Some Possible Consequences Of Toronto’s Foreign Buyer Tax

A 15 per cent tax on foreign buyers of property in the Toronto region has been introduced. This is predicted to have some consequences for the real estate market in Toronto as well as possible effects for the real estate sector in other parts of Canada as well as the wider economy. Along with the tax, the province took additional measures like expanded rent controls and allowing cities, including Toronto, to tax vacant homes.

This has had some immediate effects on the real estate market in Toronto. Sales decreased by 37.3 per cent in June 2017 compared to June 2016. Similar effects were observed in Vancouver when British Columbia introduced a similar tax. Studies have found that the percentage of foreign buyers in the Toronto real estate market may not be that substantial. Analyzing data from April 24 to May 26, the government found that only 4.7 per cent of the properties in the Greater Golden Horseshoe region were purchased by foreigners. A study by the Toronto Real Estate Board revealed that foreign buyers accounted for 4.9 per cent of real estate purchases in the Greater Toronto Area.

Again, data analysis for the same period by the Globe and Mail indicate foreign ownership of residential properties was 9.1 per cent in the York Region while it was 7.2 per cent in the City of Toronto. These analysis portray that foreign buyers, even though present, are not a dominant part of buyers in the Toronto real estate market.

Last year, British Columbia implemented a 15 per cent foreign buyers’ tax for the Metro Vancouver area. Initially, it did have the desired effect and the number of real estate transactions decreased. Also, the price of real estate declined as well. However, both sales and prices have picked up in Vancouver. In March, sales of homes in the Metro Vancouver area increased by almost 50 per cent. This shows that the impact of the foreign buyers’ tax is decreasing and may not have been as effective in stemming real estate sales and prices in the Metro Vancouver area.

The imposition of foreign buyers’ tax in the two largest cities in Canada has made the relative price of real estate in other parts of Canada cheaper for foreigners. This means that foreign buyers may start purchasing real estate outside of Toronto and the Metro Vancouver area. Even though they are not a significant percentage of real estate buyers in Toronto, it is possible that they might increase the demand for real estate in smaller cities and drive up prices in those cities. Therefore, there is a possible downside of introducing foreign buyers’ tax in only the two largest cities. There may be a spillover effect in the real estate sector in other parts of Canada.

It is possible that like Vancouver, foreign buyers’ tax may not be able to stem the rising real estate prices in Toronto. Rather than solely focusing on foreign ownership, a more effective policy would be to analyze the impact of foreign earnings and wealth on the real estate sector. When new Canadians move to Canada, they bring wealth earned outside of Canada. A portion of this wealth goes to purchasing real estate in Canada, and contributes to real estate demand and prices. Therefore, any policy to alleviate high demand and prices in the real estate sector has to focus on the influence of foreign-earned money.

Also, if there is a slowdown in purchase of real estate and a decline in real estate prices in Toronto in the short run due to the imposition of foreign buyers’ tax, it may lead to a slowdown in the wider Toronto economy. However, as has been seen in the case of Vancouver, both the sale and price of real estate increased over time after the introduction of the foreign buyers’ tax. Therefore, it is expected that the same will happen in Toronto and the effect on the wider economy will be insignificant over time.

The foreign buyers’ tax is an important initiative in the correct direction of stemming the price of real estate, especially in large cities, and making housing affordable for the average Canadian. However, it does not seem to have the desired effect in the Metro Vancouver area as both demand and price of real estate are increasing there. A better policy initiative will be to monitor the influence of foreign-earned money on the real estate sector. New Canadians consist a substantial portion of the Canadian population and bring their wealth when they move to Canada, a part of which goes to the purchase of real estate. Appropriate policies that can monitor and control the impact of foreign-earned money on the real estate sector in Canada need to be formulated to make housing affordable for the average Canadian.

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How Will The Rise In Interest Rate Affect Us?

The Bank of Canada had hiked the interest rate for the first time in seven years by 0.25 per cent, from 0.5 per cent to 0.75 per cent. The increase in the interest rate will have effects on various stakeholders in the Canadian economy, including consumers and businesses. It must be mentioned that the U.S. Federal Reserve also recently increased the benchmark interest rate by 25 basis points from one per cent to 1.25 per cent.

The increase in the interest rate will provide greater incentive to Canadians to save more. The higher interest rate will lead to higher income for depositors in banks, which may encourage people to save more. However, with an increase in interest rate of only 0.25 per cent, the effect on savings is expected to be quite limited.

The higher interest rate may lead to an increase in mortgage rates. This will make it more expensive and, consequently, more difficult for existing homeowners to pay their mortgages. When existing homeowners struggle to pay off their mortgage, it may even push some towards foreclosures. Also, the higher mortgage rate may dissuade prospective entrants from delaying their house purchases. This may lead to less demand for real estate, which may have a dampening effect on high real estate prices. This will reduce the possibility of the creation of real estate bubbles or dampen an existing one.

The higher interest rate has prompted the five banks to increase their prime rate from 2.7 per cent to 2.95 per cent. The higher borrowing cost, including for credit cards and line of credit, may affect consumer spending. It may force consumers to curtail their expenditure on goods and services, and purchase less on credit. However, the Canadian economy has been performing relatively well and employment creation has been quite steady so that the possible adverse effect of higher interest rate on consumer expenditure may be negated.

The higher interest rate will increase the cost of borrowing to invest. This may make Canadian businesses less enthusiastic to borrow to invest or expand their businesses. However, the Canadian economy has performed quite well, which has allowed the Bank of Canada to increase the interest rate. So, it is predicted that businesses will borrow more to invest in spite of the increase in borrowing cost. Also, the potential adverse effect on business investment decisions due to only a 0.25 per cent increase in interest rate may not be that significant.

The higher cost of borrowing will increase the cost of production of goods and services. If businesses decide to pass on this higher cost to consumers, it will lead to higher prices of goods and services. This will increase the cost of living and may even contribute to inflationary pressures. Also, the higher prices of goods and services may make Canadian exports less competitive in export destinations. Imported goods and services to Canada will be cheaper relative to domestically manufactured goods and services, which may make them more appealing to Canadian consumers. However, the possible effect on the prices of goods and services due to a 0.25 per cent in interest rates is predicted to be quite insignificant.

Again, the higher cost of domestic borrowing may prompt Canadian businesses to seek borrowing in other countries. As the U.S. Federal Reserve increased the U.S. interest rate by 0.25 per cent as well, Canadian businesses may not particularly explore the U.S. market to seek lower rates as the interest rate differential between the two countries remain the same as before the interest rate increase. However, the effect may be quite limited as the interest rate has increased by only 0.25 per cent.

Foreign capital may flow in to take advantage of higher interest rates offered by Canadian financial institutions. It may not particularly flow from the U.S. to take advantage of higher interest rates as the interest rate differential between the countries remain the same as before the interest rate increase. However, with only a 0.25 per cent increase in interest rate, the effect on foreign capital inflow to Canada is forecasted to be not significant.

As cheap money becomes scarce and borrowing becoming expensive, it is predicted that less capital that is financed by borrowing will flow into the stock market. When less funds flow into the stock market, it will dampen the rise in stock prices and reduce the possibility of the creation of stock market bubbles or deflate an existing one.

The higher interest rate has led to an appreciation of the Canadian dollar. It was trading at 78.70 cents U.S. when the rise in interest rate was announced. However, this sudden rise in the exchange rate can be attributed to the panic created by the higher interest rate. It is expected that this sudden surge in the Canadian dollar will subside as the markets adjust to the higher interest rate unless other factors contribute to the appreciation of the Canadian dollar.

The increase in the interest rate is predicted to have some effects on Canadians. It could incentivize Canadians to save more, reduce their expenditure and borrow less than before. However, an increase of only 0.25 per cent in the interest rate is predicted to have quite limited effects on Canadians’ savings, expenditure and borrowing habits. The most profound effect of the higher interest rate is expected to be on real estate purchases.

With higher mortgage rates, the demand for house purchases may decline that may stem the rise in real estate prices. Also, the higher borrowing cost may diminish the interest of Canadian businesses to domestically borrow to finance their business operations, and increase their interest in seeking financing abroad. Moreover, the higher cost of borrowing may lead to higher prices of goods and services. But, the effects will be quite minimal as the interest rate has increased by only 0.25 per cent. The effect on inflow of foreign capital is predicted to be not substantial as well. Finally, higher borrowing cost may lead to less borrowed capital flowing to the stock market, which may limit the rise in stock prices and diminish any possible stock market bubbles.

The Possible Effects Of An Interest Rate Hike By The Federal Reserve

The Federal Reserve recently raised benchmark interest rate by 25 basis points from one per cent to 1.25 per cent. This will have effects on the U.S. economy as well as possible effects for Canada as well. The increase in the interest rate will affect both consumers and businesses. Also, the Federal Reserve plans to reduce its more than $4 trillion reserve of Treasury bonds and mortgage-backed securities that were mostly purchased during the Great Recession.

The increase in the interest rate will provide greater incentive to people to save more. As people can earn more from higher interest rates, they will save more money in banks. Therefore, the higher interest rate may lead to higher savings by U.S. citizens. However, it will lead to higher cost of borrowing, including for credit cards, which may affect consumer spending. Due to the higher cost of borrowing, including for credit cards, U.S. consumers may spend less on the purchase of goods and services. This may adversely affect U.S. consumer spending on Canadian goods and services as well.

As the U.S. is Canada’s largest export destination, any potential shrinkage in U.S. consumers’ expenditure on Canadian exports of goods and services will be deleterious for Canadian exporters. However, an improved U.S. economy may allow U.S. consumers to spend more on goods and services in spite of higher borrowing costs so that they may spend more on Canadian exports of goods and services as well.

The cost of borrowing to invest will increase as well. This may make businesses more reluctant to borrow to invest. However, overall business conditions have improved in the U.S. which has made a rise in interest rate feasible. Therefore, it is fair to state that businesses will borrow more to invest in spite of the increase in interest rates. It is possible that as credit becomes more expensive, businesses may decrease their purchase of equipments and services made in other countries, including Canada. This may hamper the sells of Canadians exporters to U.S. businesses. However, it is very likely that U.S. businesses will invest more in spite of higher borrowing costs due to improved business conditions, including purchases from Canadian exporters.

Also, the higher cost of borrowing may make goods and services manufactured in the U.S. more expensive if U.S. businesses decide to pass on the higher cost to consumers. This may make U.S. exports to Canada pricier so that Canadian consumers may end up spending more on U.S. exports of goods and services. However, a possible increase in prices of goods and services due to a 0.25 per cent increase in interest rates will be quite insignificant.

The higher cost of domestic borrowing may prompt U.S. businesses to seek lower borrowing rates outside the U.S., including Canada. The higher interest rates of borrowing may encourage U.S. businesses to borrow from Canadian financial markets and financial institutions. This may bring increased business for Canadian financial institutions. However, it may lead to increased competition for Canadian businesses to borrow in order to finance and expand their businesses. Even if these occur, the effects will be quite insignificant as the interest rate increases by only 0.25 per cent.

Again, foreign investments may flow into the U.S. due to better investment climate which means that the U.S. may experience higher foreign direct investment (FDI). Foreign capital funds may flow in to take advantage of higher returns offered by U.S. financial institutions due to the higher interest rate. However, with only a 0.25 per cent increase in interest rates, the effect on the flow of foreign capital funds will be very limited, if at all.

The increase in the interest rate may have some negative effects on U.S. consumer spending and business spending. This may possibly have a negative effect on Canadian exports of goods and services to its largest export destination. However, the effect will be quite insignificant and will be negated by increased U.S. consumer and business spending due to improved U.S. economic conditions, including expenditure on Canadian exports. Canadians may pay more for U.S. exports of goods and services if U.S. businesses decide to pass on the higher cost of borrowing to consumers. But, it will be quite insignificant as the cost of borrowing is increasing by only 0.25 per cent.

Also, the U.S. may experience increased foreign investments to take advantage of better investment climate and increased foreign capital inflow attracted by higher interest rates offered by U.S. financial institutions. But, the effect on foreign capital funds will be quite limited due to only a 0.25 per cent increase in interest rates. Finally, it may bring increased business for Canadian financial institutions as well as increased competition for borrowing funds by Canadian businesses, both of which may be muted as the Federal Reserve rate is increasing by only 0.25 per cent.

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. http://www.budget.gc.ca/2017/docs/plan/budget-2017-en.pdf

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.