The Possible Consequences Of A $15 Minimum Wage In Ontario

Ontario has decided to increase its minimum wage to $15 an hour by 2019. It will become the second province after Alberta to move towards a minimum wage of $15 an hour. The implementation of a higher minimum wage is expected to affect workers and businesses differently.

The demand for higher minimum wage has gained increasing momentum. Cities like Seattle and San Francisco have implemented $15 minimum wage for some workers. In Alberta, the $15 minimum wage will be implemented in October 2018, while New York and California will implement it in 2021 and 2022 respectively.

The new minimum wage will offer the same pay to part-time, temporary, casual or seasonal workers as full-time employees. Also, all employees will be entitled to a minimum of two days emergency leave per year, and employees working for a company for five years or more will receive three weeks of vacation.

According to the Changing Workplaces, approximately one-third of Ontario’s 6.6 million workers are vulnerable to new technology, a shrinking manufacturing sector and fewer union jobs, over other factors. This indicates that workers are in a tight spot and a higher minimum wage will significantly benefit them.

A $15-an-hour minimum wage will provide minimum wage workers a decent living and improve their quality of life. Currently, 1.5 million workers in Ontario make less than $15 an hour. This means that the implementation of a higher minimum wage will benefit many workers and their dependents in Ontario. A substantial portion of the population in Ontario will benefit from the implementation of a $15-per-hour minimum wage and enjoy higher standard of living. They will be able to pay rent and afford groceries, and live comfortably relative to their current situation.

Also, higher pay will allow these workers to spend more which will be beneficial for Ontario’s economy. There will be a multiplier effect of their expenditure on Ontario’s economy which will lead to local businesses growing and creating more employment in Ontario. Therefore, the higher minimum wage will not only help workers working at minimum wage but also their dependents, and have a beneficial impact on Ontario’s economy and employment.

However, there are some possible adverse effects of a higher minimum wage. There are small businesses that employ minimum wage workers and make low profit margins. A higher minimum wage may force these businesses to hire fewer workers as their cost of operations will increase and the businesses may not be able to expand their operations. Also, they may be forced to lay off workers to compensate for the increased cost of operations entailing from a higher minimum wage. Again, the higher minimum wage may make some small businesses unprofitable and they may be forced to shut down their operations. All these possible effects may adversely affect small businesses and the employment situation of minimum wage workers.

Small businesses are crucial to Ontario’s economy and as employment generators; therefore, due emphasis has to be put on the possible effects of a higher minimum wage on their operations and employment generation. However, large businesses that hire workers at minimum wage or close to minimum wage may not have their businesses adversely affected due to a higher minimum wage.

Another possible adverse effect of a higher minimum wage is that businesses may replace their workers with automation. Higher minimum wage increases the cost of labour which may make hiring workers less financially lucrative relative to automation. There are businesses where machines are serious contenders for human workers, especially with declining prices for computers. The fast food industry is vulnerable to automation with the introduction of self-serving kiosks.

It could also be true for some clerical and administrative positions. Therefore, if a higher minimum wage prompts businesses to replace human workers with automation, it may adversely affect the very group that is being targeted to benefit from the introduction of a higher minimum wage. Wendy’s and McDonald’s are introducing self-service kiosks in their outlets. With the introduction of automation, businesses may hire fewer workers so that the unemployment rate among minimum wage workers may actually increase. This will be very harmful for their plight and this possibility needs to be considered in analyzing the possible effects of the introduction of a $15-per-hour minimum wage.

However, sometimes the introduction of automation has led to more orders and an increased number of hours for employees to serve these increased volume of orders. Also, historically, automation has created new jobs. There are arguments that the current wave of automation may not necessarily create jobs.

Overall, the $15 per hour minimum wage will definitely improve the lives of low-income earners in Ontario and their dependents. They can afford to have an improved standard of living and higher purchasing power that will have a positive impact on Ontario’s economy and employment. Also, recent research has shown that higher minimum wage leads to job creation. Also, when the higher minimum wage is combined with working income tax benefit (WITB), which is a refundable tax credit for eligible working low-income individuals, it will allow low-income earners to experience an improved quality of life. However, the possible adverse effects of a higher minimum wage like small businesses suffering, reduction or less creation of minimum wage jobs, and workers being replaced by machines have to be considered as well.

What’s In It For You? Unpacking The 2017 Ontario Budget

The 2017 Ontario Budget has suggested some proposals which are expected to have substantial effects on the lives of Ontarians. This budget is a balanced budget and this trend of a balanced budget is expected to continue for the next two years. A balanced budget will be beneficial for the Ontario economy. The province has eliminated a deficit of more than $19 billion at the height of the recession. The net debt-to-GDP ratio was 37.8 per cent in 2016-17, which is predicted to decline. A lower net debt-to-GDP ratio can be a positive indicator of the health for the province’s economy.

One of the highlights of this budget is the launch of OHIP+, which allows free prescription drugs for people under 25 regardless of their family income. This radical proposal will be very beneficial for young people and families with children. It will lead to healthier children and young adults, which may have positive effects on school attendance and performance, and contribute towards a young and healthy workforce. Investments on the future citizens of the province will definitely pay rich rewards in both the short and long runs.

Another noticeable highlight of the budget is the proposed reduction of hydro costs by 25 per cent. The high level of hydro bills has been a concern for both individuals and businesses in Ontario. A decrease in hydro costs will benefit 500,000 small businesses and farms, approximately. Lower hydro bills will decrease their cost of operations and may improve their businesses, leading to higher business activity in Ontario.

The budget has proposed a 15 per cent tax on properties bought by non-Canadians. This proposal will be judicious in reducing the effect of speculation in the Ontario real-estate market. Also, real estate prices have been increasing significantly in Toronto. The proposed Non-Resident Speculation Tax (NRST) may dampen the price increase as it will make it more expensive for non-Canadians to purchase property. It may stem real estate bubble and help Canadians to afford properties in Ontario.

Health care has received attention in this budget. The budget proposes an additional investment of $7 billion over the next three years compared to last year’s budget. This will reduce wait times, access to care and improve patient experience. Investments in health care will improve the health of Ontarians and lead to a healthy population and workforce. This will improve the quality of life of Ontarians as well as make positive impacts on the Ontario economy. Also, the budget proposes an additional $9 billion in new capital grants over 10 years in the construction of several new major hospital projects. This will improve access to health care. Again, the needs of a growing aging population will be better met with this investment.

Education is very important for Ontarians and the budget proposes investment to the sector. It has proposed allocation of almost $16 billion over 10 years to help build and improve schools. Also, the Ontario Student Assistance Program has been revamped. The new program will allow 210,000 students in postsecondary education across the province to attend for free. As expenses can be a hurdle for people to access education, particularly postsecondary education, this is a very prudent program. More people can access education, which will lead to more educated Ontarians and a more educated workforce. Investments on education are predicted to benefit the province socially and economically in the short and long runs.

Ontario has proposed investments of more than $190 billion over a 13-year period in public infrastructure. The largest infrastructure investment in its history, it started in 2014-15 and invests in building child-care spaces, hospitals, public transit, highways and roads. This massive investment is predicted to generate employment, improve health care, reduce cost of business and boost Ontario’s economy in the short and long runs.

In Ontario, job growth is quite robust. It is expected to increase by 1.3 per cent, or 94,000 jobs in 2017 and 900,000 jobs between 2010 and 2020. These job growth figures are impressive and this budget will certainly play a role in making it a reality. This balanced budget is an ambitious budget with important allocations to education, health care and infrastructure spending. It is predicted to pay important rewards in terms of better education and health care, higher employment and improved quality of life for Ontarians in the short-run to the long-run.

Some Thoughts On Budget 2017

The federal budget has emphasized on skills training and job creation. It has also focused on being gender-based and puts emphasis on the middle-class. However, it is also a deficit budget. With a projected revenue of $304.7 billion dollars and expenditure of $330.2 billion, the budget is forecasted to have a deficit of $28.5 billion in 2017-18, which means that the federal debt is expected to be 31.6 percent of GDP in this fiscal year.

The budget allocates additional funding to skills development. Currently, under the existing Labour Market Transfer Agreements, the federal government provides $3 billion per year to provinces and territories for skills development and employment support that help Canadians in entering, returning or maintaining employment. The budget has allocated an additional $2.7 billion over six years to expand these agreements and increase access to training and employment assistance. Also, Canada Student Loans and Grants will help adult learners access post-secondary and part-time education. In a rapidly changing economic and employment landscape, policies that allow Canadians to access education and improve their skills will be very beneficial. It will improve the human capital of Canadians that will make them more capable employees. This will enable Canadians to obtain high paying jobs that will improve their standard of living while reinvigorating the Canadian economy.

The budget allocates funds to increase internet literacy among the low-income segment of the population. In a new Affordable Access program, it will allocate $13.2 million over five years to provide low-cost home internet with refurbished computers to low-income families. This will particularly benefit women as they are overrepresented in this economic class. It also allocates $29.5 million over five years to a new digital literacy exchange program. This will improve internet literacy among some groups like seniors and low-income Canadians. These initiatives are commendable as access to internet and internet literacy are important in developing human capital of low-income groups as well as improve functionality of others like seniors.

Budget 2017 has proposed providing $691.3 million over five years starting in 2017-18 and $168.1 million per year thereafter to a new Employment Insurance (EI) caregiver benefit. According to this new benefit, eligible caregivers will be allowed 15 weeks of EI benefits when they are temporarily away from work for taking care of family members who need attention. It may help women more than men as women participate in more caregiving than men. This proposed benefit will be humane and very beneficial for employees who need to take care of their sick or injured loved ones. It will allow people to worry less about work and missed income during times of distress, possibly leading to a more productive, less stressed and happier working population.

The budget has proposed an investment of $7 billion over ten years in early learning and child care initiatives. By reducing the burden of child care costs, it will help support families having children. Lower child care costs and early learning will benefit working mothers and their children, which will have a positive effect on the population, economy and country from the shot-term to the long-term. Again, a proposed investment of more than $11.2 billion over eleven years starting from 2017-18 to a National Housing Strategy will help Canadians to find adequate, suitable and affordable housing, including a large number of single women and single mothers. This investment will help as housing is a formidable challenge that Canadians face. The Strategy will invest $2.1 billion over ten years starting in 2018-19, to renew and expand the Homelessness Partnering Strategy that will help homeless Canadians to access housing. This Strategy will improve the quality of life of Canadians, including vulnerable citizens.

In Budget 2017, there is targeted investments of $11 billion over ten years to the provinces and territories for home care and mental health services. Home care will particularly benefit women as they account for a significant percentage of home care clients and providers. Also, mental health is very important for all segments of the population. Funding that will shorten the wait times for mental health services will be very beneficial. A physically and mentally healthy population means a more productive and happier workforce as well as happier citizens. Investments in home care and mental health services are expected to yield benefits from the short-run to the long-run. Again, investments in health services for First Nations and Inuit people as well as Urban Indigenous Strategy will lead to positive effects for them including women. Provisions in the budget to address gender-based violence and support for the LGBTQ community are important and are predicted to yield socially beneficial results. Investments in the physical and mental health of the population definitely yield very beneficial results.

The budget has allocated $39.9 million to Statistics Canada over five years to develop and implement the Housing Statistics Framework (HSF). The framework will create a nationwide database of residential properties in Canada which will help to gather data on foreign ownership. This database will be helpful to understand the underlying reasons of soaring real estate prices.

Even though the budget has proposed investments to important areas, it is a deficit budget. The deficit aspect of the budget is predicted to continue till 2021-22 when it will decrease to $18.8 billion dollars and the federal debt slightly decreases to 30.9 percent. A deficit budget is not necessarily bad; however, continued deficit budget for a prolonged time may lead to challenges in reducing a burgeoning federal debt. It should be mentioned that Canada’s net debt-GDP ratio is favourable compared to other G7 countries.

The budget, even though is a deficit budget, has proposed investments in important aspects like Pathways to Education Canada which will provide support to youth from low-income neighbourhoods to complete high school. Also, the imposition of same tax on Uber as taxis can be considered fair. Provisions in the budget to allow Canadians to access education and improve their skills are commendable. Again, proposed investments in home care and mental health services, affordable housing, early learning and child care initiatives, revamped Employment Insurance benefit are predicted to improve the lives of Canadians, Canadian workers and the economy. This budget proposes investments on Canadians that will definitely yield positive outcomes in various ways including socially and economically.

The Case For Universal Basic Income

When the government provides a basic income to all citizens of the country without any conditions attached, it is termed as universal basic income. It is a form of social security. There is increasing debate in the developed countries about the introduction of Universal Basic Income.

The combination of four factors, globalization, outsourcing, automaton, and the increasing adaptation and use of artificial intelligence is taking a growing toll on the low-income and middle-class sections of the society in developed countries, which is prompting the debate for the introduction of universal basic income.

In Canada, manufacturing employment has decreased. According to Statistics Canada, manufacturing employment decreased by 322,000 between 2004 and 2008. This indicates the impact that globalization, outsourcing and automation had on Canadian manufacturing employment during this period. However, during the same period, 1.5 million jobs were created in the Canadian economy. It was a net increase in jobs, which indicated dynamism in the Canadian economy.

But, some of the unemployed manufacturing workers may have found it difficult to find employment in other industries. This could have been due to lack of skills and not enough opportunities, including financing opportunities, for retraining of the unemployed workers. This might have led to lower income and standard of living for the unemployed workers, and some might have even fallen into poverty.

In the United States, there has been a decline in manufacturing employment as well. 5.8 million manufacturing workers lost their employment between 1999 and 2011. It shows that the combination of globalization, outsourcing and automation has taken a serious toll on US manufacturing employment. While other jobs were created, the manufacturing sector workers might have fallen into economic difficulty.

The same trend is observed in other advanced economies. The manufacturing sector is shrinking. While this trend is expected as an economy matures, it is creating significant manufacturing unemployment in the advanced economies.

Even though retraining the unemployed workers is important, it is a reality that there will simply not be enough jobs to employ the relatively low-skilled unemployed workers as many of these companies, typically manufacturing companies, move their production to low-wage destinations while automation reduces the number of workers required in the production processes.

Again, the increasing adaptation and use of artificial intelligence is also taking a toll on employment in the developed countries.

Therefore, these four factors are leading to unemployment among the low-income and middle-class sections of the society in developed countries, especially among the low-income and low-skilled section of the society. The impact of artificial intelligence on employment may become more pronounced when driverless cars and trucks become more widely used.

These economic changes (globalization and outsourcing) and technological changes (automation and artificial intelligence) are leading to economic difficulty or even poverty among the disenfranchised workers. At the same time, there are people who have benefited significantly from these economic and technological changes. This has led to rising income inequality in the advanced economies which is undesirable.

Also, a large pool of unemployed people can lead to social and political instability. Angst and anger of the unemployed, and adversely affected low-income and middle-class sections of the society have led to the rise and popularity of right-wing politics. Again, reduced income of the low-income and middle-class may have dampened consumption and expenditure by these sections of the society.

Considering the challenges that these four factors have created and may create in the future, it is prudent to introduce universal basic income in the developed countries. It will help the adversely affected workers and their families to have decent standard of living. This will reduce or even eliminate poverty. With higher levels of income, people will be in better health leading to lower health care costs and healthier workers.

Also, they may be more inclined to access and afford education. This may lead to healthier, more skilled and competent workers. Again, the buffer created by universal basic income may encourage people to pursue entrepreneurship and take risks in being self-employed and start businesses. This may increase business activity and employment in the country.

As it will increase the income of the low-income and middle-class, universal basic income will reduce income inequality. With its introduction, the disenfranchised workers and their families will have decent standard of living that will contribute to higher levels of social and political stability. This will stem the rise and popularity of right-wing politics that has affected some developed countries.

Again, with higher income, the low-income and middle-class may consume and spend more. Higher levels of consumption and expenditure will stimulate the economies of developed countries.

One argument against universal basic income is that it may make people less inclined to work. But, research has shown that its introduction has little effect on the number of hours worked. It added that even the people who worked less became involved in alternative work valuable to the society.

There are several countries that have considered as well as experimented with universal basic income. Finland is the first European country to conduct a two-year social experiment to understand the effectiveness of introducing universal basic income.

Universal basic income will replace existing social benefits and be paid irrespective of a citizen’s employment status. The Finnish government hopes that it will reduce poverty and increase employment. However, the majority of Swiss voters rejected a proposal to give every citizen and long-time residents a universal basic income.

Therefore, the idea is not popular in all countries. In Canada, Ontario is planning to run a trial of universal basic income. Even though two-third of the respondents in a poll of 1,500 Canadians were open to the idea of basic income, most were unwilling to pay higher tax to finance the program.

This is a challenge to governments and policy makers trying to implement universal basic income. Also, Silicon Valley has become a supporter of universal basic income realizing the job-replacing effect of technology.

The combination of globalization, outsourcing, automation and the increasing adaptation and use of artificial intelligence is creating significant challenges in the developed countries. This makes the introduction of universal basic income an increasingly viable policy option. It will generate a myriad of benefits like reducing or eliminating poverty to fostering greater social and political stability in the developed countries. Also, research has shown that it has limited effect on the number of hours worked. One concern of universal basic income is the way in which it will be financed.

As respondents from a poll in Canada show, people are unwilling to pay higher tax to finance the program. In this case, governments can get increasing revenues from corporate tax and by encouraging corporations to bring their overseas profits to their home countries at attractive tax rates, generating tax revenues to finance the program of universal basic income. Also, governments can save funds as universal basic income will replace other social programs.

Finally, healthier population will lead to lower health care costs so that governments have to spend less on public health care, sparing funds which can be redirected to finance universal basic income.

Are We In Too Much Debt?

The notion of debt is something very common, whether it is for households or government. Households borrow to finance purchase of houses, vehicles, education, etc. The government borrows to finance its programs like building infrastructure and implementing various social programs while companies borrow to finance their operations.

Debt is necessary for households to build assets and improve human capital while for the government, it facilitates government investment in the society. Debt helps companies to grow and develop. However, excessive debt held by households, companies or the government may create potential financial or economic instability.

In Canada, the combined debt of households, companies and governments is 288 per cent of gross domestic product. At $4.4 trillion in the first quarter of 2015, the combined debt is almost three times the size of the Canadian economy. Compared to other G-7 countries, Canada’s government debt is the lowest. However, Canadian household debt crossed 100 per cent of GDP in September 2015.

This may be putting excessive strain on the economy while making it vulnerable to shocks. Households have been taking advantage of record low interest rates to purchase real estate, which has led to increase in house prices, especially in cities like Toronto and Vancouver. The runaway prices of real estate in these cities may not be viable and may pave the way for a correction in the housing market in the future, which can lead to contagion effects in the economy.

Also, the potential rise of interest rates may put households in a tight spot in terms of higher monthly payments on their debt. If this leads to wide-scale default among indebted households, it can lead to instability in the wider economy.

In the US, debt securities and loans of all sectors stood at US $62.5 trillion in the first quarter of 2015. Again, US national debt is more than US $19 trillion. A high level of national debt which means higher level of government borrowing can crowd out private sector borrowing, which may lead to lower investment. More importantly, a high level of debt can lead to potential instability in the economy.

Also, it can impose excessive burden on future generations as they have to service the national debt and eventually pay it back. It must be mentioned that a significant part of US national debt is held by US citizens while other countries like China and Japan account for the rest. While domestic ownership of national debt makes it less vulnerable to financial or economic chaos, any sudden and major changes in foreign ownership can create problems in the financial sector, which can lead to further problems in the economy.

The second-largest economy in the world, China, also has high level of debt. While public debt stood at 55 per cent of gross domestic product in 2015, total credit excluding equity raising, was close to 200 per cent of GDP in 2015. The high level of debt can create potential instabilities in the economy that can create contagion effects in the Chinese economy, which may lead to financial chaos and unemployment in China. Also, any problems in the Chinese economy may have spillover effects on the global economy.

Many developed countries have high debt-GDP ratio; sometimes, household debt is a bigger concern than government debt. However, as in the case of Japan, most of the debt is held by the citizens of the country. This makes Japan less susceptible to sudden outflow of funds due to foreign investors reducing their holdings of Japanese financial assets. This in turn makes Japan less susceptible to financial and economic instability. Even though public debt was incurred to reinvigorate the Japanese economy, its impact was quite limited while it led to high level of debt-GDP ratio.

Debt is important in a modern economy to both the public and private sector. Public sector debt imposes a burden on the current and future citizens of the country. However, it is important to understand the reason that public debt is incurred.

If the public debt is incurred to finance infrastructure spending, expenditure on retraining of unemployed workers, increased public education or increased public health care, then, they are all investments that the citizens and country can benefit from, in the short-run to the long-run. Therefore, in evaluating public debt, it is important to understand the reason for public debt and its potential costs and benefits to the citizens and the country from the short-run to the long-run.

The same is true for private sector debt. When the private sector is borrowing to invest and establish companies that create employment and grow the economy, it is beneficial for the country. Again, when households borrow to finance their education or purchase a residential property to live in, it is a desirable policy.

However, when household debt increase exponentially to finance housing debt that lead to spiraling housing prices that in turn fuel further housing debt, it can become a vicious cycle that will only lead to a housing market crash that may further lead to a contagion effect on the financial and economic sector of the country. Therefore, policies to cool a hot housing market with regulations for higher down payments, stricter mortgage eligibility and curbing foreign buyers’ appetite for purchasing domestic property may stem the disproportionate rise of housing prices and housing debt.

This will reduce the probability of a housing bubble that may lead to financial or economic instability. Therefore, the type of household debt is important when evaluating its potential problems. However, spiralling household debt would obviously be a concern for policy makers.

Governments, central banks and policy makers need to be vigilant of too much public or private sector debt and a too high debt-GDP ratio. When evaluating the potential implication of debt, the reason for debt needs to be taken into account as well. Unsustainable levels of debt need to be curbed so that they do not cause potential financial or economic instability.

Neoliberalism And The Rise Of Right-Wing Politics

There is rise of right-wing politics in several countries of the world. Brexit in the UK and the election of Donald Trump in the US demonstrate the popularity of right-wing politics in various parts of the world. Also, right-wing politics is gaining traction in countries like France and Germany. Backed by populism, right-wing politics is becoming more and more popular and widespread in several countries.

The rise and popularity of right-wing politics can be categorized into economic and non-economic factors. Immigration and the movement of refugees into Europe played a role. While xenophobia, racism, Islamophobia and other kinds of discrimination play roles in the rise and popularity of right-wing politics in various countries, there are economic factors at play as well. This article focuses on the economic factors that are contributing to the rise and popularity of right-wing politics.

Many Western countries have followed a policy of neoliberalism for the last few decades. A combination of privatization, deregulation including financial deregulation, free trade and globalization characterize neoliberalism. Neoliberalism has been a boon for global economic growth; both developed and developing countries have benefited from neoliberalism in terms of high economic growth.

Globalization and outsourcing have allowed countries like China to rapidly develop while developed countries have benefited from cheaper goods and services produced in low-wage countries. At the same time, technological improvement has allowed to automate manufacturing processes, lowering manufacturing costs by using fewer number of workers. Automation has benefited companies as fewer number of workers mean lower costs and, consequently, higher profits and efficient production processes.

Therefore, outsourcing, globalization and automation led to higher economic growth in both developed and developing countries, benefited companies producing in low-wage countries in terms of lower production costs and higher profits, and consumers in developed countries by having access to cheaper goods and services made in low-wage countries.

However, the benefits of globalization, outsourcing and automation came at a high cost. Companies in developed countries moved their production processes to low-wage countries or outsourced parts of their production processes to low-wage countries. Workers in developed countries who were employed in these manufacturing and service industries have become unemployed with neoliberal policies adopted by the developed countries. Combined with automation, it has been putting significant pressure on the employment situation of the working class and middle-class in developed countries.

Globalization, outsourcing and automation have led to dissipation of the manufacturing sector in developed countries that employed the working class in these countries. This led to increased unemployment among the working class and a shrinking middle class. While manufacturing flourished in low-wage countries, developed countries started to experience industrial rust belts which led to unemployment of factory workers.

With increased globalization, outsourcing and automation, the adverse effects on the working class and middle-class have only increased over time. However, the unemployed did not find alternative employment which forced them to fall into difficult financial circumstances or even poverty. At the same time, the beneficiaries of globalization, outsourcing and automation included the multi-national companies and large corporations. The people who have benefited from this continuous change have become incredibly wealthy while the working class and middle class have suffered financially. This has led to higher income inequality among the population of developed countries.

The suffering of the working class and middle-class have led to rise of angst and anger among this segment of the population, which is a majority in many developed countries. They are disillusioned with globalization and free trade, and the way it has wreaked havoc to their livelihood. Also, the social programs in the developed countries have been inadequate to help these disenfranchised people.

This led to these people rallying against the establishment in these countries contributing to the rise of anti-establishment popularity among the masses and support of right-wing politics, including far-right politics, in these countries. The disillusionment and resentment with neoliberalism, globalization and insufficient social programs have contributed to Brexit in the UK, Donald Trump being elected in the US and the rise of right-wing parties in France, Germany, etc.

Globalization, outsourcing and automation have taken a toll on the working class and middle-class of developed countries. The governments of these countries can introduce social programs that will help the adversely affected population. Health care is a considerable cost to people, especially the working class and middle-class segments of the population. Sometimes, health care costs can push someone into poverty. The introduction of more affordable health care or universal health care could help the low-income and middle-income people in having access to health care services.

Also, while some of the unemployed workers found alternative employment, others have fallen into financial difficulty or poverty. In order to help them have a decent living that will contribute to social stability, guaranteed minimum income may be introduced. Guaranteed minimum income ensures that all citizens have a minimum income that they can live on. The introduction of guaranteed minimum income will allow the adversely affected segments of the population to have a decent living. This will alleviate their suffering and lead to social stability and harmony.

The introduction of affordable post-secondary education will help the low income and middle-class to access post-secondary education for themselves and their children. Rising costs of tuition particularly at the post-secondary level have made it increasingly difficult for the low-income and middle-class to afford post-secondary education.

Also, increased access and affordability to trade schools and retraining opportunities will help the unwitting victims of global economic and technological changes as well as the low-income and middle-class. This will improve the standard of living of the low-income and middle-class of the developed countries as well as stem the rising income inequality that plagues these countries.

The income tax system can be made more progressive so that it taxes high-income earners more to finance social programs targeting the low-income and middle-class sections of the society. This will reduce income inequality while helping the low-income and middle-class. Also, changes can be made in the corporate tax system so that it benefits domestic producers and companies that choose not to offshore production in low-wage countries.

The introduction of subsidies and lower corporate taxes can encourage companies to produce domestically and even reshore, which is bringing back jobs to their home countries. This may improve employment in some types of manufacturing and service sectors in the developed countries.

Again, incentives in terms of lower tax rates can be offered to corporations to bring their overseas profits to their home countries. When they bring back overseas profits and invest in domestic economies of the developed countries, it will boost their respective economies and employment scenarios.

A combination of these economic and public policies accompanied by social policies like increased awareness among the population of the benefits of immigration will definitely reduce the anger and disillusionment among the adversely affected sections of the population in developed countries. Policies that benefit all sections of the population so that they enjoy the benefits of globalization, outsourcing and automation will reap rich rewards in terms of higher economic, social and political stability and harmony. This will make right-wing politics less appealing to the population of developed countries.

Tax Havens Impact Canadians Too

Tax havens have become increasingly formidable players in the global economy. With increased globalization and financialization of the global economy, tax havens have become important players in the world economy. According to a report by Tax Justice Network, $21 to $32 trillion is stashed offshore. According to the World Bank, the GDP of the world was US $73.4 trillion in 2015. This shows the importance of tax havens in the world and the influence they have on the world economy.

The money that pour into tax havens does not stay there, but is invested in various countries. However, any financial flow through a tax haven makes it tax-free, and any return on it tax-free as well.

Corporations and wealthy individuals invest their finances through tax havens to avoid paying taxes or reduce their tax burden. Canada is not immune to it as well.

In 2015, Canadians put $40 billion in tax havens while the total amount of wealthheld in top ten most popular tax havens is $270 billion. This shows that Canadians put significant amount of capital in tax havens. Therefore, the outflow of capital to tax havens is a concern for Canada as well.

The US is also prone to outflow of capital to tax havens. US corporations and wealthy citizens pour capital into tax havens. In 2013, US corporations held $2.1 trillion in untaxed foreign profits held overseas. This shows the level of foreign profits that US corporations hold overseas. If these overseas profits are brought into the US, this will generate increased levels of economic activity and employment generation in the US.

According to a report by US PIRG Education Fund and Citizens for Tax Justice (CTJ), US-based multinational corporations evade $90 billion of federal income taxes each year. This is a substantial amount of revenue that the US federal government could use to support its various programs.

However, there are some areas in the US like Delaware, South Dakota, etc. which effectively operate as corporate tax havens.

This shows that US corporations do not necessarily need to go to tax havens outside the US but take advantage of domestic tax havens to reduce or eliminate their tax burden.

Some of the leading economists of the world mentioned that tax havens ‘serve no useful economic purpose’. It is true that tax havens do not serve any useful economic purpose, as they do not necessarily augment economic activity or increase the level of employment in a society. A counter-argument can be that tax havens reduce or eliminate taxes that lower the cost of doing business. This boosts the incentive to invest which leads to increased economic activity and employment.

However, the capital flow through tax havens are ultimately invested in countries where tax is imposed and going through tax havens only lead to tax avoidance. As the capital is ultimately invested in non-tax havens, companies and wealthy individuals would invest even if tax havens did not exist. Therefore, it can be argued that tax havens do not have significant influence on capital investment and employment generation, and do not necessarily boost capital investment and employment generation. On the other hand, tax havens allow corporations and wealthy individuals to avoid paying taxes, and dodge their tax and social obligations to the societies in which they operate.

Even though tax havens ‘serve no useful economic purpose’, they have important effects on countries. When companies and wealthy individuals evade tax or lower their tax burden by channeling their funds into tax havens, it leads to lower government revenues. When the government has lower revenue, it can fund fewer infrastructure, build fewer public schools, provide less subsidized or free healthcare, and provide fewer social programs for the marginalized sections of the society.

This shows the negative impact of tax havens on a society that experiences capital outflow to a tax haven. When the government has less money to invest in infrastructure and social programs, it leads to poor infrastructure, and lower health and education of the population that in turn lead to lower human capital in the country. This decreases labour productivity and dampens economic activity in the country. Therefore, tax havens can have serious deleterious consequences, both economic and non-economic, for societies.

In Canada, when corporations and wealthy individuals pour capital into tax havens, there are lower tax revenues for the provincial and federal government. When they are evading or lowering their tax burden, the government cannot finance its various programs. Also, to maintain its expenditures, the government has to increase taxation on other sections of the society.

This invariably means that the tax burden on the middle-class and low-income segment of the population increases. The same is true in the US as it leads to lower tax revenue for the federal government, state governments and local governments. Therefore, tax havens lead to two problems, lower government revenues that make it difficult to fund government programs and increased tax burden on the middle-class and low-income segments of the society.

Tax havens have become increasingly important players in the global economy. A significant portion of global finance flows through them. Other than allowing tax avoidance and reduction of tax burden by corporations and wealthy individuals, tax havens do not play any beneficial role for the society. However, they lead to lower government revenues that make it difficult for governments to finance various programs while shifting the tax burden on the middle-income and low-income segments of the population.

A concerted effort by various countries, especially ones with large economies, and international organizations to reduce the practice and existence of tax havens could lead to decrease of tax avoidance by corporations and wealthy individuals. This will enable governments to generate more revenue that could finance various social programs as well as decrease tax burden on the middle-class and low-income section of the society.