Laws in relation to Matters coming within the Classes of Subject next hereinafter enumerated; that is to say,--

    1. Repealed.(48)

    2. Direct Taxation within the Province in order to the raising of a Revenue for Provincial Purposes.

    3. The borrowing of Money on the sole Credit of the Province.

    4. The Establishment and Tenure of Provincial Offices and the Appointment and Payment of Provincial Officers.

    5. The Management and Sale of the Public Lands belonging to the Province and of the Timber and Wood thereon.

    6. The Establishment, Maintenance, and Management of Public and Reformatory Prisons in and for the Province.

    7. The Establishment, Maintenance, and Management of Hospitals, Asylums, Charities, and Eleemosynary Institutions in and for the Province, other than Marine Hospitals.

    8. Municipal Institutions in the Province.

    9. Shop, Saloon, Tavern, Auctioneer, and other Licences in order to the raising of a Revenue for Provincial, Local, or Municipal Purposes.

    10. Local Works and Undertakings other than such as are of the following Classes:--

        (a) Lines of Steam or other Ships, Railways, Canals, and other Works and Undertakings connecting the Province with any other or others of the Provinces, or extending beyond the Limits of the Province;

        (b) Lines of Steam Ships between the Province and any British or Foreign Country;

        (c) Such Works as, although wholly situate within the Province, are before or after the Execution declared by the Parliament of Canada to be for the general Advantage of Canada or for the Advantage of Two or more of the Provinces.

    11. The Incorporation of Companies with Provincial Objects.

    12. The Solemnization of Marriage in the Province.

    13. Property and Civil Rights in the Province.

    14. The Administration of Justice in the Province, including the Constitution, Maintenance, and Organization of Provincial Courts, both of Civil and of Criminal Jurisdiction, and including Procedure in Civil Matters in those Courts.

    15. The Imposition of Punishment by Fine, Penalty, or Imprisonment for enforcing any Law of the Province made in relation to any Matter coming within any of the Classes of Subjects enumerated in this Section.

    16. Generally all Matters of a merely local or private Nature in the Province.

So, if I were the SCOC I would conclude that the Province has the right to delegate the administration and collection to the federal goverment, but I think you could pobably argue your point on the "exclusive" part. I don't suppose anyone has any cases handy for reference?

Those silly buggers should have posted the damn thing on army.ca first, so we could go over it and pick out ambiguities like this.

 

[squealiox]

I'm not even sure what Squeeliox and Zipper are complaining about - really.

If you were a Japanese auto executive wouldn't you invest in Ontario? After all it's so familiar to them - an overtaxed and quiescent electorate, obedient to higher authority, rarely questioning the wisdom of one party rule, satisfied (or self-satisfied) with social and economic mediocrity.  

so you mean to say that despite being 23% foreign-owned and listed on the Tokyo and NY stock exchanges, Toyota is completely immune to the disciplinary effect of capital markets? guess that makes the entire finance industry redundant, then. time to update my resume...

No one is suggesting that it isn't a marginal benefit for Canada: the point is that it is only a benefit because our economy is worse than that of the US.  Americans with equivalent skills already have jobs ... it is the equivalent of hiring IT people in India: they have tons of supply, while the American supply is already fully utilized.  We are the kids with no shoes in the Nike factory.

in other words, you are saying that none of these low-wage southern states have economies capable of adding new workers to meet the demand for adequately skilled labour (toyota DID consider locating there), now that the supposedly fixed number of good ones are all employed. come to think of it, do you even have any data to back up this weird claim?

 

[I_am_John_Galt]

The above In detail:
So, if I were the SCOC I would conclude that the Province has the right to delegate the administration and collection to the federal goverment, but I think you could pobably argue your point on the "exclusive" part. I don't suppose anyone has any cases handy for reference?

Those silly buggers should have posted the darn thing on army.ca first, so we could go over it and pick out ambiguities like this.

Yeah, that's the crux: it doesn't say that the Provinces can delegate that power (or any other, for that matter) to another level of government.  IIRC, the book that I read said that the CCRA/RevCan people have always settled out-of-court when anyone has gotten close to challenging it.

 

[I_am_John_Galt]

in other words, you are saying that none of these low-wage southern states have economies capable of adding new workers to meet the demand for adequately skilled labour (toyota DID consider locating there), now that the supposedly fixed number of good ones are all employed. come to think of it, do you even have any data to back up this weird claim?

Huh?  Who said anything about "fixed" supply?  Toyota would have to do more more training of the (obviously lesser-skilled) available workforce in the southern States vis-a-vis Ontario (which is to say that Ontario has more unemployed skilled and semi-skilled workers available to work at  the future Toyota plant).  The incremental cost of training the available American workforce is more than what was offered to be offset by subsidy, ergo the decision to locate in Ontario (of course there were other factors, too).  Check out the relative unemployment rates: the unskilled are generally the last to get hired, because they require a greater training investment.  It is quite straightforward: what is weird about this?

 

[mdh]

Quote from: mdh on Yesterday at 21:37:45
I'm not even sure what Squeeliox and Zipper are complaining about - really.

If you were a Japanese auto executive wouldn't you invest in Ontario? After all it's so familiar to them - an overtaxed and quiescent electorate, obedient to higher authority, rarely questioning the wisdom of one party rule, satisfied (or self-satisfied) with social and economic mediocrity. 

so you mean to say that despite being 23% foreign-owned and listed on the Tokyo and NY stock exchanges, Toyota is completely immune to the disciplinary effect of capital markets? guess that makes the entire finance industry redundant, then. time to update my resume...

Even though my rhetorical outburst was meant tongue-in-cheek, I'm still not sure what you are arguing about.  If you're suggesting that government has a role to play in the economy then fine - that is of course a legitimate position to take.  I take the position (and I assume one or two others here do as well  ) that there is too much government in the Canadian economy and it's impacting one of the most important elements of a strong future economy - productivity. 

There's little debate about this - it is an economic fact that our productivity has been very weak compared to the US. 

Ontario's manufacturing sector, for example, was artificially shielded from this throughout most of the 1990s because of our low dollar policy. (see below from today's Vancouver Sun). It's possible that a higher dollar will spur efficiencies - but only to a degree. 

Taxation is part of the productivity equation - whether the CAW or the NDP likes it or not. Unfortunately, the left has made a high tax regime synonomous with patriotism and it's been difficult to debate the issue without the usual propaganda about the glories of the Canadian welfare state trotted out as the ultimate trump card.

Your fixation with Toyota building another plant in Ontario - while interesting - hardly negates the arguments put forward by a_majoor and IAJG.

Presumably you have a better solution to offer for Canada's economic future?

Canada's productivity gap - Vancouver Sun, A09 - 26-Jul-2005

By Jock Finlayson

Canadians are fortunate to live in one of the world's most successful countries. The 2004 United Nations Human Development Index ranked Canada fourth among all nations in quality of life.

On some measures Canada has been an economic pacesetter over the past several years. Inflation has remained low and stable for more than a decade, the country's job creation record has been impressive, and the yawning public sector deficits that characterized the 1980s and early 1990s have given way to surpluses or balanced budgets in Ottawa and most of the provinces.

Canada's performance has been disappointing, however, in one area that is vital to long-term economic well-being: productivity. Productivity is commonly defined as gross domestic product (GDP) per hour worked -- the sum of output produced across the economy, divided by the total number of hours worked.

Because it is difficult to gauge productivity in the public or "non-market" sector, economists usually focus on trends in the business sector.

According to a study published in the fall 2004 issue of the International Productivity Monitor, aggregate labour productivity in the Canadian business sector is 22 per cent below the U.S. level. And the gap has widened since 2000, when it stood at 17 per cent. In manufacturing, the Canada-U.S. productivity differential is ever bigger -- 31 per cent. Since productivity in British Columbia is below the Canadian average, our province is in an even worse position vis-a-vis the Americans.

While Canada clearly lags behind the United States overall, the picture varies by industry. Canada is actually more productive than the U.S. in a handful of sectors, notably wood products, mining, primary metals, construction, transportation equipment, and chemicals.

In a large majority of industries, however, Canadian business significantly under-performs its U.S. counterpart. And it is not just against the U.S. that our place in the productivity pecking order has deteriorated: We now rank 18th out of 23 industrial countries in GDP per hour worked, down from fifth in the 1950s.

Over time, higher productivity translates into rising incomes and a better standard of living. Thus, if the U.S. continues to outpace Canada in productivity growth, we are destined to fall further behind our neighbours in per capita incomes and economic prosperity.

In 2000, John McCallum, currently the federal minister of national revenue but at the time the chief economist of the Royal Bank, penned a gloomy paper suggesting that, by 2020, per capita income in Canada conceivably could drop to half of that in the U.S., in part because of persistently weaker productivity growth.

A cross-border difference in incomes on this scale would act as a powerful magnet enticing skilled Canadian workers, ambitious entrepreneurs and high value business activities to migrate south.

Against this backdrop, Canadians might reasonably expect that parliamentarians and their national government would be intensely focused on tackling the growing productivity gap vis-a-vis the United States.

Yet judging from the goings-on in Ottawa, this has not been a priority, for either the minority Liberal government or other political parties.

Instead, Ottawa has been gripped with the sponsorship scandal, while the Martin government's attention and fiscal resources have been concentrated on hiking social spending and frantically trying to hammer out multi-year agreements with the provinces in the areas of health care, equalization transfers, child care and early learning, and municipal affairs.

The economic policy agenda, to the extent one even exists, has become almost invisible, lost amid a torrent of new spending initiatives and unusually strident partisan rhetoric.

In recent weeks, Finance Minister Ralph Goodale has finally acknowledged that the government needs to do more to bolster productivity. Progress will require action on a number of fronts.

First, Canada must step up investment in machinery and equipment, which many economic studies have shown is key to raising productivity. Moving ahead with promised reductions in federal corporate taxes and overhauling capital cost allowances to bring them into line with the economic life of productive assets would help.

Second, productivity growth is also enhanced by policies that promote open markets, the dismantling of internal trade barriers, and efficient regulation. Ottawa should be playing a stronger leadership role in all of these areas.

A third priority is continuing to develop the nation's human capital. A large body of research confirms that skills and education are essential to fostering innovation and the commercialization and diffusion of technologies. Canada has a good record on educational attainment, but in recent years we have slipped behind the U.S. in the growth of the university-educated work force.

Finally, federal policy-makers would be wise to temper their boundless enthusiasm for small business and self-employment. The self-employed generally have lower earnings and productivity than paid workers. In addition, the data show that large and medium-sized businesses have higher levels of worker productivity than small firms.

Creating an economic climate that encourages businesses to grow rather than stay small, and that supports the development of large, globally oriented Canadian companies, would put the country on track for improved productivity.

Jock Finlayson is executive vice-president of policy at the Business Council of British Columbia.

 

[Britney Spears]

Yeah, that's the crux: it doesn't say that the Provinces can delegate that power (or any other, for that matter) to another level of government.   IIRC, the book that I read said that the CCRA/RevCan people have always settled out-of-court when anyone has gotten close to challenging it.

I don't understand. I can see an individual sueing his provincial goverment over this (whether the province has the right to delegate tax collection), but to what end? If he does win he'll just end up paying more taxes, no? And how exactly does one "settle" in a case like this? I can't see how the CRA would even be involved in such a suit....

Can you give a few more details about this case?

 

[I_am_John_Galt]

I don't understand. I can see an individual sueing his provincial goverment over this (whether the province has the right to delegate tax collection), but to what end? If he does win he'll just end up paying more taxes, no? And how exactly does one "settle" in a case like this? I can't see how the CRA would even be involved in such a suit....

Can you give a few more details about this case?

I wish I could, it was a while ago (the book was "My Blue Haven," or something along those lines), but the gist of it was that a few people had sued RevCan on the basis that it had no authority to collect taxes on behalf of the Provinces (or, I think more accurately, that the authority it had been given was unconstitutional).  IIRC, there were two reaons for challenging it: 1) to make it more difficult for the governments (in general) to collect income taxes (which would in turn make it more difficult for them to spend taxpayer's money without more accountability); and 2) reduce the reliance of Provincial Governments on transfers from the feds (making them more accountable for their spending, too).  The bigger picture was that the power that  RevCan/CCRA holds has become too tyrranical and needs to be checked.  Of course I realize that Income Taxes are collected solely by the Federal Government (except in Quebec, no?) to reduce adminstrativfe costs and there would be some offsetting overheads (although the degree is in question) ... it would cause a tax crisis that would force a rethink of the collection of Income Taxes (and the spending of same).

 

[a_majoor]

While it may be an interesting law case in theory, the taxpayer foolish enough to attempt to fight the CCRA in court had better be named Bill Gates, because the Government has the resources and willpower to crush anyone else who can't muster up similar resources, armies of lawyers etc. It would also be difficult to fight a multi-year court battle with all your assets seized to pay taxes owing 

I will argue the only way to fight against low productivity, high taxation and an adverse regulatory environment is to do it as a "self help" project at the municipal level. This isn't quite as exciting as singing the "International" at the barricades while the HMCS Aurora fires the opening shot in Toronto harbour (oops, wrong revolution), but it is a level that is accessable to all of us, can be tacked in a dispersed manner, and has measurable and immediate impact on the taxpayer and local economy. I have argued that my home city of London Ontario could see a spending and tax cut totalling $100 million dollars; which is not only not a huge streach given an $800 million dollar budget, but also highly symbolic: one Adscams worth of money injected back into the local economy.

Politics is not only about results, it is about theater. Running for municipal office or supporting candidates who run on tax and spending cut platforms is certain to arouse comment and drive discussion, as long as the candidates and supporters are not obvious nutbars and astute enough not to fall into media traps, they will get a message out, they will start at least some people questioning the status quo, and perhaps they will win their elections and start putting these proposals into practice.

The spectacle of a city reducing its budget and ramping up local employment, attracting outside investment and so on can only build the virtuous circle as people outside of those municipalities begin to question why "they" are not getting the bigger pie, and begin to take action against status quo municipal politicians. My long term hope, of course is that many of these new generation politicians can and will set their sights on higher levels of government, and put these proven principles to work there as well.

 

[squealiox]

Your fixation with Toyota building another plant in Ontario - while interesting - hardly negates the arguments put forward by a_majoor and IAJG.

Presumably you have a better solution to offer for Canada's economic future?

canada's productivity is behind that of the us in a number of industries that we probably shouldn't be too involved in in the first place. we just don't have the comparative advantage in some of these fields. in others, there is of course real room for improvement.
and this gets to my main point: our govt spending is probably to blame for much of these bad decisions, but not EVERY AREA of govt spending. the biggest culprit is industrial and regional subsidies and other forms of protectionism, which do a lot of damage by distorting the economy. On the other hand, some spending on healthcare, education, social safety net, etc., may well provide benefits that are more than negated by the costs of excessive industrial policy.
the toyota case just happens to be a tidy illustration of this. it appears, among other things, the southern states just can't meet the demand for skilled labour as well as canada can (and that remains the simplest explanation, pending any actual data to the contrary emanating from Galt's Gulch).
to dogmatically ignore this distinction and robotically cry "suffocating nanny state" at every penny of public expenditure is like throwing the baby out with the bathwater, and is in any case unrealistic.

 

[I_am_John_Galt]

the toyota case just happens to be a tidy illustration of this. it appears, among other things, the southern states just can't meet the demand for skilled labour as well as canada can (and that remains the simplest explanation, pending any actual data to the contrary emanating from Galt's Gulch).

What the hell statistics are you looking for?!?!?!?

Here's in article from 2002 describing Hyundai's new plant in Montgomery (this is when the skilled workforce in the southeast US was getting jobs):

Talking to economic developers in the southeast over the past eight months was impossible without the mention of Hyundai Motors. The Korean automaker's success in this country made it inevitable that it would build an assembly plant here. Everyone expected Hyundai to choose the southeast for its low labor costs and low unionization ratesâ “but which state? On April 3, Hyundai followed the path taken by Mercedes, Toyota, and Honda since 1993 by choosing Alabama. ... According to Hyundai, it was Montgomery's and Alabama's quality of workforce, proximity to U.S. population centers, efficient automotive parts supply chain in the region, and closeness to the Port of Mobile that made the case for Alabama. The plant will manufacture Hyundai's mid-size sedans and sport-utility vehicles ...

http://www.facilitycity.com/busfac/bf_02_06_analysis.asp

In 2004, it was noted that continued low unemployment was creating a shortage of skilled labour:

Maintaining the current low rate of unemployment requires employment growth roughly in balance with labor force growth -- on average, this implies net creation of about 1.3 million jobs per year. However, from early 1995 to early 1998, the U.S. economy actually generated more than 5 million new jobs. A slowdown from this very rapid rate of job creation seemed likely, even without a slowing of the overall economy from external forces. Tightening labor markets show evidence that they are beginning to increase the unit cost of labor, and increases in the labor force resulting from ever higher participation rates have been harder to sustain as each new record level was achieved. Thus, it appears that the U.S. pace of job creation can fall dramatically without any significant increase in the unemployment rate.

The greatest challenge that U.S. employers face with slow labor force growth and tight labor markets is meeting their needs for a higher skilled workforce. Thirty years ago, new entrants to the labor force typically had higher levels of education than the older workers who were retiring. That is no longer true. Furthermore, there have been significant changes in the way work is done. Research shows that these changes have significantly increased the productivity payoff of higher skill levels. Technology and workplace organization have both played a role in these productivity increases. Improvements in skills sought by employers will have to come primarily through investments in the human capital of existing workers.

http://www.epf.org/pubs/newsletters/1998/et981116.asp

In late 2004, Hyundai (remember them?) ran into trouble finding skilled labour to staff the new plant:

Help Wanted: Auto workers

Competition intense as Hyundai, suppliers work to fill 5,000 jobs

By Marty Roney and Brett Clanton
Montgomery Advertiser

No one is complaining about new jobs being created by Hyundai and its suppliers. It just means competition for skilled labor is about to intensify.

"It sounds like in a year or two, if you're a good machine operator, you can write your own ticket," said Montgomery resident Larry Nichols.

South Korea's Hyundai Motor Co. is building a $1 billion plant in Montgomery that will employ 2,000 workers by 2005.

Eleven of Hyundai's tier one suppliers also have committed to building plants in Alabama, accounting for more than $500 million in capital investment and 3,300 new jobs.

Creating such a large number of jobs could never be considered a liability, said Phyllis Kennedy, director of the state's Department of Industrial Relations.

But ensuring a qualified work force is available can pose challenges, she said.

http://www.montgomeryadvertiser.com/specialreports/hyundai/StoryBusinessworker08w.htm

And you claim that the shortage of skilled labourers had nothing to do with Toyota's decision?  Who are you calling dogmatic?  Skilled workers in Canada are getting jobs because skilled workers in the US are already working.

 

[I_am_John_Galt]

And a more direct critique of the Krugman article (particularly the notion of the supposed healthcare benefit:

July 25, 2005

Krugman's sloppy economics

Paul Krugman's attempts at economics are getting stranger. Today, he writes about Toyota setting up a factory in Canada to try to buttress his claims for the virtues of big government. Give him a C for effort.

He tries two lines of attack. One is to claim that American workers have lower productivity because of low government expenditure on schooling.

    But last month Toyota decided to put the new plant, which will produce RAV4 mini-S.U.V.'s, in Ontario. Explaining why it passed up financial incentives to choose a U.S. location, the company cited the quality of Ontario's work force.

    .        .        .

    There's some bitter irony here for Alabama's governor. Just two years ago voters overwhelmingly rejected his plea for an increase in the state's rock-bottom taxes on the affluent, so that he could afford to improve the state's low-quality education system.

Krugman's implicit claim is that more government spending improves schools. The difficulty here is that the evidence for this assertion is at best spotty, and there is a good deal of evidence that spending more makes little if any difference (see, for example, the work of Eric Hanushek of Stanford and Jeff Grogger of Chicago).

His other line of attack is to assert that Canada's national health insurance system gives Canada an advantage.

    But education is only one reason Toyota chose Ontario. Canada's other big selling point is its national health insurance system, which saves auto manufacturers large sums in benefit payments compared with their costs in the United States.

    You might be tempted to say that Canadian taxpayers are, in effect, subsidizing Toyota's move by paying for health coverage. But that's not right, even aside from the fact that Canada's health care system has far lower costs per person than the American system, with its huge administrative expenses. In fact, U.S. taxpayers, not Canadians, will be hurt by the northward movement of auto jobs.

    To see why, bear in mind that in the long run decisions like Toyota's probably won't affect the overall number of jobs in either the United States or Canada. But the result of international competition will be to give Canada more jobs in industries like autos, which pay health benefits to their U.S. workers, and fewer jobs in industries that don't provide those benefits. In the U.S. the effect will be just the reverse: fewer jobs with benefits, more jobs without.

    So what's the impact on taxpayers? In Canada, there's no impact at all: since all Canadians get government-provided health insurance in any case, the additional auto jobs won't increase government spending.

To sort out this mess, start with asking why employers offer benefits, rather than just giving employees more cash. There are two reasons:

1) Sometimes benefits to employees provide benefits to the employer as well. For example, it is widely believed that married men are more productive than single men, either because marriage improves productivity or because more productive men also make better husbands, and so marrige is a signal of higher productivity. Either way, employers who want married men can offer a pay package including a variety of family friendly benefits that are more attractive to married men than single men.

2) Employees may be able to get something cheaper if it is an employer benefit than if it is provided by the market. Usually this is for tax reasons. My employer provides free parking (actually free if you show up early enough). Unlike my salary, the value of this benefit is not taxed. This is a reason why American employers frequently offer health insurance, because employer provided insurance gets more favorable tax treatment than insurance you purchase yourself.

Either way, to survive in the market, an employer has to offer, for a given cost, the pay and benefit package that is most attractive to employees. That might include health insurance, but maybe not. If your employees are young, health care is not particularly attractive, because the young tend not to get sick. Simply noting that benefits are lower hardly means the overall pay package is lower. If Krugman does not know this, he slept through his labor economics class. If does know this, well, figure it out.

When Toyota sets up in Canada, it has to attract employees, either from other employers or by getting them into the labor market. Since everyone gets the health care the government provides, it follows that Toyota will still have to pay Canadian market wages. From the point of view of health care, the only advantage to moving to Canada is if the Canadian system can supply health care at a more advantageous combination of cost and quality, a doubtful proposition.

But Krugman is not trying to praise Canada, he is trying to get Americans to sign up for Canadian style national health care. Suppose the US created a Canadian style system. Then everyone would get the government health package regardless of whether they were working. To get employees to work for Toyota (and any other employer), the employers would have to compensate them for the wages lost to the extra taxes.

Suppose costs in the two systems were identical (say $1000), and there were no uncovered people out of work. Leaving aside things like tax issues, without national health care, an employer who offered health insurance could cut pay by $1000. The employer gives the $1000 to the insurance company. With national health insurance, the government takes the $1000 in extra taxes. The employer takes the $1000, gives it to government. Same thing. Everything hinges on whether national health insurance offers a better combination of cost and quality. Krugman says nothing on that beyond noting, irrelevantly, the fact that health care costs per person are lower in Canada than in the U.S. That could be a more efficient system, or just worse health care. Health care costs per person in Kenya are only $19/year, but only a lunatic would prefer to be sick in Kenya.

So Krugman barely touches the central point, and instead gives us a lot of tripe about lost benefits, as if the ratio of benefits to pay were fixed. If he weren't a relentless partisan, he would give a principles student no more than a C for this effort.

http://www.atlanticblog.com/archives/001977.html#001977

 

[squealiox]

In 2004, it was noted that continued low unemployment was creating a shortage of skilled labour:  http://www.epf.org/pubs/newsletters/1998/et981116.asp

you might want to actually check the date on that article. it's from 16 Nov 1998 -- at the height of a particularly overheated jobs market, when the unemployment rate was, as it says, "at its lowest level in the past 28 years."
(and you might also want to try explaining away the statement:"Thirty years ago, new entrants to the labor force typically had higher levels of education than the older workers who were retiring. That is no longer true." sorta suggests the problem is a lot closer to the supply end than the demand end, don't you think?)

According to Hyundai, it was Montgomery's and Alabama's quality of workforce, proximity to U.S. population centers, efficient automotive parts supply chain in the region, and closeness to the Port of Mobile that made the case for Alabama.

and of course you saw no reason to highlight all these other considerations, or how they all affect one another. and the article seems to be comparing alabama's advantages with other u.s. states, rather than, say, canada or japan. and anyway, it gives by far the greatest prominence to the "low cost" advantage.

2) Employees may be able to get something cheaper if it is an employer benefit than if it is provided by the market. Usually this is for tax reasons. My employer provides free parking (actually free if you show up early enough). Unlike my salary, the value of this benefit is not taxed. This is a reason why American employers frequently offer health insurance, because employer provided insurance gets more favorable tax treatment than insurance you purchase yourself.

this is just mind-boggling. the whole reason U.s. employers can provide full coverage cheaper than employees could provide it for themselves (if the same were actually available to random individuals) has nearly nothing to do with taxes or even buyer power and everything to do with health insurers' inherent inability to make money by selling to self-selecting customers. in the industry, it's called adverse selection.
it's also the big reason the canadian system can cover everyone at lower cost than u.s. insurers can.

 

[a_majoor]

this is just mind-boggling. the whole reason U.s. employers can provide full coverage cheaper than employees could provide it for themselves (if the same were actually available to random individuals) has nearly nothing to do with taxes or even buyer power and everything to do with health insurers' inherent inability to make money by selling to self-selecting customers. in the industry, it's called adverse selection.
it's also the big reason the Canadian system can cover everyone at lower cost than u.s. insurers can.

Without qualifications, the arguments about health care spending are like comparing apples to halibut, since the systems are so dissimilar. When doing comparisons based on hard data like number of MRI or CT scanners per capita, Canada, despite its vast health care spending, comes up rather short (1.7 MRI/million population vs 7.7/million in the US; 8.1 CT scan/million vs 13.4/million in the US), and we see newspaper articles from time to time highlighting the practice of sending Canadian patients to the US for various treatments (from blasting kidney stones with ultrasonic shockwaves to cancer treatment) which is simply unavailable to Canadians in anything like a timely manner.

A company like Toyota might find it annoying when something like this hapens to one of its Canadian employees, but on the other hand, since the Canadian taxpayer is covering the bill anyway, (along with so much else), it still keeps the shareholder happy.

The health insurance industry in the US may indeed use "adverse selection", but the thrust of this argument is that the buyer of insurance is being influenced by external factors such as cost and tax treatment. If the United States moves towards "Health Savings Accounts" (sort of like an RRSP, except you save the money to offset routine health care costs), then you will see market pressures change the way the US health care system operates since individual consumers will have an immediate impact on the system, rather than a cartel of insurance companies. How this will affect Corporate hiring and infrastructure investment is anyone's guess, since it depends on how the system is structured. The only "sure thing" is the company will factor that in the decision making process, with the ultimate goal of maximizing shareholder value.

 

[loyalcana]

Actually some of that data is a bit out of date, you can find a newer report here
http://www.oecd.org/dataoecd/16/9/34969633.pdf
or just googling OECD health data Canada

Things aren't as bad on the MRI/CT scan front as they were in 2001 but we still lag behind with 4.6MRI/million, 10.3 CT scanners/million.
One big thing to note is that the U.S governments spend more per capita on health care than what Canada does from both government and privately.

 

[I_am_John_Galt]

you might want to actually check the date on that article. it's from 16 Nov 1998 -- at the height of a particularly overheated jobs market, when the unemployment rate was, as it says, "at its lowest level in the past 28 years."
(and you might also want to try explaining away the statement:"Thirty years ago, new entrants to the labor force typically had higher levels of education than the older workers who were retiring. That is no longer true." sorta suggests the problem is a lot closer to the supply end than the demand end, don't you think?)

  I missed the date, but the point stands anyway: the US has been at or near full employment for almost the whole ensuing period.

and of course you saw no reason to highlight all these other considerations, or how they all affect one another. and the article seems to be comparing alabama's advantages with other u.s. states, rather than, say, canada or japan. and anyway, it gives by far the greatest prominence to the "low cost" advantage.

  Um, yeah: what is confusing about this?  When Hyundai made the decision to build, they thought that there was more available (=unemployed) skilled workforce (= less training costs): when it came to actually staffing the plant, they found that it was not the case.  Instead of repeating Hyundai's mistake, Toyota looked for an available skilled, workforce.

this is just mind-boggling. the whole reason U.s. employers can provide full coverage cheaper than employees could provide it for themselves (if the same were actually available to random individuals) has nearly nothing to do with taxes or even buyer power and everything to do with health insurers' inherent inability to make money by selling to self-selecting customers. in the industry, it's called adverse selection.
it's also the big reason the canadian system can cover everyone at lower cost than u.s. insurers can.

The Canadian System DOES NOT cover everyone to anywhere near the same level as US insurers: this is why it is cheaper.  Period.  Actually, the only Canadians that have similar levels of coverage are those that have supplemental coverage purchased themselves or through their employers (but it's not a second tier).  For the mind-boggled, the realities of economics doesn't always reflect your favourite theoretical argument.  Adverse Selection is a theoretical problem for the US Insurers: it is an ACTUAL problem for the uninsurable.  If this was not the case, we would constantly be reading stories of failing insurance companies in the US.  Perhaps you missed this, but they have actually developed the capacity to underwrite effectively.

More reaction ...
Krugman exposed to be flat-out lying:

Editorial Notebook: Dear Mr. Krugman

In our opinion
07-28-2005

Mr. Paul Krugman
New York

Dear Mr. Krugman:

Every once and a while it is good to know what other folks are saying about us, even if it is wrong. Especially if it is wrong.

And out there is the notion that Southerners in general, Alabamians in particular, are not really up to the demands of the modern, industrialized economy.

Recently this came out in your column in The New York Times, which was reprinted in The Star on Wednesday. I was glad that The Star chose to publish the piece because it not only had a lot to say about the competition between the United States and Canada but also because publishing it gives me the opportunity to respond to misinformation and misconceptions that need to be addressed.

In discussing why Toyota decided to locate a new plant in Ontario, you went out of your way to engage in a little Dixie bashing by observing that â Å“Japanese auto companies opening plants in the Southern U.S. have been unfavorably surprised by the work force's poor level of training.â ? You went on to single out Alabama where, you reported, instructors â Å“had to use 'pictorials' to teach some illiterate workers how to use high-tech equipment.â ?

Now I understand it is difficult to cover all the bases, but it would have been nice if you had checked things more carefully, for if you had you would have found that over a week before you published your piece the source you cited, the president of the Toronto-based Automotive Parts Manufacturers' Association, denied saying that Alabama workers were â Å“illiterateâ ? and noted that â Å“the use of diagrams and illustrations is commonâ ? in industry training. Nor, apparently, did you ask yourself how it could be that such a sub-standard workforce as we supposedly have in Alabama could win the DaimlerChrysler Top Quality Award for 2004 for the best performance by a Mercedes plant, worldwide.

Now I know that Alabama has its problems. And if you would like to engage in a discussion of what the state is and is not doing to prepare its citizens for a 21st century industrial economy, I'd be happy to oblige. We'd probably agree on a lot. Unfortunately, what you have done is perpetuate the very stereotypes that people of your inclination and influence should be working to overcome. Down here we are doing what we can to set the record right but face it, more people read the The New York Times than read The Anniston Star.

Ironically, on the very day your column appeared in The Times, Gov. Bob Riley announced that British-owned GKN Aerospace will expand its factory in Tallassee. The reason for this $20 million investment? The â Å“work ethicâ ? of Alabamians.

You might want to put that in the file for future reference.

All the best,
Hardy Jackson

http://www.annistonstar.com/opinion/2005/as-editorials-0728-editorial-5g27r1943.htm

And Donald Luskin tears him apart on the same (and other) lies:

July 29, 2005, 8:39 a.m.
'Bamagate
Krugman does a Rather on Alabama.

Paul Krugman, America's most dangerous liberal pundit, has his own little Rather-gate on his hands. In his New York Times column on Monday, Krugman wrote about Toyota's decision to locate a new automobile plant in Ontario, Canada, rather than in Alabama. According to Krugman, workers in the South are too unskilled to build cars, because taxes aren't high enough to throw more money at education. And according to Krugman, we need socialized health care like they have in Canada so that employers won't have to bear those costs themselves.

Krugman never mentions the fact that there are other foreign auto manufacturers already operating successfully in Alabama (I just bought a new Mercedes Benz SUV made there, and I can tell you it's a far finer car than the German-made lemon that it replaced). And Krugman never mentions the fact that Toyota itself is building a new plant in Texas.

What Krugman does mention, instead, is a hateful statement from Gerry Fedchun, president of the Automotive Parts Manufacturers' Association in Toronto. Krugman writes that Feldchen

    claimed that the educational level in the Southern United States was so low that trainers for Japanese plants in Alabama had to use â Å“pictorialsâ ? to teach some illiterate workers how to use high-tech equipment.

But Fedchen never actually said those things, and Krugman should have known it. Fedchen denied that he made such statements, in the strongest possible terms, in a letter to the editor published in Alabama's Birmingham News on July 15, ten days before Krugman's column was published. Fedchen wrote,

    I never used the word â Å“illiterate,â ? nor would I. I have been in this industry a long time. The use of diagrams and illustrations is common. I was horrified that my remarks were reported as they were.

This is turning into a real embarrassment for the Times. On Thursday the Anniston Star, an Alabama newspaper that had reprinted Krugman's column in syndication, ran an open letter to Krugman complaining, â Å“you went out of your way to engage in a little Dixie bashing ... it would have been nice if you had checked things more carefully.â ?

Krugman cites no source for Fedchen's bogus remarks. But it's virtually certain that his source was a June 30 story on the website of the government-sponsored Canadian Broadcasting Company, which used near-identical language to frame Fedchen's claim that manufacturers â Å“had to use 'pictorials' to teach some illiterate workers how to use high-tech equipment.â ? Perhaps, by Krugman's having inserted the penultimate word â Å“plantâ ? in the Times version, charges of plagiarism can be avoided.

How did Krugman find the CBC story in the first place? Do you really need to ask? Most likely he found it the same way he gets so many of his story ideas â ” by trawling the leftist hate-blogs. In this case, the CBC story was linked on July 8 on the Daily Kos, perhaps the foulest (and consequently most popular) of the ultraliberal blogs.

Krugman shot himself in the very same foot three years ago. In his September 17, 2002, Times column, he reported that a former Enron executive â ” later a Bush administration official â ” had sent an e-mail ordering the cover-up of financial misdealings. Krugman's source was a story in the leftist web magazine Salon, which removed the story over concerns both for accuracy and potential plagiarism. When the official denied having written the e-mail, Krugman was forced by the Times to run a retraction in his October 4, 2002, column, in which he said, â Å“I erred by citing it in my column.â ?

Setting aside Krugman's use of fictitious statements to bolster his case, what about his substantive point?

First, he claims that the supposed failure of Alabama's educational system is due to the state's voters having rejected â Å“an increase in the state's rock-bottom taxes on the affluent.â ? Rock-bottom? Hardly. Alabama's affluent are taxed at a 5 percent rate. There are seventeen states with the same or lower top rates, including blue states like Connecticut, Massachusetts, Washington, Pennsylvania, and Maryland. Krugman's characterization is a flat-out lie.

Second, Krugman sings the praises of Canada's socialized health care system as a lure for high-paying employers who don't have to bear the costs of providing health insurance. Krugman overlooks the fact that Canada's system is so bad that the nation's supreme court recently overturned the government's medical monopoly, noting that â Å“patients die as a result of waiting lists for public health care.â ?

Third, if subsidizing big business is Krugman's idea of the proper role of government, then he should have supported President Bush's 2003 program that adds a prescription drug benefit to Medicare. According to a story this week in the New York Times, which ran the very same day as Krugman's column, that program will â Å“give companies $50 billion in tax benefits to help with prescription drug coverage.â ? If such subsidies are so great, how come Krugman called this Bush program part of â Å“a golden age of porkâ ??

Fourth, Krugman completely ducks the question of why economic performance in Canada is so bad compared to that of the U.S. If everything Canada does is so wonderful for business, why is their unemployment rate 6.7 percent while ours is 5 percent? And according to Canada's most recent Labour Force Survey, â Å“the largest [employment] declines over the last 12 months have been in ... motor vehicle and parts manufacturing.â ? On that, Krugman punts: â Å“I'll have to leave the issue of ... comparative economic performance for another day.â ?

The New York Times famously defended Dan Rather's use of bogus documents about Bush's military service on the grounds that the documents were â Å“fake but accurate.â ? Is that the case here? Did Krugman use a bogus statement to make a valid case for higher taxes and socialized health care? Nope. Krugman's statements are fake and wrong â ” all the way.

http://www.nationalreview.com/nrof_luskin/luskin200507290839.asp

 

[loyalcana]

Nor, apparently, did you ask yourself how it could be that such a sub-standard workforce as we supposedly have in Alabama could win the DaimlerChrysler Top Quality Award for 2004 for the best performance by a Mercedes plant, worldwide.

According to the 2004 JD Power survey Mercedes-Benz cars ranked near the bottom in terms of quality.

  Um, yeah: what is confusing about this?  When Hyundai made the decision to build, they thought that there was more available (=unemployed) skilled workforce (= less training costs): when it came to actually staffing the plant, they found that it was not the case.  Instead of repeating Hyundai's mistake, Toyota looked for an available skilled, workforce.

Since however Alabama has a open labour market, Hyundai being a automobile manufacturer is relatively high on the labour food chain with fairly decent wages, good benefits, and relatively secure positions Hyundai should have been able to asorb skilled but lower paid workers from smaller companies.

The Canadian System DOES NOT cover everyone to anywhere near the same level as US insurers: this is why it is cheaper.  Period.  Actually, the only Canadians that have similar levels of coverage are those that have supplemental coverage purchased themselves or through their employers (but it's not a second tier).  For the mind-boggled, the realities of economics doesn't always reflect your favourite theoretical argument.  Adverse Selection is a theoretical problem for the US Insurers: it is an ACTUAL problem for the uninsurable.  If this was not the case, we would constantly be reading stories of failing insurance companies in the US.  Perhaps you missed this, but they have actually developed the capacity to underwrite effectively.

Why it is true Canadians do have to pay for uncovered health services such as dentistry or optometry, either though supplementary insurance or out-of-pocket, the total expenditures per capita for Canadians remain less than what the U.S governments pay per capita. Although that is a significant gap in timeliness and quality between Canada and the United States, it still doesn't explain why the US pays so much for it's health care especially when compared with countries like Japan which boast a comparable (some would say superior) health system despite having a higher proportion of public sector expenditure than Canada.

Third, if subsidizing big business is Krugman's idea of the proper role of government, then he should have supported President Bush's 2003 program that adds a prescription drug benefit to Medicare. According to a story this week in the New York Times, which ran the very same day as Krugman's column, that program will â Å“give companies $50 billion in tax benefits to help with prescription drug coverage.â ? If such subsidies are so great, how come Krugman called this Bush program part of â Å“a golden age of porkâ ??

The prescription drug benefits applies to those who on MEDICARE which provides medical health benefits to the elderly and disabled. MEDICAID provides medical insurance for low-income earners. Thus prescription drug benefits will have a minimal effect on big businesses such as Toyota or Hyundai.

 

[squealiox]

  And Donald Luskin tears him apart on the same (and other) lies: http://www.nationalreview.com/nrof_luskin/luskin200507290839.asp

"Krugman cites no source for Fedchen's bogus remarks. But it's virtually certain that his source was a June 30 story on the website of the government-sponsored Canadian Broadcasting Company, which used near-identical language to frame Fedchen's claim that manufacturers â Å“had to use 'pictorials' to teach some illiterate workers how to use high-tech equipment.â ?

how about a link to a retraction from some of the mainstream media that originally carried these comments then? that includes the ottawa citizen and some others. (assuming this is anything more than a source regretting some intemperate remarks, a daily occurrence in the media world.)
a search on factiva turns up blank.
this luskin guy makes plenty of bald assertions, with a side order of name-calling, but still no "bulletproof rebuttal" in sight...

 

[squealiox]

 And Donald Luskin tears him apart on the same (and other) lies: http://www.nationalreview.com/nrof_luskin/luskin200507290839.asp

First, he claims that the supposed failure of Alabama's educational system is due to the state's voters having rejected â Å“an increase in the state's rock-bottom taxes on the affluent.â ? Rock-bottom? Hardly. Alabama's affluent are taxed at a 5 percent rate. There are seventeen states with the same or lower top rates, including blue states like Connecticut, Massachusetts, Washington, Pennsylvania, and Maryland. Krugman's characterization is a flat-out lie.

before i forget, this is pretty hilarious too. last time i checked there were 50 states in the union. that would indeed put alabama in the bottom third.
a rich vein of similar gems throughout, but i gotta get back to work...